[Federal Register Volume 80, Number 158 (Monday, August 17, 2015)]
[Rules and Regulations]
[Pages 49326-49843]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-19049]



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Vol. 80

Monday,

No. 158

August 17, 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; Hospital Inpatient Prospective Payment Systems for 
Acute Care Hospitals and the Long-Term Care Hospital Prospective 
Payment System Policy Changes and Fiscal Year 2016 Rates; Revisions of 
Quality Reporting Requirements for Specific Providers, Including 
Changes Related to the Electronic Health Record Incentive Program; 
Extensions of the Medicare-Dependent, Small Rural Hospital Program and 
the Low-Volume Payment Adjustment for Hospitals; Final Rule

  Federal Register / Vol. 80, No. 158 / Monday, August 17, 2015 / Rules 
and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1632-F and IFC]
RIN-0938-AS41


Medicare Program; Hospital Inpatient Prospective Payment Systems 
for Acute Care Hospitals and the Long-Term Care Hospital Prospective 
Payment System Policy Changes and Fiscal Year 2016 Rates; Revisions of 
Quality Reporting Requirements for Specific Providers, Including 
Changes Related to the Electronic Health Record Incentive Program; 
Extensions of the Medicare-Dependent, Small Rural Hospital Program and 
the Low-Volume Payment Adjustment for Hospitals

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

ACTION: Final rule; interim final rule with comment period.

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SUMMARY: We are revising the Medicare hospital inpatient prospective 
payment systems (IPPS) for operating and capital-related costs of acute 
care hospitals to implement changes arising from our continuing 
experience with these systems for FY 2016. Some of these changes 
implement certain statutory provisions contained in the Patient 
Protection and Affordable Care Act and the Health Care and Education 
Reconciliation Act of 2010 (collectively known as the Affordable Care 
Act), the Pathway for Sustainable Growth Reform (SGR) Act of 2013, the 
Protecting Access to Medicare Act of 2014, the Improving Medicare Post-
Acute Care Transformation Act of 2014, the Medicare Access and CHIP 
Reauthorization Act of 2015, and other legislation. We also are 
addressing the update of the rate-of-increase limits for certain 
hospitals excluded from the IPPS that are paid on a reasonable cost 
basis subject to these limits for FY 2016. As an interim final rule 
with comment period, we are implementing the statutory extensions of 
the Medicare-dependent, small rural hospital (MDH) Program and changes 
to the payment adjustment for low-volume hospitals under the IPPS.
    We also are updating the payment policies and the annual payment 
rates for the Medicare prospective payment system (PPS) for inpatient 
hospital services provided by long-term care hospitals (LTCHs) for FY 
2016 and implementing certain statutory changes to the LTCH PPS under 
the Affordable Care Act and the Pathway for Sustainable Growth Rate 
(SGR) Reform Act of 2013 and the Protecting Access to Medicare Act of 
2014.
    In addition, we are establishing new requirements or revising 
existing requirements for quality reporting by specific providers 
(acute care hospitals, PPS-exempt cancer hospitals, and LTCHs) that are 
participating in Medicare, including related provisions for eligible 
hospitals and critical access hospitals participating in the Medicare 
Electronic Health Record (EHR) Incentive Program. We also are updating 
policies relating to the Hospital Value-Based Purchasing (VBP) Program, 
the Hospital Readmissions Reduction Program, and the Hospital-Acquired 
Condition (HAC) Reduction Program.

DATES: Effective Date: This final rule is effective on October 1, 2015.
    Applicability Date: The provisions of the interim final rule with 
comment period portion of this rule (presented in section IV.L. of the 
preamble) are applicable for discharges on or after April 1, 2015 and 
on or before September 30, 2017.
    Comment Period: To be assured consideration, comments on the 
interim final rule with comment period presented in section IV.L. of 
this document must be received at one of the addresses provided in the 
ADDRESSES section no later than 5 p.m. EST on September 29, 2015.

ADDRESSES: In commenting, please refer to file code CMS-1632-IFC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (no duplicates, 
please):
    1. Electronically. You may (and we encourage you to) submit 
electronic comments on this regulation to http://www.regulations.gov. 
Follow the instructions under the ``submit a comment'' tab.
    2. By regular mail. You may mail written comments to the following 
address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Attention: CMS-1632-IFC, P.O. Box 8013, Baltimore, MD 
21244-1850.

    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments via 
express or overnight mail to the following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Attention: CMS-1632-IFC, Mail Stop C4-26-05, 7500 
Security Boulevard, Baltimore, MD 21244-1850.

    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal Government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD-- Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call the telephone number (410) 786-7195 in advance to schedule 
your arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, we refer readers to the 
beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Ing-Jye Cheng, (410) 786-4548 and 
Donald Thompson, (410) 786-4487, Operating Prospective Payment, MS-
DRGs, Deficit Reduction Act Hospital-Acquired Acquired Conditions--
Present on Admission (DRA HAC-POA) Program, Hospital-Acquired 
Conditions Reduction Program, Hospital Readmission Reductions Program, 
Wage Index, New Medical Service and Technology Add-On Payments, 
Hospital Geographic Reclassifications, Graduate Medical Education, 
Capital Prospective Payment, Excluded Hospitals, Medicare 
Disproportionate Share Hospital (DSH), Medicare-dependent, small rural 
hospital (MDH), and Low Volume Hospital Payment Adjustment Issues.
    Michele Hudson, (410) 786-4487, Long-Term Care Hospital Prospective

[[Page 49327]]

Payment System and MS-LTC-DRG Relative Weights Issues.
    Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital 
Demonstration Program Issues.
    Cindy Tourison, (410) 786-1093, Hospital Inpatient Quality 
Reporting and Hospital Value-Based Purchasing--Program Administration, 
Validation, and Reconsideration Issues.
    Pierre Yong, (410) 786-8896, Hospital Inpatient Quality Reporting--
Measures Issues Except Hospital Consumer Assessment of Healthcare 
Providers and Systems Issues.
    Elizabeth Goldstein, (410) 786-6665, Hospital Inpatient Quality 
Reporting--Hospital Consumer Assessment of Healthcare Providers and 
Systems Measures Issues.
    Mary Pratt, (410) 786-6867, LTCH Quality Data Reporting Issues.
    Kim Spalding Bush, (410) 786-3232, Hospital Value-Based Purchasing 
Efficiency Measures Issues.
    James Poyer, (410) 786-2261, PPS-Exempt Cancer Hospital Quality 
Reporting Issues.
    Deborah Krauss, (410) 786-5264, and Alexandra Mugge, (410) 786-
4457, EHR Incentive Program Clinical Quality Measure Related Issues.
    Elizabeth Myers, (410) 786-4751, EHR Incentive Program Nonclinical 
Quality Measure Related Issues.
    Lauren Wu, (202) 690-7151, Certified EHR Technology Related Issues.
    Kellie Shannon, (410) 786-0416, Simplified Cost Allocation 
Methodology Issues

SUPPLEMENTARY INFORMATION:

Electronic Access

    Inspection of Public Comments: All public comments received before 
the close of the comment period are available for viewing by the 
public, including any personally identifiable or confidential business 
information that is included in a comment. We post all public comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    This Federal Register document is also available from the Federal 
Register online database through Federal Digital System (FDsys), a 
service of the U.S. Government Printing Office. This database can be 
accessed via the Internet at: http://www.gpo.gov/fdsys.

Tables Available Only Through the Internet on the CMS Web site

    In the past, a majority of the tables referred to throughout this 
preamble and in the Addendum to the proposed rule and the final rule 
were published in the Federal Register as part of the annual proposed 
and final rules. However, beginning in FY 2012, some of the IPPS tables 
and LTCH PPS tables are no longer published in the Federal Register. 
Instead, these tables are generally only available through the 
Internet. The IPPS tables for this final rule are available through the 
Internet on the CMS Web site at: http://www.cms.hhs.gov/Medicare/medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on 
the link on the left side of the screen titled, ``FY 2016 IPPS Final 
Rule Home Page'' or ``Acute Inpatient--Files for Download''. The LTCH 
PPS tables for this FY 2016 final rule are available through the 
Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the 
list item for Regulation Number CMS-1632-F. For further details on the 
contents of the tables referenced in this final rule, we refer readers 
to section VI. of the Addendum to this final rule.
    Readers who experience any problems accessing any of the tables 
that are posted on the CMS Web sites identified above should contact 
Michael Treitel at (410) 786-4552.

Acronyms

3M 3M Health Information System
AAMC Association of American Medical Colleges
ACGME Accreditation Council for Graduate Medical Education
ACoS American College of Surgeons
AHA American Hospital Association
AHIC American Health Information Community
AHIMA American Health Information Management Association
AHRQ Agency for Healthcare Research and Quality
AJCC American Joint Committee on Cancer
ALOS Average length of stay
ALTHA Acute Long Term Hospital Association
AMA American Medical Association
AMGA American Medical Group Association
AMI Acute myocardial infarction
AOA American Osteopathic Association
APR DRG All Patient Refined Diagnosis Related Group System
APRN Advanced practice registered nurse
ARRA American Recovery and Reinvestment Act of 2009, Public Law 111-
5
ASCA Administrative Simplification Compliance Act of 2002, Public 
Law 107-105
ASITN American Society of Interventional and Therapeutic 
Neuroradiology
ASPE Assistant Secretary for Planning and Evaluation [DHHS]
ATRA American Taxpayer Relief Act of 2012, Public Law 112-240
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999, Public 
Law 106-113
BIPA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Benefits Improvement and Protection Act of 2000, 
Public Law 106-554
BLS Bureau of Labor Statistics
CABG Coronary artery bypass graft [surgery]
CAH Critical access hospital
CARE [Medicare] Continuity Assessment Record & Evaluation 
[Instrument]
CART CMS Abstraction & Reporting Tool
CAUTI Catheter-associated urinary tract infection
CBSAs Core-based statistical areas
CC Complication or comorbidity
CCN CMS Certification Number
CCR Cost-to-charge ratio
CDAC [Medicare] Clinical Data Abstraction Center
CDAD Clostridium difficile-associated disease
CDC Center for Disease Control and Prevention
CERT Comprehensive error rate testing
CDI Clostridium difficile (C. difficile)
CFR Code of Federal Regulations
CLABSI Central line-associated bloodstream infection
CIPI Capital input price index
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
CMSA Consolidated Metropolitan Statistical Area
COBRA Consolidated Omnibus Reconciliation Act of 1985, Public Law 
99-272
COLA Cost-of-living adjustment
COPD Chronis obstructive pulmonary disease
CPI Consumer price index
CQM Clinical quality measure
CY Calendar year
DACA Data Accuracy and Completeness Acknowledgement
DPP Disproportionate patient percentage
DRA Deficit Reduction Act of 2005, Public Law 109-171
DRG Diagnosis-related group
DSH Disproportionate share hospital
EBRT External Bean Radiotherapy
ECI Employment cost index
eCQM Electronic clinical quality measure
EDB [Medicare] Enrollment Database
EHR Electronic health record
EMR Electronic medical record
EMTALA Emergency Medical Treatment and Labor Act of 1986, Public Law 
99-272
EP Eligible professional
FAH Federation of American Hospitals
FDA Food and Drug Administration
FFY Federal fiscal year
FPL Federal poverty line
FQHC Federally qualified health center
FR Federal Register
FTE Full-time equivalent
FY Fiscal year
GAF Geographic Adjustment Factor

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GME Graduate medical education
HAC Hospital-acquired condition
HAI Healthcare-associated infection
HCAHPS Hospital Consumer Assessment of Healthcare Providers and 
Systems
HCFA Health Care Financing Administration
HCO High-cost outlier
HCP Healthcare personnel
HCRIS Hospital Cost Report Information System
HHA Home health agency
HHS Department of Health and Human Services
HICAN Health Insurance Claims Account Number
HIPAA Health Insurance Portability and Accountability Act of 1996, 
Public Law 104-191
HIPC Health Information Policy Council
HIS Health information system
HIT Health information technology
HMO Health maintenance organization
HPMP Hospital Payment Monitoring Program
HSA Health savings account
HSCRC [Maryland] Health Services Cost Review Commission
HSRV Hospital-specific relative value
HSRVcc Hospital-specific relative value cost center
HQA Hospital Quality Alliance
HQI Hospital Quality Initiative
HwH Hospital-within-hospital
IBR Intern- and Resident-to-Bed Ratio
ICD-9-CM International Classification of Diseases, Ninth Revision, 
Clinical Modification
ICD-10-CM International Classification of Diseases, Tenth Revision, 
Clinical Modification
ICD-10-PCS International Classification of Diseases, Tenth Revision, 
Procedure Coding System
ICR Information collection requirement
ICU Intensive care unit
IGI IHS Global Insight, Inc.
IHS Indian Health Service
IME Indirect medical education
I-O Input-Output
IOM Institute of Medicine
IPF Inpatient psychiatric facility
IPFQR Inpatient Psychiatric Facility Quality Reporting [Program]
IPPS [Acute care hospital] inpatient prospective payment system
IRF Inpatient rehabilitation facility
IQR Inpatient Quality Reporting
LAMCs Large area metropolitan counties
LOS Length of stay
LTC-DRG Long-term care diagnosis-related group
LTCH Long-term care hospital
LTCH QRP Long-Term Care Hospital Quality Reporting Program
MAC Medicare Administrative Contractor
MACRA Medicare Access and CHIP Reauthorization Act of 2015, Public 
Law 114-10
MAP Measure Application Partnership
MCC Major complication or comorbidity
MCE Medicare Code Editor
MCO Managed care organization
MDC Major diagnostic category
MDH Medicare-dependent, small rural hospital
MedPAC Medicare Payment Advisory Commission
MedPAR Medicare Provider Analysis and Review File
MEI Medicare Economic Index
MGCRB Medicare Geographic Classification Review Board
MIEA-TRHCA Medicare Improvements and Extension Act, Division B of 
the Tax Relief and Health Care Act of 2006, Public Law 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008, 
Public Law 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Public Law 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public 
Law 110-173
MRHFP Medicare Rural Hospital Flexibility Program
MRSA Methicillin-resistant Staphylococcus aureus
MSA Metropolitan Statistical Area
MS-DRG Medicare severity diagnosis-related group
MS-LTC-DRG Medicare severity long-term care diagnosis-related group
MU Meaningful Use [EHR Incentive Program]
NAICS North American Industrial Classification System
NALTH National Association of Long Term Hospitals
NCD National coverage determination
NCHS National Center for Health Statistics
NCQA National Committee for Quality Assurance
NCVHS National Committee on Vital and Health Statistics
NECMA New England County Metropolitan Areas
NHSN National Healthcare Safety Network
NQF National Quality Forum
NQS National Quality Strategy
NTIS National Technical Information Service
NTTAA National Technology Transfer and Advancement Act of 1991, 
Public Law 104-113
NUBC National Uniform Billing Code
NVHRI National Voluntary Hospital Reporting Initiative
OACT [CMS] Office of the Actuary
OBRA 86 Omnibus Budget Reconciliation Act of 1986, Public Law 99-509
OES Occupational employment statistics
OIG Office of the Inspector General
OMB [Executive] Office of Management and Budget
ONC Office of the National Coordinator for Health Information 
Technology
OPM [U.S.] Office of Personnel Management
OQR [Hospital] Outpatient Quality Reporting
O.R. Operating room
OSCAR Online Survey Certification and Reporting [System]
PAC Postacute care
PAMA Protecting Access to Medicare Act of 2014, Public Law 113-93
PCH PPS-exempt cancer hospital
PCHQR PPS-exempt cancer hospital quality reporting
PMSAs Primary metropolitan statistical areas
POA Present on admission
PPI Producer price index
PPS Prospective payment system
PRM Provider Reimbursement Manual
ProPAC Prospective Payment Assessment Commission
PRRB Provider Reimbursement Review Board
PRTFs Psychiatric residential treatment facilities
PSF Provider-Specific File
PSI Patient safety indicator
PS&R Provider Statistical and Reimbursement [System]
PQRS Physician Quality Reporting System
QIG Quality Improvement Group [CMS]
QRDA Quality Reporting Data Architecture
RFA Regulatory Flexibility Act, Public Law 96-354
RHC Rural health clinic
RHQDAPU Reporting hospital quality data for annual payment update
RNHCI Religious nonmedical health care institution
RPL Rehabilitation psychiatric long-term care (hospital)
RRC Rural referral center
RSMR Risk-standardized mortality rate
RSRR Risk-standard readmission rate
RTI Research Triangle Institute, International
RUCAs Rural-urban commuting area codes
RY Rate year
SAF Standard Analytic File
SCH Sole community hospital
SCHIP State Child Health Insurance Program
SCIP Surgical Care Improvement Project
SFY State fiscal year
SGR Sustainable Growth Rate
SIC Standard Industrial Classification
SNF Skilled nursing facility
SOCs Standard occupational classifications
SOM State Operations Manual
SSI Surgical site infection
SSI Supplemental Security Income
SSO Short-stay outlier
SUD Substance use disorder
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law 
97-248
TEP Technical expert panel
THA/TKA Total hip arthroplasty/Total knee arthroplasty
TMA TMA [Transitional Medical Assistance], Abstinence Education, and 
QI [Qualifying Individuals] Programs Extension Act of 2007, Public 
Law 110-90
TPS Total Performance Score
UHDDS Uniform hospital discharge data set
UMRA Unfunded Mandate Reform Act, Public Law 104-4
VBP [Hospital] Value Based Purchasing [Program]
VTE Venous thromboembolism

Table of Contents

I. Executive Summary and Background
    A. Executive Summary
    1. Purpose and Legal Authority
    2. Summary of the Major Provisions
    3. Summary of Costs and Benefits
    B. Summary
    1. Acute Care Hospital Inpatient Prospective Payment System 
(IPPS)

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    2. Hospitals and Hospital Units Excluded From the IPPS
    3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
    4. Critical Access Hospitals (CAHs)
    5. Payments for Graduate Medical Education (GME)
    C. Summary of Provisions of Recent Legislation Discussed in This 
Final Rule and Interim Final Rule With Comment Period
    1. Patient Protection and Affordable Care Act (Pub. L. 111-148) 
and the Health Care and Education Reconciliation Act of 2010 (Pub. 
L. 111-152)
    2. American Taxpayer Relief Act of 2012 (Pub. L. 112-240)
    3. Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 
(Pub. L. 113-67)
    4. Protecting Access to Medicare Act of 2014 (Pub. L. 113-93)
    5. Improving Medicare Post-Acute Care Transformation Act of 2014
    6. Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 
114-10)
    D. Issuance of a Notice of Proposed Rulemaking
    E. Public Comments Received in Response to the FY 2016 IPPS/LTCH 
PPS Proposed Rule
II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG) 
Classifications and Relative Weights
    A. Background
    B. MS-DRG Reclassifications
    C. Adoption of the MS-DRGs in FY 2008
    D. FY 2016 MS-DRG Documentation and Coding Adjustment
    1. Background on the Prospective MS-DRG Documentation and Coding 
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
    2. Adjustment to the Average Standardized Amounts Required by 
Public Law 110-90
    a. Prospective Adjustment Required by Section 7(b)(1)(A) of 
Public Law 110-90
    b. Recoupment or Repayment Adjustments in FYs 2010 Through 2012 
Required by Section 7(b)(1)(B) Public Law 110-90
    3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data
    4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by 
Section 7(b)(1)(A) of Public Law 110-90
    5. Recoupment or Repayment Adjustment Authorized by Section 
7(b)(1)(B) of Public Law 110-90
    6. Recoupment or Repayment Adjustment Authorized by Section 631 
of the American Taxpayer Relief Act of 2012 (ATRA)
    E. Refinement of the MS-DRG Relative Weight Calculation
    1. Background
    2. Discussion for FY 2016 and Summary of Public Comments 
Received in Response to Our Solicitation of Comments on Nonstandard 
Cost Center Codes
    F. Adjustment to MS-DRGs for Preventable Hospital-Acquired 
Conditions (HACs), Including Infections, for FY 2016
    1. Background
    2. HAC Selection
    3. Present on Admission (POA) Indicator Reporting
    4. HACs and POA Reporting in Preparation for Transition to ICD-
10-CM and ICD-10-PCS
    5. Changes to the HAC Program for FY 2016
    6. RTI Program Evaluation
    7. RTI Report on Evidence-Based Guidelines
    G. Changes to Specific MS-DRG Classifications
    1. Discussion of Changes to Coding System and Basis for MS-DRG 
Updates
    a. Conversion of MS-DRGs to the International Classification of 
Diseases, 10th Edition (ICD-10)
    b. Basis for FY 2016 MS-DRG Updates
    2. MDC 1 (Diseases and Disorders of the Nervous System): 
Endovascular Embolization (Coiling) Procedures
    3. MDC 5 (Diseases and Disorders of the Circulatory System)
    a. Adding Severity Levels to MS-DRGs 245 Through 251
    b. Percutaneous Intracardiac Procedures
    c. Zilver[supreg] PTX Drug-Eluting Peripheral Stent 
(ZPTX[supreg])
    d. Percutaneous Mitral Valve Repair System--Revision of ICD-10-
PCS Version 32 Logic
    e. Major Cardiovascular Procedures: Zenith[supreg] Fenestrated 
Abdominal Aortic Aneurysm (AAA) Endovascular Graft
    4. MDC 8 (Diseases and Disorders of the Musculoskeletal System 
and Connective Tissue)
    a. Revision of Hip or Knee Replacement: Revision of ICD-10 
Version 32 Logic
    b. Spinal Fusion
    5. MDC 14 (Pregnancy, Childbirth and the Puerperium): MS-DRG 775 
(Vaginal Delivery With Complicating Diagnosis)
    6. MDC 21 (Injuries, Poisoning and Toxic Effects of Drugs): 
CroFab Antivenin Drug
    7. MDC 22 (Burns): Additional Severity of Illness Level for MS-
DRG 927 (Extensive Burns or Full Thickness Burns With Mechanical 
Ventilation 96 + Hours With Skin Graft)
    8. Medicare Code Editor (MCE) Changes
    9. Changes to Surgical Hierarchies
    10. Changes to the MS-DRG Diagnosis Codes for FY 2016
    a. Major Complications or Comorbidities (MCCs) and Complications 
or Comorbidities (CCs) Severity Levels for FY 2016
    b. Coronary Atherosclerosis Due to Calcified Coronary Lesion
    c. Hydronephrosis
    11. Complications or Comorbidity (CC) Exclusions List for FY 
2016
    a. Background
    b. CC Exclusions List for FY 2016
    12. Review of Procedure Codes in MS-DRGs 981 Through 983, 984 
Through 986, and 987 Through 989
    a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-
DRGs 987 Through 989 Into MDCs
    b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984 
Through 986, and 987 Through 989
    c. Adding Diagnosis or Procedure Codes to MDCs
    13. Changes to the ICD-9-CM Coding System in FY 2016
    a. ICD-10 Coordination and Maintenance Committee
    b. Code Freeze
    14. Other Policy Change: Recalled/Replaced Devices
    15. Out of Scope Public Comments
    H. Recalibration of the FY 2016 MS-DRG Relative Weights
    1. Data Sources for Developing the Relative Weights
    2. Methodology for Calculation of the Relative Weights
    3. Development of National Average CCRs
    4. Discussion and Acknowledgement of Public Comments Received on 
Expanding the Bundled Payments for Care Improvement (BPCI) 
Initiative
    a. Background
    b. Considerations for Potential Model Expansion
    I. Add-On Payments for New Services and Technologies
    1. Background
    2. Public Input Before Publication of a Notice of Proposed 
Rulemaking on Add-On Payments
    3. Implementation of ICD-10-PCS Section ``X'' Codes for Certain 
New Medical Services and Technologies for FY 2016
    4. FY 2016 Status of Technologies Approved for FY 2015 Add-On 
Payments
    a. Glucarpidase (Voraxaze[supreg])
    b. Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm (AAA) 
Endovascular Graft
    c. KcentraTM
    d. Argus[supreg] II Retinal Prosthesis System
    e. Zilver[supreg]PTX[supreg] Drug-Eluting Peripheral Stent
    f. CardioMEMSTM HF (Heart Failure) Monitoring System
    g. MitraClip[supreg] System
    h. Responsive Neurostimulator (RNS[supreg] System)
    5. FY 2016 Applications for New Technology Add-On Payments
    a. Blinatumomab (BLINCYTOTM)
    b. DIAMONDBACK[supreg] 360 Coronary Orbital Atherectomy System
    c. CRESEMBA[supreg] (Isavuconazonium)
    d. LUTONIX[supreg] Drug Coated Balloon (DCB) Percutaneous 
Transluminal Angioplasty (PTA) and 
IN.PACTTMAdmiralTM Pacliaxel Coated 
Percutaneous Transluminal Angioplasty (PTA) Balloon Catheter
    e. VERASENSETM Knee Balancer System (VKS)
    f. WATCHMAN[supreg] Left Atrial Appendage Closure Technology
III. Changes to the Hospital Wage Index for Acute Care Hospitals
    A. Background
    1. Legislative Authority
    2. Core-Based Statistical Areas (CBSAs) for the Hospital Wage 
Index
    B. Worksheet S-3 Wage Data for the FY 2016 Wage Index
    1. Included Categories of Costs
    2. Excluded Categories of Costs
    3. Use of Wage Index Data by Suppliers and Providers Other Than 
Acute Care Hospitals Under the IPPS
    C. Verification of Worksheet S-3 Wage Data

[[Page 49330]]

    D. Method for Computing the FY 2016 Unadjusted Wage Index
    E. Occupational Mix Adjustment to the FY 2016 Wage Index
    1. Development of Data for the FY 2016 Occupational Mix 
Adjustment Based on the 2013 Medicare Wage Index Occupational Mix 
Survey
    2. New 2013 Occupational Mix Survey Data for the FY 2016 Wage 
Index
    3. Calculation of the Occupational Mix Adjustment for FY 2016
    F. Analysis and Implementation of the Occupational Mix 
Adjustment and the FY 2016 Occupational Mix Adjusted Wage Index
    G. Transitional Wage Indexes
    1. Background
    2. Transition for Hospitals in Urban Areas That Became Rural
    3. Transition for Hospitals Deemed Urban Under Section 
1886(d)(8)(B) of the Act Where the Urban Area Became Rural Under the 
New OMB Delineations
    4. Expiring Transition for Hospitals That Experience a Decrease 
in Wage Index Under the New OMB Delineations
    5. Budget Neutrality
    H. Application of the Rural, Imputed, and Frontier Floors
    1. Rural Floor
    2. Imputed Floor for FY 2016
    3. State Frontier Floor
    I. FY 2016 Wage Index Tables
    J. Revisions to the Wage Index Based on Hospital Redesignations 
and Reclassifications
    1. General Policies and Effects of Reclassification and 
Redesignation
    2. FY 2016 MGCRB Reclassifications and Redesignation Issues
    a. FY 2016 Reclassification Requests and Approvals
    b. Applications for Reclassifications for FY 2017
    3. Redesignations of Hospitals Under Section 1886(d)(8)(B) of 
the Act (Lugar)
    4. Waiving Lugar Redesignation for the Out-Migration Adjustment
    K. Out-Migration Adjustment Based on Commuting Patterns of 
Hospital Employees
    1. Background
    2. New Data Source for the FY 2016 Out-Migration Adjustment
    3. FY 2016 Out-Migration Adjustment
    4. Use of Out-Migration Data Applied for FY 2014 or FY 2015 for 
3 Years
    L. Process for Requests for Wage Index Data Corrections
    M. Labor-Related Share for the FY 2016 Wage Index
    N. Changes to 3-Year Average for the FY 2017 Wage Index Pension 
Costs and Change to Wage Index Timeline Regarding Pension Costs for 
FY 2017 and Subsequent Years
    O. Clarification of Allocation of Pension Costs for the Wage 
Index
IV. Other Decisions and Changes to the IPPS for Operating Costs and 
Indirect Medical Education (IME) Costs
    A. Changes in the Inpatient Hospital Updates for FY 2016 
(Sec. Sec.  412.64(d) and 412.211(c))
    1. FY 2016 Inpatient Hospital Update
    2. FY 2016 Puerto Rico Hospital Update
    B. Rural Referral Centers (RRCs): Annual Updates to Case-Mix 
Index (CMI) and Discharge Criteria (Sec.  412.96)
    1. Case-Mix Index (CMI)
    2. Discharges
    C. Indirect Medical Education (IME) Payment Adjustment for FY 
2016 (Sec.  412.105)
    D. FY 2016 Payment Adjustment for Medicare Disproportionate 
Share Hospitals (DSHs) (Sec.  412.106)
    1. Background
    2. Impact on Medicare DSH Payment Adjustment of the Continued 
Implementation of New OMB Labor Market Area Delineations
    3. Payment Adjustment Methodology for Medicare Disproportionate 
Share Hospitals (DSHs) Under Section 3133 of the Affordable Care Act
    a. General Discussion
    b. Eligibility for Empirically Justified Medicare DSH Payments 
and Uncompensated Care Payments
    c. Empirically Justified Medicare DSH Payments
    d. Uncompensated Care Payments
    E. Hospital Readmissions Reduction Program: Changes for FY 2016 
Through FY 2017 (Sec. Sec.  412.150 Through 412.154)
    1. Statutory Basis for the Hospital Readmissions Reduction 
Program
    2. Regulatory Background
    3. Overview of Policies Changes for the FY 2016 and FY 2017 
Hospital Readmissions Reduction Program
    4. Refinement of Hospital 30-Day, All Cause, Risk-Standardized 
Readmission Rate (RSSR) Following Pneumonia Hospitalization Measure 
Cohort (NQF #0506) for FY 2017 Payment Determination and Subsequent 
Years
    a. Background
    b. Overview of Measure Cohort Change
    c. Risk Adjustment
    d. Anticipated Effect of Refinement of Hospital 30-Day, All-
Cause, Risk-Standardized Readmission Rate (RSSR) Following Pneumonia 
Hospitalization Measure (NQF #0506) Cohort
    e. Calculating the Excess Readmissions Ratio
    5. Maintenance of Technical Specifications for Quality Measures
    6. Floor Adjustment Factor for FY 2016 (Sec.  412.154(c)(2))
    7. Applicable Period for FY 2016
    8. Calculation of Aggregate Payments for Excess Readmissions for 
FY 2016
    a. Background
    b. Calculation of Aggregate Payments
    9. Extraordinary Circumstances Exception Policy for the Hospital 
Readmissions Reduction Program Beginning FY 2016 and for Subsequent 
Years
    a. Background
    b. Requests for an Extraordinary Circumstances Exception
    F. Hospital Value-Based Purchasing (VBP) Program: Policy Changes 
for the FY 2018 Program Year and Subsequent Years
    1. Background
    a. Statutory Background and Overview of Past Program Years
    b. FY 2016 Program Year Payment Details
    2. Retention, Removal, Expansion, and Updating of Quality 
Measures for FY 2018 Program Year
    a. Retention of Previously Adopted Hospital VBP Program Measures 
for the FY 2018 Program Year
    b. Removal of Two Measures
    c. New Measure for the FY 2018 Program Year: 3-Item Care 
Transition Measure (CTM-3) (NQF #0228)
    d. Removal of Clinical Care--Process Subdomain for the FY 2018 
Program Year and Subsequent Years
    e. NHSN Measures Standard Population Data
    f. Summary of Previously Adopted and New Measures for the FY 
2018 Program Year
    3. Previously Adopted and New Measures for the FY 2019, FY 2021, 
and Subsequent Program Years
    a. Intent To Propose in Future Rulemaking To Include Selected 
Ward (Non-Intensive Care Unit (ICU)) Locations in Certain NHSN 
Measures Beginning With the FY 2019 Program Year
    b. New Measure for the FY 2021 Program Year: Hospital 30-Day, 
All-Cause, Risk-Standardized Mortality Rate Following Chronic 
Obstructive Pulmonary Disease (COPD) Hospitalization (NQF #1893)
    c. Summary of Previously Adopted and New Measures for the FY 
2019 and FY 2021 and Subsequent Program Years
    4. Possible Measure Topics for Future Program Years
    5. Previously Adopted and New Baseline and Performance Periods 
for the FY 2018 Program Year
    a. Background
    b. Baseline and Performance Periods for the Patient and 
Caregiver-Centered Experience of Care/Care Coordination Domain for 
the FY 2018 Program Year
    c. Baseline and Performance Periods for NHSN Measures and PC-01 
in the Safety Domain for the FY 2018 Program Year
    d. Baseline and Performance Periods for the Efficiency and Cost 
Reduction Domain for the FY 2018 Program Year
    e. Summary of Previously Finalized and New Baseline and 
Performance Periods for the FY 2018 Program Year
    6. Previously Adopted and New Baseline and Performance Periods 
for Future Program Years
    a. Previously Adopted Baseline and Performance Periods for the 
FY 2019 Program
    b. Baseline and Performance Periods for the PSI-90 Measure in 
the Safety Domain in the FY 2020 Program Years
    c. Baseline and Performance Periods for the Clinical Care Domain 
for the FY 2021 Program Year
    7. Performance Standards for the Hospital VBP Program
    a. Background
    b. Technical Updates
    c. Performance Standards for the FY 2018 Program Year
    d. Previously Adopted Performance Standards for Certain Measures 
for the FY 2019 Program Year
    e. Previously Adopted and New Performance Standards for Certain 
Measures for the FY 2020 Program Year

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    f. Performance Standards for Certain Measures for the FY 2021 
Program Year
    8. FY 2018 Program Year Scoring Methodology
    a. Domain Weighting for the FY 2018 Program Year for Hospitals 
That Receive a Score on All Domains
    b. Domain Weighting for the FY 2018 Program Year for Hospitals 
Receiving Scores on Fewer Than Four Domains
    G. Changes to the Hospital-Acquired Condition (HAC) Reduction 
Program
    1. Background
    2. Statutory Basis for the HAC Reduction Program
    3. Overview of Previous HAC Reduction Program Rulemaking
    4. Implementation of the HAC Reduction Program for FY 2016
    5. Changes for Implementation of the HAC Reduction Program for 
FY 2017
    a. Applicable Time Period for the FY 2017 HAC Reduction Program
    b. Narrative Rule Used in Calculation of the Domain 2 Score for 
the FY 2017 HAC Reduction Program
    c. Domain 1 and Domain 2 Weights for the FY 2017 HAC Reduction 
Program
    6. Measure Refinements for the FY 2018 HAC Reduction Program
    a. Inclusion of Select Ward (Non-Intensive Care Unit (ICU)) 
Locations in Certain CDC NHSN Measures Beginning in the FY 2018 
Program Year
    b. Update to CDC NHSN Measures Standard Population Data
    7. Maintenance of Technical Specifications for Quality Measures
    8. Extraordinary Circumstances Exception Policy for the HAC 
Reduction Program Beginning in FY 2016 and for Subsequent Years
    a. Background
    b. Requests for an Extraordinary Circumstances Exception
    H. Simplified Cost Allocation Methodology
    1. Background
    2. Proposed Regulatory Changes
    3. Summary of Public Comments, Our Responses, and Final Policy
    I. Rural Community Hospital Demonstration Program
    1. Background
    2. FY 2016 Budget Neutrality Offset Amount
    J. Changes to MS-DRGs Subject to the Postacute Care Transfer 
Policy (Sec.  412.4)
    1. Background
    2. Changes to the Postacute Care Transfer MS-DRGs
    K. Short Inpatient Hospital Stays
    L. Interim Final Rule With Comment Period Implementing 
Legislative Extensions Relating to the Payment Adjustment for Low-
Volume Hospitals and the Medicare-Dependent, Small Rural Hospital 
(MDH) Program
    1. Recent Legislation
    2. Payment Adjustment for Low-Volume Hospitals (Sec.  412.101)
    a. Background
    b. Implementation of Provisions of the MACRA for FY 2015
    c. Low-Volume Hospital Definition and Payment Adjustment for FY 
2016
    3. Medicare-Dependent, Small Rural Hospital (MDH) Program (Sec.  
412.108)
    a. Background for MDH Program
    b. MACRA Provisions for Extension of the MDH Program
    4. Response to Comments
    5. Waiver of Notice of Proposed Rulemaking and Delay in 
Effective Date
    6. Collection of Information Requirements
    7. Impact of Legislative Changes
V. Changes to the IPPS for Capital-Related Costs
A. Overview
B. Additional Provisions
1. Exception Payments
2. New Hospitals
3. Hospitals Located in Puerto Rico
C. Annual Update for FY 2016
VI. Changes for Hospitals Excluded from the IPPS
    A. Rate-of-Increase in Payments To Excluded Hospitals for FY 
2016
    B. Report of Adjustment (Exceptions) Payments
    C. Out of Scope Comments Relating to Critical Access Hospitals 
(CAHs) Inpatient Services
VII. Changes to the Long-Term Care Hospital Prospective Payment 
System (LTCH PPS) for FY 2016
    A. Background of the LTCH PPS
    1. Legislative and Regulatory Authority
    2. Criteria for Classification as an LTCH
    a. Classification as an LTCH
    b. Hospitals Excluded From the LTCH PPS
    3. Limitation on Charges to Beneficiaries
    4. Administrative Simplification Compliance Act (ASCA) and 
Health Insurance Portability and Accountability Act (HIPAA) 
Compliance
    B. Application of Site Neutral Payment Rate (New Sec.  412.522)
    1. Overview
    2. Application of the Site Neutral Payment Rate Under the LTCH 
PPS
    3. Criteria for Exclusion from the Site Neutral Payment Rate
    a. Statutory Provisions
    b. Implementation of Criterion for a Principal Diagnosis 
Relating to a Psychiatric Diagnosis or to Rehabilitation
    c. Addition of Definition of ``Subsection (d) Hospital'' to LTCH 
Regulations
    d. Interpretation of ``Immediately Preceded'' by a Subsection 
(d) Hospital Discharge
    e. Implementation of Intensive Care Unit (ICU) Criterion
    f. Implementation of the Ventilator Criterion
    4. Determination of the Site Neutral Payment Rate (Proposed New 
Sec.  412.522(c))
    a. General
    b. Blended Payment Rate for FY 2016 and FY 2017
    c. LTCH PPS Standard Federal Payment Rate
    5. Application of Certain Exiting LTCH PPS Payment Adjustments 
to Payments Made Under the Site Neutral Payment Rate
    6. LTCH Discharge Payment Percentage
    7. Additional LTCH PPS Policy Considerations Related to the 
Implementation of the Site Neutral Payment Rate Required by Section 
1206(a) of Public Law 113-67
    a. MS-LTC-DRG Relative Payment Weights
    b. High-Cost Outliers
    c. Limitation on Charges to Beneficiaries
    C. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-
LTC-DRG) Classifications and Relative Weights for FY 2016
    1. Background
    2. Patient Classifications into MS-LTC-DRGs
    a. Background
    b. Changes to the MS-LTC-DRGs for FY 2016
    3. Development of the FY 2016 MS-LTC-DRG Relative Weights
    a. General Overview of the Development of the MS-LTC-DRG 
Relative Weights
    b. Development of the MS-LTC-DRG Relative Weights for FY 2016
    c. Data
    d. Hospital-Specific Relative Value (HSRV) Methodology
    e. Treatment of Severity Levels in Developing the MS-LTC-DRG 
Relative Weights
    f. Low-Volume MS-LTC-DRGs
    g. Steps for Determining the Proposed FY 2016 MS-LTC-DRG 
Relative Weights
    D. Changes to the LTCH PPS Standard Payment Rates for FY 2016
    1. Overview of Development of the LTCH PPS Standard Federal 
Payment Rates
    2. FY 2016 LTCH PPS Annual Market Basket Update
    a. Overview
    b. Revision of Certain Market Basket Updates as Required by the 
Affordable Care Act
    c. Adjustment to the Annual Update to the LTCH PPS Standard 
Federal Rate Under the Long-Term Care Hospital Quality Reporting 
Program (LTCH QRP)
    d. Market Basket Under the LTCH PPS for FY 2016
    e. Annual Market Basket Update for LTCHs for FY 2016
    E. Moratoria on the Establishment of LTCHs and LTCH Satellite 
Facilities and on the Increase in Number of Beds in Existing LTCHs 
and LTCH Satellite Facilities
    F. Changes to Average Length of Stay Criterion Under Public Law 
113-67 (Sec.  412.23)
VIII. Quality Data Reporting Requirements for Specific Providers and 
Suppliers for FY 2016
    A. Hospital Inpatient Quality Reporting (IQR) Program
    1. Background
    a. History of the Hospital IQR Program
    b. Maintenance of Technical Specifications for Quality Measures
    c. Public Display of Quality Measures
    2. Process for Retaining Previously Adopted Hospital IQR Program 
Measures for Subsequent Payment Determinations
    3. Removal and Suspension of Hospital IQR Program Measures
    a. Considerations in Removing Quality Measures From the Hospital 
IQR Program
    b. Removal of Hospital IQR Program Measures for the FY 2018 
Payment Determination and Subsequent Years

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    4. Previously Adopted Hospital IQR Program Measures for the FY 
2017 Payment Determination and Subsequent Years
    a. Background
    b. NHSN Measures Standard Population Data
    5. Expansion and Updating of Quality Measures
    6. Refinements of Existing Measures in the Hospital IQR Program
    a. Refinement of Hospital 30-Day, All-Cause, Risk-Standardized 
Mortality Rate (RSMR) Following Pneumonia Hospitalization (NQF 
#0468) Measure Cohort
    b. Refinement of Hospital 30-Day, All-Cause, Risk-Standardized 
Readmission Rate (RSRR) Following Pneumonia Hospitalization (NQF 
#0468) Measure Cohort
    7. Additional Hospital IQR Program Measures for the FY 2018 and 
FY 2019 Payment Determinations and Subsequent Years
    a. Hospital Survey on Patient Safety Culture
    b. Clinical Episode-Based Payment Measures
    c. Hospital-Level, Risk-Standardized Payment Associated With a 
90-Day Episode-of-Care for Elective Primary Total Hip Arthroplasty 
(THA) and/or Total Knee Arthroplasty (TKA)
    d. Excess Days in Acute Care After Hospitalization for Acute 
Myocardial Infarction
    e. Excess Days in Acute Care After Hospitalization for Heart 
Failure
    f. Summary of Previously Adopted and New Hospital IQR Program 
Measure Set for the FY 2018 and FY 2019 Payment Determinations and 
Subsequent Years
    8. Electronic Clinical Quality Measures
    a. Previously Adopted Voluntarily Reported Electronic Clinical 
Quality Measures for the FY 2017 Payment Determination
    b. Clarification of the Venous Thromboembolism (VTE) Prophylaxis 
(STK--01) Measure (NQF #0434)
    c. Requirements for Hospitals To Report Electronic Clinical 
Quality Measures for the FY 2018 Payment Determination and 
Subsequent Years
    9. Future Considerations for Electronically Specified Measures: 
Consideration To Implement a New Type of Measure That Utilizes Core 
Clinical Data Elements
    a. Background
    b. Overview of Core Clinical Data Elements
    c. Core Clinical Data Elements Development
    d. Core Clinical Data Elements Feasibility Testing Using 
Readmission and Mortality Models
    e. Use of Core Clinical Data Elements in Hospital Quality 
Measures for the Hospital IQR Program
    f. Content Exchange Standard Considerations for Core Clinical 
Data Elements
    10. Form, Manner, and Timing of Quality Data Submission
    a. Background
    b. Procedural Requirements for the FY 2018 Payment Determination 
and Subsequent Years
    c. Data Submission Requirements for Chart-Abstracted Measures
    d. Alignment of the Medicare EHR Incentive Program Reporting for 
Eligible Hospitals and CAHs With the Hospital IQR Program
    e. Sampling and Case Thresholds for the FY 2018 Payment 
Determination and Subsequent Years
    f. HCAHPS Requirements for the FY 2018 Payment Determination and 
Subsequent Years
    g. Data Submission Requirements for Structural Measures for the 
FY 2018 Payment Determination and Subsequent Years
    h. Data Submission and Reporting Requirements for Healthcare-
Associated Infection (HAI) Measures Reported via NHSN
    11. Modifications to the Existing Processes for Validation of 
Hospital IQR Program Data
    a. Background
    b. Modifications to the Existing Processes for Validation of 
Chart-Abstracted Hospital IQR Program Data
    12. Data Accuracy and Completeness Acknowledgement Requirements 
for the FY 2018 Payment Determination and Subsequent Years
    13. Public Display Requirements for the FY 2018 Payment 
Determination and Subsequent Years
    14. Reconsideration and Appeal Procedures for the FY 2018 
Payment Determination and Subsequent Years
    15. Hospital IQR Program Extraordinary Circumstances Extensions 
or Exemptions
    B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
    1. Statutory Authority
    2. Removal of Six Surgical Care Improvement Project (SCIP) 
Measures From the PCHQR Program Beginning With Fourth Quarter (Q4) 
2015 Discharges and for Subsequent Years
    3. New Quality Measures Beginning With the FY 2018 Program
    a. Considerations in the Selection of Quality Measures
    b. Summary of New Measures
    c. CDC NHSN Facility-Wide Inpatient Hospital-Onset Clostridium 
Difficile (C. difficile) Infection (CDI) Outcome Measure (NQF #1717)
    d. CDC NHSN Facility-Wide Inpatient Hospital-Onset Methicillin-
Resistant Staphylococcus Aureus (MSRA) Bacteremia Outcome Measure 
(NQF #1716)
    e. CDC NHSN Influenza Vaccination Coverage Among Healthcare 
Personnel (HCP) Measure (NQF #0431) (CDC NHSN HCP Measure)
    4. Possible New Quality Measure Topics for Future Years
    5. Maintenance of Technical Specifications for Quality Measures
    6. Public Display Requirements
    a. Background
    b. Additional Public Display Requirements
    7. Form, Manner, and Timing of Data Submission
    a. Background
    b. Reporting Requirements for the Proposed New Measures: CDC 
NHSN CDI (NQF #1717), CDC NHSN MRSA (NQF #1716), and CDC NHSN HCP 
(NQF #0431) Measures
    C. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
    1. Background and Statutory Authority
    2. General Considerations Used for Selection, Resource Use, and 
Other Quality Measures for the LTCH QRP
    3. Policy for Retention of LTCH QRP Measures Adopted for 
Previous Payment Determinations
    4. Policy for Adopting Changes to LTCH QRP Measures
    5. Previously Adopted Quality Measures
    a. Previously Adopted Quality Measures for the FY 2015 and FY 
2016 Payment Determinations and Subsequent Years
    b. Previously Adopted Quality Measures for the FY 2017 and FY 
2018 Payment Determinations and Subsequent Years
    6. Previously Adopted LTCH QRP Quality Measures for the FY 2018 
Payment Determinations and Subsequent Years
    a. Policy to Reflect NQF Endorsement: All-Cause Unplanned 
Readmission Measure for 30 Days Post-Discharge From LTCHs (NQF 
#2512)
    b. Policy To Address the IMPACT Act of 2014: Quality Measure 
Addressing the Domain of Skin Integrity and Changes in Skin 
Integrity: Percent of Residents or Patients With Pressure Ulcers 
That Are New or Worsened (Short Stay) (NQF #0678)
    c. Policy To Address the IMPACT Act of 2014: Quality Measure 
Addressing the Domain of Incidence of Major Falls: Application of 
Percent of Residents Experiencing One or More Falls With Major 
Injury (Long Stay) (NQF #0674)
    d. Policy To Address the IMPACT Act of 2014: Quality Measure 
Addressing the Domain of Functional Status, Cognitive Function, and 
Changes in Function and Cognitive Function: Application of Percent 
of LTCH Patients With an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function (NQF #2631; Under 
NQF review)
    7. LTCH QRP Quality Measures for the FY 2019 Payment 
Determination and Subsequent Years
    8. LTCH QRP Quality Measures and Concepts Under Consideration 
for Future Years
    9. Form, Manner, and Timing of Quality Data Submission for the 
FY 2016 Payment Determinations and Subsequent Years
    a. Background
    b. Timing for New LTCHs To Begin Reporting Data to CMS for the 
FY 2017 Payment Determinations and Subsequent Years
    c. Revisions to Previously Adopted Data Submission Timelines 
Under the LTCH QRP for the FY 2017 and FY 2018 Payment 
Determinations and Subsequent Years and Data Collection and Data 
Submission Timelines for Quality Measures in This Final Rule

[[Page 49333]]

    10. Previously Adopted LTCH QRP Data Completion Thresholds for 
the FY 2016 Payment Determination and Subsequent Years
    11. Future LTCH QRP Data Validation Process
    12. Public Display of Quality Measure Data for the LTCH QRP
    13. Previously Adopted and New LTCH QRP Reconsideration and 
Appeals Procedures for the FY 2017 Payment Determination and 
Subsequent Years
    14. Previously Adopted and New LTCH QRP Submission Exception and 
Extension Requirements for the FY 2017 Payment Determination and 
Subsequent Years
    D. Clinical Quality Measurement for Eligible Hospitals and 
Critical Access Hospitals (CAHs) Participating in the EHR Incentive 
Programs in 2016
    1. Background
    2. CQM Reporting for the Medicare and Medicaid EHR Incentive 
Programs in 2016
    a. Background
    b. CQM Reporting Period for the Medicare and Medicaid EHR 
Incentive Programs for CY 2016
    c. CQM Form and Method for the Medicare EHR Incentive Programs 
for 2016
    3. ``CQM--Report'' Certification Criterion in ONC's 2015 Edition 
Proposed Rule
    4. CQM Development and Certification Cycle
IX. MedPAC Recommendations
X. Other Required Information
    A. Requests for Data From the Public
    B. Collection of Information Requirements
    1. Statutory Requirement for Solicitation of Comments
    2. ICRs for Add-On Payments for New Services and Technologies
    3. ICRs for the Occupational Mix Adjustment to the FY 2016 Wage 
Index (Hospital Wage Index Occupational Mix Survey)
    4. Hospital Applications for Geographic Reclassifications by the 
MGCRB
    5. ICRs for the Hospital Inpatient Quality Reporting (IQR) 
Program
    6. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) 
Program
    7. ICRs for Hospital Value-Based Purchasing (VBP) Program
    8. ICRs for the Long-Term Care Hospital Quality Reporting 
Program (LTCHQR)

Regulation Text

Addendum--Schedule of Standardized Amounts, Update Factors, and Rate-
of-Increase Percentages Effective With Cost Reporting Periods Beginning 
on or After October 1, 2015 and Payment Rates for LTCHs Effective With 
Discharges Occurring on or After October 1, 2015

I. Summary and Background
II. Changes to the Prospective Payment Rates for Hospital Inpatient 
Operating Costs for Acute Care Hospitals for FY 2016
    A. Calculation of the Adjusted Standardized Amount
    B. Adjustments for Area Wage Levels and Cost-of-Living
    C. MS-DRG Relative Weights
    D. Calculation of the Prospective Payment Rates
III. Changes to Payment Rates for Acute Care Hospital Inpatient 
Capital-Related Costs for FY 2016
    A. Determination of Federal Hospital Inpatient Capital-Related 
Prospective Payment Rate Update
    B. Calculation of the Inpatient Capital-Related Prospective 
Payments for FY 2016
    C. Capital Input Price Index
IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-
Increase Percentages for FY 2016
V. Updates to the Payment Rates for the LTCH PPS for FY 2016
    A. LTCH PPS Standard Federal Payment Rate for FY 2016
    1. Background
    2. Development of the FY 2016 LTCH PPS Standard Federal Rate
    B. Adjustment for Area Wage Levels Under the LTCH PPS Standard 
Federal Payment Rate for FY 2016
    1. Background
    2. Geographic Classifications (Labor Market Areas) for the LTCH 
PPS Standard Federal Payment Rate
    3. Labor-Related Share for the LTCH PPS Standard Federal Payment 
Rate
    4. Wage Index for FY 2016 for the LTCH PPS Standard Federal 
Payment Rate
    5. Budget Neutrality Adjustment for Changes to the LTCH PPS 
Standard Federal Payment Rate Area Wage Level Adjustment
    C. LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located 
in Alaska and Hawaii
    D. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases
    1. Overview
    2. Determining LTCH CCRs Under the LTCH PPS
    3. High-Cost Outlier Payments for LTCH PPS Standard Federal 
Payment Rate Cases
    4. High-Cost Outlier Payments for Site Neutral Payment Rate 
Cases
    E. Update to the IPPS Comparable/Equivalent Amounts To Reflect 
the Statutory Changes To the IPPS DSH Payment Adjustment Methodology
    F. Computing the Adjusted LTCH PPS Federal Prospective Payments 
for FY 2016
VI. Tables Referenced in This Final Rule and Interim Final Rule With 
Comment Period and Available Through the Internet on the CMS Web 
site

Appendix A--Economic Analyses

I. Regulatory Impact Analysis
    A. Introduction
    B. Need
    C. Objectives of the IPPS
    D. Limitations of Our Analysis
    E. Hospitals Included in and Excluded From the IPPS
    F. Effects on Hospitals and Hospital Units Excluded From the 
IPPS
    G. Quantitative Effects of the Policy Changes Under the IPPS for 
Operating Costs
    1. Basis and Methodology of Estimates
    2. Analysis of Table I
    3. Impact Analysis of Table II
    H. Effects of Other Policy Changes
    1. Effects of Policy on MS-DRGs for Preventable HACs, Including 
Infections
    2. Effects of Policy Relating to New Medical Service and 
Technology Add-On Payments
    3. Effects of Changes in Medicare DSH Payments for FY 2016
    4. Effects of Reductions Under the Hospital Readmissions 
Reduction Program
    5. Effects of Changes Under the FY 2016 Hospital Value-Based 
Purchasing (VBP) Program
    6. Effects of Changes to the HAC Reduction Program for FY 2016
    7. Effects of Modification of the Simplified Cost Allocation 
Methodology
    8. Effects of Implementation of Rural Community Hospital 
Demonstration Program
    9. Effects of Changes to List of MS-DRGs Subject to Postacute 
Care Transfer and DRG Special Pay Policy
    I. Effects of Changes in the Capital IPPS
    1. General Considerations
    2. Results
    J. Effects of Payment Rate Changes and Policy Changes Under the 
LTCH PPS
    1. Introduction and General Considerations
    2. Impact on Rural Hospitals
    3. Anticipated Effects of LTCH PPS Payment Rate Changes and 
Policy Changes
    4. Effect on the Medicare Program
    5. Effect on Medicare Beneficiaries
    K. Effects of Requirements for Hospital Inpatient Quality 
Reporting (IQR) Program
    L. Effects of Requirements for the PPS-Exempt Cancer Hospital 
Quality Reporting (PCHQR) Program for FY 2016
    M. Effects of Requirements for the LTCH Quality Reporting 
Program (LTCH QRP) for FY 2016 Through FY 2020
    N. Effects of Changes to Clinical Quality Measurement for 
Eligible Hospitals and Critical Access Hospitals Participating in 
the EHR Incentive Programs in 2016
II. Alternatives Considered
III. Overall Conclusion
    A. Acute Care Hospitals
    B. LTCHs
IV. Accounting Statements and Tables
    A. Acute Care Hospitals
    B. LTCHs
V. Regulatory Flexibility Act (RFA) Analysis
VI. Impact on Small Rural Hospitals
VII. Unfunded Mandate Reform Act (UMRA) Analysis
VIII. Executive Order 12866

Appendix B: Recommendation of Update Factors for Operating Cost Rates 
of Payment for Inpatient Hospital Services

I. Background
II. Inpatient Hospital Updates for FY 2016
    A. FY 2016 Inpatient Hospital Update
    B. Update for SCHs and MDHs for FY 2016
    C. FY 2016 Puerto Rico Hospital Update
    D. Update for Hospitals Excluded From the IPPS for FY 2016
    E. Update for LTCHs for FY 2016
III. Secretary's Recommendation

[[Page 49334]]

IV. MedPAC Recommendation for Assessing Payment Adequacy and 
Updating Payments in Traditional Medicare

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority
    This final rule makes payment and policy changes under the Medicare 
inpatient prospective payment systems (IPPS) for operating and capital-
related costs of acute care hospitals as well as for certain hospitals 
and hospital units excluded from the IPPS. In addition, it makes 
payment and policy changes for inpatient hospital services provided by 
long-term care hospitals (LTCHs) under the long-term care hospital 
prospective payment system (LTCH PPS). It also makes policy changes to 
programs associated with Medicare IPPS hospitals, IPPS-excluded 
hospitals, and LTCHs.
    This interim final rule with comment period implements the 
provisions of the Medicare Access and CHIP Reauthorization Act of 2015 
which extended the MDH Program and changes to the low-volume payment 
adjustment for hospitals through FY 2017.
    Under various statutory authorities, we are making changes to the 
Medicare IPPS, to the LTCH PPS, and to other related payment 
methodologies and programs for FY 2016 and subsequent fiscal years. 
These statutory authorities include, but are not limited to, the 
following:
     Section 1886(d) of the Social Security Act (the Act), 
which sets forth a system of payment for the operating costs of acute 
care hospital inpatient stays under Medicare Part A (Hospital 
Insurance) based on prospectively set rates. Section 1886(g) of the Act 
requires that, instead of paying for capital-related costs of inpatient 
hospital services on a reasonable cost basis, the Secretary use a 
prospective payment system (PPS).
     Section 1886(d)(1)(B) of the Act, which specifies that 
certain hospitals and hospital units are excluded from the IPPS. These 
hospitals and units are: Rehabilitation hospitals and units; LTCHs; 
psychiatric hospitals and units; children's hospitals; cancer 
hospitals; and short-term acute care hospitals located in the Virgin 
Islands, Guam, the Northern Mariana Islands, and American Samoa. 
Religious nonmedical health care institutions (RNHCIs) are also 
excluded from the IPPS.
     Sections 123(a) and (c) of Public Law 106-113 and section 
307(b)(1) of Public Law 106-554 (as codified under section 1886(m)(1) 
of the Act), which provide for the development and implementation of a 
prospective payment system for payment for inpatient hospital services 
of long-term care hospitals (LTCHs) described in section 
1886(d)(1)(B)(iv) of the Act.
     Sections 1814(l), 1820, and 1834(g) of the Act, which 
specify that payments are made to critical access hospitals (CAHs) 
(that is, rural hospitals or facilities that meet certain statutory 
requirements) for inpatient and outpatient services and that these 
payments are generally based on 101 percent of reasonable cost.
     Section 1866(k) of the Act, as added by section 3005 of 
the Affordable Care Act, which establishes a quality reporting program 
for hospitals described in section 1886(d)(1)(B)(v) of the Act, 
referred to as ``PPS-Exempt Cancer Hospitals.''
     Section 1886(d)(4)(D) of the Act, which addresses certain 
hospital-acquired conditions (HACs), including infections. Section 
1886(d)(4)(D) of the Act specifies that, by October 1, 2007, the 
Secretary was required to select, in consultation with the Centers for 
Disease Control and Prevention (CDC), at least two conditions that: (a) 
Are high cost, high volume, or both; (b) are assigned to a higher 
paying MS-DRG when present as a secondary diagnosis (that is, 
conditions under the MS-DRG system that are complications or 
comorbidities (CCs) or major complications or comorbidities (MCCs); and 
(c) could reasonably have been prevented through the application of 
evidence-based guidelines. Section 1886(d)(4)(D) of the Act also 
specifies that the list of conditions may be revised, again in 
consultation with CDC, from time to time as long as the list contains 
at least two conditions. Section 1886(d)(4)(D)(iii) of the Act requires 
that hospitals, effective with discharges occurring on or after October 
1, 2007, submit information on Medicare claims specifying whether 
diagnoses were present on admission (POA). Section 1886(d)(4)(D)(i) of 
the Act specifies that effective for discharges occurring on or after 
October 1, 2008, Medicare no longer assigns an inpatient hospital 
discharge to a higher paying MS-DRG if a selected condition is not POA.
     Section 1886(a)(4) of the Act, which specifies that costs 
of approved educational activities are excluded from the operating 
costs of inpatient hospital services. Hospitals with approved graduate 
medical education (GME) programs are paid for the direct costs of GME 
in accordance with section 1886(h) of the Act. A payment for indirect 
medical education (IME) is made under section 1886(d)(5)(B) of the Act.
     Section 1886(b)(3)(B)(viii) of the Act, which requires the 
Secretary to reduce the applicable percentage increase in payments to a 
subsection (d) hospital for a fiscal year if the hospital does not 
submit data on measures in a form and manner, and at a time, specified 
by the Secretary.
     Section 1886(o) of the Act, which requires the Secretary 
to establish a Hospital Value-Based Purchasing (VBP) Program under 
which value-based incentive payments are made in a fiscal year to 
hospitals meeting performance standards established for a performance 
period for such fiscal year.
     Section 1886(p) of the Act, as added by section 3008 of 
the Affordable Care Act, which establishes an adjustment to hospital 
payments for hospital-acquired conditions (HACs), or a Hospital-
Acquired Condition (HAC) Reduction Program, under which payments to 
applicable hospitals are adjusted to provide an incentive to reduce 
hospital-acquired conditions.
     Section 1886(q) of the Act, as added by section 3025 of 
the Affordable Care Act and amended by section 10309 of the Affordable 
Care Act, which establishes the ``Hospital Readmissions Reduction 
Program'' effective for discharges from an ``applicable hospital'' 
beginning on or after October 1, 2012, under which payments to those 
hospitals under section 1886(d) of the Act will be reduced to account 
for certain excess readmissions.
     Section 1886(r) of the Act, as added by section 3133 of 
the Affordable Care Act, which provides for a reduction to 
disproportionate share hospital payments under section 1886(d)(5)(F) of 
the Act and for a new uncompensated care payment to eligible hospitals. 
Specifically, section 1886(r) of the Act requires that, for fiscal year 
2014 and each subsequent fiscal year, subsection (d) hospitals that 
would otherwise receive a disproportionate share hospital payment made 
under section 1886(d)(5)(F) of the Act will receive two separate 
payments: (1) 25 percent of the amount they previously would have 
received under section 1886(d)(5)(F) of the Act for DSH (``the 
empirically justified amount''), and (2) an additional payment for the 
DSH hospital's proportion of uncompensated care, determined as the 
product of three factors. These three factors are: (1) 75 percent of 
the payments that would otherwise be made under section 1886(d)(5)(F) 
of the Act; (2) 1 minus the percent change in the percent of 
individuals under the age of 65 who are uninsured (minus 0.1 percentage 
points for FY 2014, and minus 0.2 percentage points for FY 2015 through 
FY 2017);

[[Page 49335]]

and (3) a hospital's uncompensated care amount relative to the 
uncompensated care amount of all DSH hospitals expressed as a 
percentage.
     Section 1886(m)(6) of the Act, as added by section 
1206(a)(1) of the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), 
which provided for the establishment of site neutral payment rate 
criteria under the LTCH PPS with implementation beginning in FY 2016.
     Section 1206(b)(1) of the Pathway for SGR Reform Act of 
2013, which further amended section 114(c) of the MMSEA, as amended by 
section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the 
Affordable Care Act, by retroactively reestablishing and extending the 
statutory moratorium on the full implementation of the 25-percent 
threshold payment adjustment policy under the LTCH PPS so that the 
policy will be in effect for 9 years (except for ``grandfathered'' 
hospital-within-hospitals (HwHs), which are permanently exempt from 
this policy); and section 1206(b)(2) (as amended by section 112(b) of 
Pub. L. 113-93), which together further amended section 114(d) of the 
MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) 
and 10312(a) of the Affordable Care Act to establish a new moratoria 
(subject to certain defined exceptions) on the development of new LTCHs 
and LTCH satellite facilities and a new moratorium on increases in the 
number of beds in existing LTCHs and LTCH satellite facilities 
beginning January 1, 2015 and ending on September 30, 2017; and section 
1206(d), which instructs the Secretary to evaluate payments to LTCHs 
classified under section 1886(b)(1)(C)(iv)(II) of the Act and to adjust 
payment rates in FY 2015 or FY 2016 under the LTCH PPS, as appropriate, 
based upon the evaluation findings.
     Section 1886(m)(5)(D)(iv) of the Act, as added by section 
1206(c) of the Pathway for SGR Reform Act of 2013, which provides for 
the establishment, no later than October 1, 2015, of a functional 
status quality measure under the LTCH QRP for change in mobility among 
inpatients requiring ventilator support.
     Section 1899B of the Act, as added by the Improving 
Medicare Post-Acute Care Transformation Act of 2014 (the IMPACT Act of 
2014), which imposes new data reporting requirements for certain 
postacute care providers, including LTCHs.
     Section 1886(d)(12) of the Act, as amended by section 204 
of the Medicare Access and CHIP Reauthorization Act of 2015, which 
extended, through FY 2017, changes to the inpatient hospital payment 
adjustment for certain low-volume hospitals; and section 1886(d)(5)(G) 
of the Act, as amended by section 205 of the Medicare Access and CHIP 
Reauthorization Act of 2015, which extended, through FY 2017, the 
Medicare-dependent, small rural hospital (MDH) program.
2. Summary of the Major Provisions
a. MS-DRG Documentation and Coding Adjustment
    Section 631 of the American Taxpayer Relief Act (ATRA, Pub. L. 112-
240) amended section 7(b)(1)(B) of Public Law 110-90 to require the 
Secretary to make a recoupment adjustment to the standardized amount of 
Medicare payments to acute care hospitals to account for changes in MS-
DRG documentation and coding that do not reflect real changes in case-
mix, totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016, 
and 2017. This adjustment represents the amount of the increase in 
aggregate payments as a result of not completing the prospective 
adjustment authorized under section 7(b)(1)(A) of Public Law 110-90 
until FY 2013. Prior to the ATRA, this amount could not have been 
recovered under Public Law 110-90.
    While our actuaries estimated that a -9.3 percent adjustment to the 
standardized amount would be necessary if CMS were to fully recover the 
$11 billion recoupment required by section 631 of the ATRA in one year, 
it is often our practice to delay or phase in rate adjustments over 
more than one year, in order to moderate the effects on rates in any 
one year. Therefore, consistent with the policies that we have adopted 
in many similar cases, we made a -0.8 percent recoupment adjustment to 
the standardized amount in FY 2014 and FY 2015. For FY 2016, we are 
making an additional -0.8 percent recoupment adjustment to the 
standardized amount.
b. Reduction of Hospital Payments for Excess Readmissions
    We are making changes in policies to the Hospital Readmissions 
Reduction Program, which is established under section 1886(q) of the 
Act, as added by section 3025 of the Affordable Care Act. The Hospital 
Readmissions Reduction Program requires a reduction to a hospital's 
base operating DRG payment to account for excess readmissions of 
selected applicable conditions. For FYs 2013 and 2014, these conditions 
are acute myocardial infarction, heart failure, and pneumonia. For FY 
2014, we established additional exclusions to the three existing 
readmission measures (that is, the excess readmission ratio) to account 
for additional planned readmissions. We also established additional 
readmissions measures, chronic obstructive pulmonary disease (COPD), 
and total hip arthroplasty and total knee arthroplasty (THA/TKA), to be 
used in the Hospital Readmissions Reduction Program for FY 2015 and 
future years. We expanded the readmissions measures for FY 2017 and 
future years by adding a measure of patients readmitted following 
coronary artery bypass graft (CABG) surgery.
    In this final rule, we are making a refinement to the pneumonia 
readmissions measure, which expands the measure cohort for the FY 2017 
payment determination and subsequent years. Specifically, we are 
finalizing a modified version of the expanded pneumonia cohort from 
what we had specified in the FY 2016 IPPS/LTCH PPS proposed rule such 
that the modified version includes patients with a principal discharge 
diagnosis of pneumonia or aspiration pneumonia, and patients with a 
principal discharge diagnosis of sepsis with a secondary diagnosis of 
pneumonia coded as present on admission. However, we are not including 
patients with a principal discharge diagnosis of respiratory failure or 
patients with a principal discharge diagnosis of sepsis if they are 
coded as having severe sepsis as we had previously proposed. In 
addition, we are adopting an extraordinary circumstance exception 
policy that will align with existing extraordinary circumstance 
exception policies for other IPPS quality reporting and payment 
programs and will allow hospitals that experience an extraordinary 
circumstance (such as a hurricane or flood) to request a waiver for use 
of data from the affected time period.
c. Hospital Value-Based Purchasing (VBP) Program
    Section 1886(o) of the Act requires the Secretary to establish a 
Hospital VBP Program under which value-based incentive payments are 
made in a fiscal year to hospitals based on their performance on 
measures established for a performance period for such fiscal year.
    For FY 2016, we are adopting one additional measure beginning with 
the FY 2018 program year and one measure beginning with the FY 2021 
program year. We also are removing two measures beginning with the FY 
2018 program year. In addition, we are moving one measure to the Safety 
domain and removing the Clinical Care--Process subdomain and renaming 
the Clinical Care--Outcomes subdomain

[[Page 49336]]

as the Clinical Care domain. Finally, we are signaling our intent to 
propose in future rulemaking to expand one measure and to update the 
standard population data we use to calculate several measures beginning 
with the FY 2019 program year.
d. Hospital-Acquired Condition (HAC) Reduction Program
    Section 1886(p) of the Act, as added under section 3008(a) of the 
Affordable Care Act, establishes an incentive to hospitals to reduce 
the incidence of hospital-acquired conditions by requiring the 
Secretary to make an adjustment to payments to applicable hospitals 
effective for discharges beginning on October 1, 2014 and for 
subsequent program years. This 1-percent payment reduction applies to a 
hospital whose ranking is in the top quartile (25 percent) of all 
applicable hospitals, relative to the national average, of conditions 
acquired during the applicable period and on all of the hospital's 
discharges for the specified fiscal year. The amount of payment shall 
be equal to 99 percent of the amount of payment that would otherwise 
apply to such discharges under section 1886(d) or 1814(b)(3) of the 
Act, as applicable.
    In this final rule, we are making three changes to existing 
Hospital-Acquired Condition Reduction Program policies: (1) An 
expansion to the population covered by the central line-associated 
bloodstream infection (CLABSI) and catheter-associated urinary tract 
infection (CAUTI) measures to include patients in select nonintensive 
care unit sites within a hospital; (2) an adjustment to the relative 
contribution of each domain to the Total HAC Score which is used to 
determine if a hospital will receive the payment adjustment; and (3) a 
policy that will align with existing extraordinary circumstance 
exception policies for other IPPS quality reporting and payment 
programs and will allow hospitals to request a waiver for use of data 
from the affected time period.
e. DSH Payment Adjustment and Additional Payment for Uncompensated Care
    Section 3133 of the Affordable Care Act modified the Medicare 
disproportionate share hospital (DSH) payment methodology beginning in 
FY 2014. Under section 1886(r) of the Act, which was added by section 
3133 of the Affordable Care Act, starting in FY 2014, DSHs will receive 
25 percent of the amount they previously would have received under the 
statutory formula for Medicare DSH payments in section 1886(d)(5)(F) of 
the Act. The remaining amount, equal to 75 percent of what otherwise 
would have been paid as Medicare DSH payments, will be paid as 
additional payments after the amount is reduced for changes in the 
percentage of individuals that are uninsured. Each Medicare DSH 
hospital will receive an additional payment based on its share of the 
total amount of uncompensated care for all Medicare DSH hospitals for a 
given time period.
    In this final rule, we are updating our estimates of the three 
factors used to determine uncompensated care payments for FY 2016. We 
are continuing to use the methodology we established in FY 2015 to 
calculate the uncompensated care payment amounts for merged hospitals 
such that we combine uncompensated care data for the hospitals that 
have undergone a merger in order to calculate their relative share of 
uncompensated care. We also are changing the time period of the data 
used to calculate the uncompensated care payment amounts to be 
distributed.
f. Changes to the LTCH PPS
    Under the current LTCH PPS, all discharges are paid under the LTCH 
PPS standard Federal payment rate. In this final rule, we are 
implementing section 1206 of the Pathway for SGR Reform Act, which 
requires the establishment of an alternative site neutral payment rate 
for Medicare discharges from an LTCH that fail to meet certain 
statutory defined criteria, beginning with LTCH discharges occurring in 
cost reporting periods beginning on or after October 1, 2015. We 
include provisions regarding the application of the site neutral 
payment rate and the criteria for exclusion from the site neutral 
payment rate, as well as provisions on a number of methodological and 
implementation issues, such as the criterion for a principal diagnosis 
relating to a psychiatric diagnosis or to rehabilitation, the intensive 
care unit (ICU) criterion, the ventilator criterion, the definition of 
``immediately preceded'' by a subsection (d) hospital discharge, 
limitation on beneficiary charges in the context of the new site 
neutral payment rate, and the transitional blended payment rate 
methodology for FY 2016 and FY 2017.
    In addition, we are making changes to address certain statutory 
requirements related to an LTCH's average length of stay criterion and 
discharge payment percentage. We also are providing technical 
clarifications relating to our FY 2015 implementation of the new 
statutory moratoria on the establishment of new LTCHs and LTCH 
satellite facilities (subject to certain defined exceptions) and on bed 
increases in existing LTCHs and LTCH satellite facilities as well as 
making a technical revision to the regulations to more clearly reflect 
our established policies.
g. Hospital Inpatient Quality Reporting (IQR) Program
    Under section 1886(b)(3)(B)(viii) of the Act, hospitals are 
required to report data on measures selected by the Secretary for the 
Hospital IQR Program in order to receive the full annual percentage 
increase in payments. In past years, we have established measures for 
reporting data and the process for submittal and validation of the 
data.
    In this final rule, we are updating considerations for measure 
removal and retention. In addition, we are removing nine chart-
abstracted measures for the FY 2018 payment determination and 
subsequent years: Six of these measures are ``topped-out'' (STK-01, 
STK-06, STK-08, VTE-1, VTE-2, and VTE-3) and two of the measures are 
suspended (IMM-1 and SCIP-Inf-4). However, we are retaining the 
electronic versions of five of the chart-abstracted measures finalized 
for removal.
    We are refining two previously adopted measures for the FY 2018 
payment determination and subsequent years. We are also adding seven 
new measures: Three new claims-based measures and one structural 
measure for the FY 2018 payment determination and subsequent years; and 
three new claims-based measures for the FY 2019 payment determination 
and subsequent years.
    Further, for the FY 2018 payment determination, we are requiring 
hospitals to report a minimum of 4 electronic clinical quality 
measures. Under this modification to our proposal, no NQS domain 
distribution will be required. We are requiring that hospitals submit 
one quarter of electronic clinical quality measure data from either Q3 
or Q4 of CY 2016 with a submission deadline of February 28, 2017. For 
the reporting of electronic clinical quality measures, hospitals may be 
certified either to the CEHRT 2014 or 2015 Edition, but must submit 
using the QRDA I format. We plan to finalize public reporting of 
electronic data in next year's rulemaking after the conclusion and 
assessment of the validation pilot. Six previously adopted measures 
(ED-1, ED-2, PC-01, STK-04, VTE-5, and VTE-6) must still be submitted 
via chart-abstraction regardless of whether they are also submitted as 
electronic clinical quality measures. We are also continuing our policy 
regarding STK-01 to clarify that

[[Page 49337]]

hospitals need not report the STK-01 measure as part of the STK measure 
set if reporting electronically, because no electronic specification 
existed for STK-01. Beginning with the FY 2018 payment determination, 
we are expanding our previously established extraordinary circumstances 
extensions/exemptions policy (79 FR 50277) to allow hospitals to 
utilize the existing Extraordinary Circumstances Exception (ECE) form 
to request exemptions based on hardships in reporting eCQMs.
    Finally, we are modifying the existing processes for validation of 
chart-abstracted Hospital IQR Program data to remove one stratum.
h. Long-Term Care Quality Reporting Program (LTCH QRP)
    Section 3004(a) of the Affordable Care Act amended section 
1886(m)(5) of the Act to require the Secretary to establish the Long-
Term Care Hospital Quality Reporting Program (LTCH QRP). This program 
applies to all hospitals certified by Medicare as LTCHs. Beginning with 
the FY 2014 payment determination and subsequent years, the Secretary 
is required to reduce any annual update to the standard Federal rate 
for discharges occurring during such fiscal year by 2 percentage points 
for any LTCH that does not comply with the requirements established by 
the Secretary.
    The IMPACT Act of 2014 amended the Act in ways that affect the LTCH 
QRP. Specifically, section 2(a) of the IMPACT Act of 2014 added section 
1899B of the Act, and section 2(c)(3) of the IMPACT Act of 2014 amended 
section 1886(m)(5) of the Act. Under section 1899B(a)(1) of the Act, 
the Secretary must require post-acute care (PAC) providers (defined in 
section 1899B(a)(2)(A) of the Act to include HHAs, SNFs, IRFs, and 
LTCHs) to submit standardized patient assessment data in accordance 
with section 1899B(b) of the Act, data on quality measures required 
under section 1899B(c)(1) of the Act, and data on resource use and 
other measures required under section 1899B(d)(1) of the Act. The Act 
also sets out specified application dates for each of the measures. The 
Secretary must specify the quality, resource use, and other measures 
not later than the applicable specified application date defined in 
section 1899B(a)(2)(E) of the Act.
    In this final rule, we are establishing three previously finalized 
quality measures: One measure establishes the newly NQF-endorsed status 
of that quality measure; two other measures are for the purpose of 
establishing the cross-setting use of the previously finalized quality 
measures, in order to satisfy the IMPACT Act of 2014 requirement of 
adopting quality measures under the domains of skin integrity and falls 
with major injury. We are adopting an application of a fourth 
previously finalized LTCH functional status measure in order to meet 
the requirement of the IMPACT Act of 2014 to adopt a cross-setting 
measure under the domain of functional status, such as self-care or 
mobility. All four measures effect the FY 2018 annual payment update 
determination and beyond.
    In addition, we will publicly report LTCH quality data beginning in 
fall 2016, on a CMS Web site, such as Hospital Compare. We will 
initially publicly report quality data on four quality measures.
    Finally, we are lengthening our quarterly data submission deadlines 
from 45 days to 135 days beyond the end of each calendar year quarter 
beginning with quarter four (4) 2015 quality data. We are making this 
change in order to align with other quality reporting programs, and to 
allow an appropriate amount of time for LTCHs to review and correct 
quality data prior to the public posting of that data.
3. Summary of Costs and Benefits
     Adjustment for MS-DRG Documentation and Coding Changes. We 
are making a -0.8 percent recoupment adjustment to the standardized 
amount for FY 2016 to implement, in part, the requirement of section 
631 of the ATRA that the Secretary make an adjustment totaling $11 
billion over a 4-year period of FYs 2014, 2015, 2016, and 2017. This 
recoupment adjustment represents the amount of the increase in 
aggregate payments as a result of not completing the prospective 
adjustment authorized under section 7(b)(1)(A) of Public Law 110-90 
until FY 2013. Prior to the ATRA, this amount could not have been 
recovered under Public Law 110-90.
    While our actuaries estimated that a -9.3 percent recoupment 
adjustment to the standardized amount would be necessary if CMS were to 
fully recover the $11 billion recoupment required by section 631 of the 
ATRA in FY 2014, it is often our practice to delay or phase in rate 
adjustments over more than one year, in order to moderate the effects 
on rates in any one year. Therefore, consistent with the policies that 
we have adopted in many similar cases and the adjustment we made for FY 
2014, we are making a -0.8 percent recoupment adjustment to the 
standardized amount in FY 2016. Taking into account the cumulative 
effects of this adjustment and the adjustments made in FYs 2014 and 
2015, we currently estimate that approximately $5 to $6 billion would 
be left to recover under section 631 of the ATRA by the end of FY 2016. 
We have not yet addressed the specific amount of the final adjustment 
required under section 631 of the ATRA for FY 2017. We intend to 
address this adjustment in the FY 2017 IPPS rulemaking. However, we 
note that section 414 of the MACRA (Pub. L. 114-10), enacted on April 
16, 2015, replaced the single positive adjustment we intended to make 
in FY 2018 with a 0.5 percent positive adjustment for each of FYs 2018 
through 2023. The provision under section 414 of the MACRA does not 
impact our FY 2016 recoupment adjustment, and we will address this 
MACRA provision in future rulemaking.
     Changes to the Hospital Readmissions Reduction Program. We 
are making a refinement to the pneumonia readmissions measure, which 
will expand the measure cohort for the FY 2017 payment determination 
and subsequent years. In addition, we are adopting an extraordinary 
circumstance exception policy that will align with existing 
extraordinary circumstance exception policies for other IPPS quality 
reporting and payment programs and will allow hospitals that experience 
an extraordinary circumstance (such as a hurricane or flood) to request 
a waiver for use of data from the affected time period. These changes 
will not significantly impact the program in FY 2016, but could impact 
future years, depending on actual experience.
    Overall, in this final rule, we estimate that 2,666 hospitals will 
have their base operating DRG payments reduced by their proxy FY 2016 
hospital-specific readmissions adjustment. As a result, we estimate 
that the Hospital Readmissions Reduction Program will save 
approximately $420 million in FY 2016, an increase of $6 million over 
the estimated FY 2015 savings.
     Value-Based Incentive Payments under the Hospital VBP 
Program. We estimate that there will be no net financial impact to the 
Hospital VBP Program for the FY 2016 program year in the aggregate 
because, by law, the amount available for value-based incentive 
payments under the program in a given year must be equal to the total 
amount of base operating MS-DRG payment amount reductions for that 
year, as estimated by the Secretary. The estimated amount of base 
operating MS-DRG payment amount reductions for the FY 2016 program year 
and, therefore, the estimated amount available for value-based 
incentive payments for FY

[[Page 49338]]

2016 discharges is approximately $1.5 billion.
     Changes to the HAC Reduction Program for FY 2016. We are 
making three changes to existing HAC Reduction Program policies: (1) An 
expansion to the population covered by the central line-associated 
bloodstream infection (CLABSI) and catheter-associated urinary tract 
infection (CAUTI) measures to include patients in select nonintensive 
care unit sites within a hospital; (2) an adjustment to the relative 
contribution of each domain to the Total HAC Score that is used to 
determine if a hospital will receive the payment adjustment; and (3) a 
policy that will align with existing extraordinary circumstance 
exception policies for other IPPS quality reporting and payment 
programs and will allow hospitals to request a waiver for use of data 
from the affected period. Hospitals in the top quartile of HAC scores 
will continue to have their HAC Reduction Program payment adjustment 
applied, as required by law. However, because a hospital's Total HAC 
score and its ranking in comparison to other hospitals in any given 
year depend on several different factors, any significant impact due to 
the HAC Reduction Program changes for FY 2016, including which 
hospitals receive the adjustment, will depend on actual experience.
     Medicare DSH Payment Adjustment and Additional Payment for 
Uncompensated Care. Under section 1886(r) of the Act (as added by 
section 3313 of the Affordable Care Act), disproportionate share 
hospital payments to hospitals under section 1886(d)(5)(F) of the Act 
are reduced and an additional payment for uncompensated care is made to 
eligible hospitals beginning in FY 2014. Hospitals that receive 
Medicare DSH payments will receive 25 percent of the amount they 
previously would have received under the current statutory formula for 
Medicare DSH payments in section 1886(d)(5)(F) of the Act. The 
remainder, equal to an estimate of 75 percent of what otherwise would 
have been paid as Medicare DSH payments, will be the basis for 
determining the additional payments for uncompensated care after the 
amount is reduced for changes in the percentage of individuals that are 
uninsured and additional statutory adjustments. Each hospital that 
receives Medicare DSH payments will receive an additional payment for 
uncompensated care based on its share of the total uncompensated care 
amount reported by Medicare DSHs. The reduction to Medicare DSH 
payments is not budget neutral.
    For FY 2016, we are providing that the 75 percent of what otherwise 
would have been paid for Medicare DSH is adjusted to approximately 
63.69 percent of the amount to reflect changes in the percentage of 
individuals that are uninsured and additional statutory adjustments. In 
other words, approximately 47.76 percent (the product of 75 percent and 
63.69 percent) of our estimate of Medicare DSH payments prior to the 
application of section 3133 of the Affordable Care Act is available to 
make additional payments to hospitals for their relative share of the 
total amount of uncompensated care. We project that Medicare DSH 
payments and additional payments for uncompensated care made for FY 
2016 will reduce payments overall by approximately 1 percent as 
compared to the Medicare DSH payments and uncompensated care payments 
distributed in FY 2015. The additional payments have redistributive 
effects based on a hospital's uncompensated care amount relative to the 
uncompensated care amount for all hospitals that are estimated to 
receive Medicare DSH payments, and the payment amount is not directly 
tied to a hospital's number of discharges.
     Implementation of Legislative Extensions Relating to the 
Payment Adjustment for Low-Volume Hospitals and the Medicare-Dependent, 
Small Rural Hospital Program. The Medicare Access and CHIP 
Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10) extended certain 
provisions relating to the payment adjustment for low-volume hospitals 
under section 1886(d)(12) of the Act and extended the Medicare-
dependent, small rural hospital (MDH) Program. Section 204 of the MACRA 
extended the temporary changes to the low-volume hospital qualifying 
criteria and payment adjustment for IPPS hospital discharges occurring 
on or after April 1, 2015 through September 30, 2017. Section 205 of 
the MACRA extended the MDH program for IPPS hospital discharges 
occurring on or after April 1, 2015 through September 30, 2017. We 
project that IPPS payments for FY 2016 will increase by approximately 
$322 million as a result of the statutory extensions of certain 
provisions of the low-volume hospital payment adjustment and 
approximately $96 million for the MDH program compared to such payments 
in absence of these extensions.
     Update to the LTCH PPS Payment Rates and Other Payment 
Factors. Based on the best available data for the 419 LTCHs in our data 
base, we estimate that the changes to the payment rates and factors 
that we are presenting in the preamble and Addendum of this final rule, 
including the application of the new site neutral payment rate required 
by section 1886(m)(6)(A) of the Act, the update to the LTCH PPS 
standard Federal payment rate for FY 2016, and the changes to short-
stay outlier and high-cost outlier payments will result in an estimated 
decrease in payments from FY 2015 of approximately $250 million.
     Hospital Inpatient Quality Reporting (IQR) Program. In 
this final rule, we are removing nine measures for the FY 2018 payment 
determination and subsequent years. We are adding seven measures to the 
Hospital IQR Program for the payment determination; four for the FY 
2018 payment determination and subsequent years and three for FY 2019 
payment determination and subsequent years. We also are requiring 
hospitals to report 4 of the 28 Hospital IQR Program electronic 
clinical quality measures that align with the Medicare EHR Incentive 
Program. We estimate that our policies for the adoption and removal of 
measures will result in total hospital costs of $169 million across 
3,300 IPPS hospitals.
     Changes in LTCH Payments Related to the LTCH QRP 
Proposals. We believe that the increase in costs to LTCHs related to 
our LTCH QRP policies in this final rule is zero. We refer readers to 
sections VIII.C. of the preamble of this final rule for detailed 
discussion of the policies.

B. Summary

1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
    Section 1886(d) of the Social Security Act (the Act) sets forth a 
system of payment for the operating costs of acute care hospital 
inpatient stays under Medicare Part A (Hospital Insurance) based on 
prospectively set rates. Section 1886(g) of the Act requires the 
Secretary to use a prospective payment system (PPS) to pay for the 
capital-related costs of inpatient hospital services for these 
``subsection (d) hospitals.'' Under these PPSs, Medicare payment for 
hospital inpatient operating and capital-related costs is made at 
predetermined, specific rates for each hospital discharge. Discharges 
are classified according to a list of diagnosis-related groups (DRGs).
    The base payment rate is comprised of a standardized amount that is 
divided into a labor-related share and a nonlabor-related share. The 
labor-related share is adjusted by the wage index applicable to the 
area where the hospital is located. If the hospital is located in 
Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-
living adjustment factor. This

[[Page 49339]]

base payment rate is multiplied by the DRG relative weight.
    If the hospital treats a high percentage of certain low-income 
patients, it receives a percentage add-on payment applied to the DRG-
adjusted base payment rate. This add-on payment, known as the 
disproportionate share hospital (DSH) adjustment, provides for a 
percentage increase in Medicare payments to hospitals that qualify 
under either of two statutory formulas designed to identify hospitals 
that serve a disproportionate share of low-income patients. For 
qualifying hospitals, the amount of this adjustment varies based on the 
outcome of the statutory calculations. The Affordable Care Act revised 
the Medicare DSH payment methodology and provided for a new additional 
Medicare payment that considers the amount of uncompensated care 
provided by the hospital. Payment under this methodology began in FY 
2014.
    If the hospital is an approved teaching hospital, it receives a 
percentage add-on payment for each case paid under the IPPS, known as 
the indirect medical education (IME) adjustment. This percentage 
varies, depending on the ratio of residents to beds.
    Additional payments may be made for cases that involve new 
technologies or medical services that have been approved for special 
add-on payments. To qualify, a new technology or medical service must 
demonstrate that it is a substantial clinical improvement over 
technologies or services otherwise available, and that, absent an add-
on payment, it would be inadequately paid under the regular DRG 
payment.
    The costs incurred by the hospital for a case are evaluated to 
determine whether the hospital is eligible for an additional payment as 
an outlier case. This additional payment is designed to protect the 
hospital from large financial losses due to unusually expensive cases. 
Any eligible outlier payment is added to the DRG-adjusted base payment 
rate, plus any DSH, IME, and new technology or medical service add-on 
adjustments.
    Although payments to most hospitals under the IPPS are made on the 
basis of the standardized amounts, some categories of hospitals are 
paid in whole or in part based on their hospital-specific rate, which 
is determined from their costs in a base year. For example, sole 
community hospitals (SCHs) receive the higher of a hospital-specific 
rate based on their costs in a base year (the highest of FY 1982, FY 
1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the 
standardized amount. SCHs are the sole source of care in their areas. 
Specifically, section 1886(d)(5)(D)(iii) of the Act defines an SCH as a 
hospital that is located more than 35 road miles from another hospital 
or that, by reason of factors such as isolated location, weather 
conditions, travel conditions, or absence of other like hospitals (as 
determined by the Secretary), is the sole source of hospital inpatient 
services reasonably available to Medicare beneficiaries. In addition, 
certain rural hospitals previously designated by the Secretary as 
essential access community hospitals are considered SCHs.
    We note that the Medicare Access and CHIP Reauthorization Act of 
2015 (Pub. L. 114-10), enacted on April 16, 2015, extended the 
Medicare-dependent, small rural hospital (MDH) program through FY 2017. 
Through and including FY 2006, an MDH received the higher of the 
Federal rate or the Federal rate plus 50 percent of the amount by which 
the Federal rate was exceeded by the higher of its FY 1982 or FY 1987 
hospital-specific rate. For discharges occurring on or after October 1, 
2007, through FY 2017, an MDH receives the higher of the Federal rate 
or the Federal rate plus 75 percent of the amount by which the Federal 
rate is exceeded by the highest of its FY 1982, FY 1987, or FY 2002 
hospital-specific rate. MDHs are a major source of care for Medicare 
beneficiaries in their areas. Section 1886(d)(5)(G)(iv) of the Act 
defines an MDH as a hospital that is located in a rural area, has no 
more than 100 beds, is not an SCH, and has a high percentage of 
Medicare discharges (not less than 60 percent of its inpatient days or 
discharges in its cost reporting year beginning in FY 1987 or in two of 
its three most recently settled Medicare cost reporting years).
    Section 1886(g) of the Act requires the Secretary to pay for the 
capital-related costs of inpatient hospital services ``in accordance 
with a prospective payment system established by the Secretary.'' The 
basic methodology for determining capital prospective payments is set 
forth in our regulations at 42 CFR 412.308 and 412.312. Under the 
capital IPPS, payments are adjusted by the same DRG for the case as 
they are under the operating IPPS. Capital IPPS payments are also 
adjusted for IME and DSH, similar to the adjustments made under the 
operating IPPS. In addition, hospitals may receive outlier payments for 
those cases that have unusually high costs.
    The existing regulations governing payments to hospitals under the 
IPPS are located in 42 CFR part 412, subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
    Under section 1886(d)(1)(B) of the Act, as amended, certain 
hospitals and hospital units are excluded from the IPPS. These 
hospitals and units are: Rehabilitation hospitals and units; long-term 
care hospitals (LTCHs); psychiatric hospitals and units; children's 
hospitals; certain cancer hospitals; and short-term acute care 
hospitals located in Guam, the U.S. Virgin Islands, the Northern 
Mariana Islands, and American Samoa. Religious nonmedical health care 
institutions (RNHCIs) are also excluded from the IPPS. Various sections 
of the Balanced Budget Act of 1997 (BBA, Pub. L. 105-33), the Medicare, 
Medicaid and SCHIP [State Children's Health Insurance Program] Balanced 
Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the 
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act 
of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs 
for rehabilitation hospitals and units (referred to as inpatient 
rehabilitation facilities (IRFs)), LTCHs, and psychiatric hospitals and 
units (referred to as inpatient psychiatric facilities (IPFs)). (We 
note that the annual updates to the LTCH PPS are now included as part 
of the IPPS annual update document. Updates to the IRF PPS and IPF PPS 
are issued as separate documents.) Children's hospitals, certain cancer 
hospitals, short-term acute care hospitals located in Guam, the U.S. 
Virgin Islands, the Northern Mariana Islands, and American Samoa, and 
RNHCIs continue to be paid solely under a reasonable cost-based system 
subject to a rate-of-increase ceiling on inpatient operating costs, as 
updated annually by the percentage increase in the IPPS operating 
market basket.
    The existing regulations governing payments to excluded hospitals 
and hospital units are located in 42 CFR parts 412 and 413.
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
    The Medicare prospective payment system (PPS) for LTCHs applies to 
hospitals described in section 1886(d)(1)(B)(iv) of the Act effective 
for cost reporting periods beginning on or after October 1, 2002. The 
LTCH PPS was established under the authority of section 123 of the BBRA 
and section 307(b) of the BIPA (as codified under section 1886(m)(1) of 
the Act). During the 5-year (optional) transition period, a LTCH's 
payment under the PPS was based on an increasing proportion of the LTCH 
Federal rate with a corresponding

[[Page 49340]]

decreasing proportion based on reasonable cost principles. Effective 
for cost reporting periods beginning on or after October 1, 2006, all 
LTCHs are paid 100 percent of the Federal rate. Section 1206(a) of 
Public Law 113-67 established the site neutral payment rate under the 
LTCH PPS. Under this statute, based on a rolling effective date that is 
linked to the date on which a given LTCH's Federal FY 2016 cost 
reporting period begins, LTCHs will be paid for LTCH discharges at the 
new site neutral payment rate unless the discharge meets the patient 
criteria for payment at the LTCH PPS standard Federal payment rate. The 
existing regulations governing payment under the LTCH PPS are located 
in 42 CFR part 412, subpart O.
4. Critical Access Hospitals (CAHs)
    Under sections 1814(l), 1820, and 1834(g) of the Act, payments made 
to critical access hospitals (CAHs) (that is, rural hospitals or 
facilities that meet certain statutory requirements) for inpatient and 
outpatient services are generally based on 101 percent of reasonable 
cost. Reasonable cost is determined under the provisions of section 
1861(v)(1)(A) of the Act and existing regulations under 42 CFR part 
413.
5. Payments for Graduate Medical Education (GME)
    Under section 1886(a)(4) of the Act, costs of approved educational 
activities are excluded from the operating costs of inpatient hospital 
services. Hospitals with approved graduate medical education (GME) 
programs are paid for the direct costs of GME in accordance with 
section 1886(h) of the Act. The amount of payment for direct GME costs 
for a cost reporting period is based on the hospital's number of 
residents in that period and the hospital's costs per resident in a 
base year. The existing regulations governing payments to the various 
types of hospitals are located in 42 CFR part 413.

C. Summary of Provisions of Recent Legislation Discussed in This Final 
Rule

    The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240), 
enacted on January 2, 2013, made a number of changes that affect the 
IPPS. We announced changes related to certain IPPS provisions for FY 
2013 in accordance with sections 605 and 606 of Public Law 112-240 in a 
notice that appeared in the Federal Register on March 7, 2013 (78 FR 
14689).
    The Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), enacted on 
December 26, 2013, also made a number of changes that affect the IPPS 
and the LTCH PPS. We implemented changes related to the low-volume 
hospital payment adjustment and MDH provisions for FY 2014 in 
accordance with sections 1105 and 1106 of Public Law 113-67 in an 
interim final rule with comment period that appeared in the Federal 
Register on March 18, 2014 (79 FR 15022).
    The Protecting Access to Medicare Act of 2014 (Pub. L. 113-93), 
enacted on April 1, 2014, also made a number of changes that affect the 
IPPS and LTCH PPS.
    The Improving Medicare Post-Acute Care Transformation Act of 2014 
(IMPACT Act of 2014) (Pub. L. 113-185), enacted on October 6, 2014, 
made a number of changes that affect the Long-Term Care Quality 
Reporting Program (LTCH QRP).
    The Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 
114-10) enacted on April 16, 2015, extended the MDH program and changes 
to the payment adjustment for low-volume hospitals through FY 2017.
1. American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240)
    In this final rule, we are making policy changes to implement 
section 631 of the American Taxpayer Relief Act of 2012, which amended 
section 7(b)(1)(B) of Public Law 110-90 and requires a recoupment 
adjustment to the standardized amounts under section 1886(d) of the Act 
based upon the Secretary's estimates for discharges occurring in FY 
2014 through FY 2017 to fully offset $11 billion (which represents the 
amount of the increase in aggregate payments from FYs 2008 through 2013 
for which an adjustment was not previously applied).
2. Pathway for SGR Reform Act of 2013 (Pub. L. 113-67)
    In this final rule, we are providing clarifications to prior policy 
changes, making new policy changes, and discussing the need for future 
policy changes to implement provisions under section 1206 of the 
Pathway for SGR Reform Act of 2013. These include:
     Section 1206(a), which provides for the establishment of 
patient criteria for exclusion from the new site neutral payment rate 
under the LTCH PPS, beginning in FY 2016.
     Section 1206(a)(3), which requires changes to the LTCH 
average length of stay criterion.
     Section 1206(b)(1), which further amended section 114(c) 
of the MMSEA, as amended by section 4302(a) of the ARRA and sections 
3106(c) and 10312(a) of the Affordable Care Act by retroactively 
reestablishing, and extending, the statutory moratorium on the full 
implementation of the 25-percent threshold payment adjustment policy 
under the LTCH PPS so that the policy will be in effect for 9 years 
(except for grandfathered hospitals-within-hospitals (HwHs), which it 
permanently exempted from this policy).
     Section 1206(b)(2), which amended section 114(d) of the 
MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) 
and 10312(a) of the Affordable Care Act to establish new moratoria 
(subject to certain defined exceptions) on the development of new LTCHs 
and LTCH satellite facilities and a new moratorium on increases in the 
number of beds in existing LTCHs and LTCH satellite facilities.
3. Protecting Access to Medicare Act of 2014 (Pub. L. 113-93)
    In this final rule, we are clarifying or discussing our prior 
policy changes that implemented the following provisions (or portions 
of the following provisions) of the Protecting Access to Medicare Act 
of 2014 that are applicable to the IPPS and the LTCH PPS for FY 2016:
     Section 112, which makes certain changes to Medicare LTCH 
provisions, including modifications to the statutory moratoria on the 
establishment of new LTCHs and LTCH satellite facilities.
     Section 212, which prohibits the Secretary from requiring 
implementation of ICD-10 code sets before October 1, 2015.
4. Improving Medicare Post-Acute Care Transformation Act of 2014 
(IMPACT Act of 2014) (Pub. L. 113-185)
    In this final rule, we are implementing portions of section 2 of 
the IMPACT Act of 2014, which, in part, requires LTCHs, among other 
postacute care providers, to report standardized patient assessment 
data, data on quality measures, and data on resource use and other 
measures.
5. The Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 
114-10)
    In this document, as an interim final rule with comment period, we 
are implementing sections 204 and 205 of the Medicare Access and CHIP 
Reauthorization Act of 2015, which extended the MDH program and changes 
to the low-volume payment adjustment for hospitals through FY 2017.

[[Page 49341]]

D. Issuance of Notice of Proposed Rulemaking

    Earlier this year, we published a proposed rule that set forth 
proposed changes for the Medicare IPPS for operating costs and for 
capital-related costs of acute care hospitals for FY 2016. The proposed 
rule appeared in the Federal Register on April 30, 2015 (80 FR 24324). 
We also set forth proposed changes to payments to certain hospitals 
that continue to be excluded from the IPPS and paid on a reasonable 
cost basis. In addition, in the proposed rule, we set forth proposed 
changes to the payment rates, factors, and other payment rate policies 
under the LTCH PPS for FY 2016.
    Below is a summary of the major changes that we proposed to make.
1. Proposed Changes to MS-DRG Classifications and Recalibrations of 
Relative Weights
    In section II. of the preamble of the proposed rule, we included--
     Proposed changes to MS-DRG classifications based on our 
yearly review, including a discussion of the conversion of MS-DRGs to 
ICD-10 and the implementation of the ICD-10-CM and ICD-10-PCS systems.
     Proposed application of the documentation and coding 
adjustment for FY 2016 resulting from implementation of the MS-DRG 
system.
     Proposed recalibrations of the MS-DRG relative weights.
     Proposed changes to hospital-acquired conditions (HACs) 
and a discussion of HACs, including infections, that would be subject 
to the statutorily required adjustment in MS-DRG payments for FY 2016.
     A discussion of the FY 2016 status of new technologies 
approved for add-on payments for FY 2015 and a presentation of our 
evaluation and analysis of the FY 2016 applicants for add-on payments 
for high-cost new medical services and technologies (including public 
input, as directed by Pub. L. 108-173, obtained in a town hall 
meeting).
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
    In section III. of the preamble to the proposed rule, we proposed 
revisions to the wage index for acute care hospitals and the annual 
update of the wage data. Specific issues addressed included the 
following:
     The proposed FY 2016 wage index update using wage data 
from cost reporting periods beginning in FY 2012.
     Calculation of the proposed occupational mix adjustment 
for FY 2016 based on the 2013 Occupational Mix Survey.
     Analysis and implementation of the proposed FY 2016 
occupational mix adjustment to the wage index for acute care hospitals.
     Application of the rural floor, the proposed imputed rural 
floor, and the frontier State floor.
     Transitional wage indexes relating to the continued use of 
the revised OMB labor market area delineations based on 2010 Decennial 
Census data.
     Proposed revisions to the wage index for acute care 
hospitals based on hospital redesignations and reclassifications.
     The proposed out-migration adjustment to the wage index 
for acute care hospitals for FY 2016 based on commuting patterns of 
hospital employees who reside in a county and work in a different area 
with a higher wage index. Beginning in FY 2016, we proposed new out-
migration adjustments based on commuting patterns obtained from 2010 
Decennial Census data.
     The timetable for reviewing and verifying the wage data 
used to compute the proposed FY 2016 hospital wage index.
     Determination of the labor-related share for the proposed 
FY 2016 wage index.
     Proposed changes to the 3-year average pension policy and 
proposed changes to the wage index timetable regarding pension cost for 
FY 2017 and subsequent years.
     Clarification of the allocation of pension costs for the 
wage index.
3. Other Decisions and Proposed Changes to the IPPS for Operating Costs 
and Indirect Medical Education (IME) Costs
    In section IV. of the preamble of the proposed rule, we discussed 
proposed changes or clarifications of a number of the provisions of the 
regulations in 42 CFR parts 412 and 413, including the following:
     Proposed changes to the inpatient hospital updates for FY 
2016, including the adjustment for hospitals that are not meaningful 
EHR users under section 1886(b)(3)(B)(ix) of the Act.
     The proposed updated national and regional case-mix values 
and discharges for purposes of determining RRC status.
     The statutorily required IME adjustment factor for FY 
2016.
     Proposal for determining Medicare DSH payments and the 
additional payments for uncompensated care for FY 2016.
     Proposed changes to the measures and payment adjustments 
under the Hospital Readmissions Reduction Program.
     Proposed changes to the requirements and provision of 
value-based incentive payments under the Hospital Value-Based 
Purchasing Program.
     Proposed requirements for payment adjustments to hospitals 
under the HAC Reduction Program for FY 2016.
     Proposed elimination of the election by hospitals to use 
the simplified cost allocation methodology for Medicare cost reports.
     Discussion of the Rural Community Hospital Demonstration 
Program and a proposal for making a budget neutrality adjustment for 
the demonstration program.
     Proposed changes in postacute care transfer policies as a 
result of proposed new MS-DRGs.
     A statement of our intent to discuss issues related to 
short inpatient hospital stays, long outpatient stays with observation 
services, and the related -0.2 percent IPPS payment adjustment in the 
CY 2016 hospital outpatient prospective payment system proposed rule.
4. Proposed FY 2016 Policy Governing the IPPS for Capital-Related Costs
    In section V. of the preamble to the proposed rule, we discussed 
the proposed payment policy requirements for capital-related costs and 
capital payments to hospitals for FY 2016.
5. Proposed Changes to the Payment Rates for Certain Excluded 
Hospitals: Rate-of-Increase Percentages
    In section VI. of the preamble of the proposed rule, we discussed 
proposed changes to payments to certain excluded hospitals for FY 2016.
6. Proposed Changes to the LTCH PPS
    In section VII. of the preamble of the proposed rule, we set 
forth--
     Proposed changes to the LTCH PPS Federal payment rates, 
factors, and other payment rate policies under the LTCH PPS for FY 
2016.
     Proposals to implement section 1206(a)(1) of the Pathway 
for SGR Reform Act, which established the site neutral payment rate as 
the default means of paying for discharges in LTCH cost reporting 
periods beginning on or after October 1, 2015.
     Provisions to make technical clarifications regarding the 
moratoria on the establishment of new LTCHs and LTCH satellite 
facilities and on bed increases in existing LTCHs and LTCH satellite 
facilities that were established by section 1206(b)(2) of the Pathway 
for SGR Reform, as amended, as well as a

[[Page 49342]]

proposal to make a technical revision to the regulations to more 
clearly reflect our established policies.
     Proposal to revise the average length of stay criterion 
for LTCHs to implement section 1206(a)(3) of the Pathway for SGR Reform 
Act.
7. Proposed Changes Relating to Quality Data Reporting for Specific 
Providers and Suppliers
    In section VIII. of the preamble of the proposed rule, we 
addressed--
     Proposed requirements for the Hospital Inpatient Quality 
Reporting (IQR) Program as a condition for receiving the full 
applicable percentage increase.
     Proposed changes to the requirements for the quality 
reporting program for PPS-exempt cancer hospitals (PCHQR Program).
     Proposed changes to the requirements under the LTCH 
Quality Reporting Program (LTCH QRP).
     Proposed changes to align the reporting and submission 
timelines for the electronic submission of clinical quality measures 
for the Medicare Electronic Health Record (EHR) Incentive Program for 
eligible hospitals and CAHs with the reporting and submission of 
timelines for the Hospital IQR Program. (We note that the proposal 
included in the proposed rule to establish in regulations an EHR 
technology certification criterion for reporting clinical quality 
measures is not being finalized in this final rule but will be 
addressed in a future rulemaking.)
8. Determining Prospective Payment Operating and Capital Rates and 
Rate-of-Increase Limits for Acute Care Hospitals
    In the Addendum to the proposed rule, we set forth proposed changes 
to the amounts and factors for determining the proposed FY 2016 
prospective payment rates for operating costs and capital-related costs 
for acute care hospitals. We also proposed to establish the threshold 
amounts for outlier cases. In addition, we addressed the update factors 
for determining the rate-of-increase limits for cost reporting periods 
beginning in FY 2016 for certain hospitals excluded from the IPPS.
9. Determining Standard Federal Payment Rates for LTCHs
    In the Addendum to the proposed rule, we set forth proposed changes 
to the amounts and factors for determining the proposed FY 2016 LTCH 
PPS standard Federal payment rate. We proposed to establish the 
adjustments for wage levels, the labor-related share, the cost-of-
living adjustment, and high-cost outliers, including the fixed-loss 
amount, and the LTCH cost-to-charge ratios (CCRs) under the LTCH PPS.
10. Impact Analysis
    In Appendix A of the proposed rule, we set forth an analysis of the 
impact that the proposed changes would have on affected acute care 
hospitals, LTCHs, and PCHs.
11. Recommendation of Update Factors for Operating Cost Rates of 
Payment for Hospital Inpatient Services
    In Appendix B of the proposed rule, as required by sections 
1886(e)(4) and (e)(5) of the Act, we provided our recommendations of 
the appropriate percentage changes for FY 2016 for the following:
     A single average standardized amount for all areas for 
hospital inpatient services paid under the IPPS for operating costs of 
acute care hospitals (and hospital-specific rates applicable to SCHs).
     Target rate-of-increase limits to the allowable operating 
costs of hospital inpatient services furnished by certain hospitals 
excluded from the IPPS.
     The standard Federal payment rate for hospital inpatient 
services furnished by LTCHs.
12. Discussion of Medicare Payment Advisory Commission Recommendations
    Under section 1805(b) of the Act, MedPAC is required to submit a 
report to Congress, no later than March 15 of each year, in which 
MedPAC reviews and makes recommendations on Medicare payment policies. 
MedPAC's March 2015 recommendations concerning hospital inpatient 
payment policies address the update factor for hospital inpatient 
operating costs and capital-related costs for hospitals under the IPPS. 
We addressed these recommendations in Appendix B of the proposed rule. 
For further information relating specifically to the MedPAC March 2015 
report or to obtain a copy of the report, contact MedPAC at (202) 220-
3700 or visit MedPAC's Web site at: http://www.medpac.gov.

E. Public Comments Received in Response to the FY 2016 IPPS/LTCH PPS 
Proposed Rule

    We received approximately 361 timely pieces of correspondence 
containing multiple comments on the FY 2016 IPPS/LTCH PPS proposed 
rule. We note that some of these public comments were outside of the 
scope of the proposed rule. These out-of-scope public comments are 
mentioned but not addressed with the policy responses in this final 
rule. Summaries of the public comments that are within the scope of the 
proposed rule and our responses to those public comments are set forth 
in the various sections of this final rule under the appropriate 
heading.

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

A. Background

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

B. MS-DRG Reclassifications

    For general information about the MS-DRG system, including yearly 
reviews and changes to the MS-DRGs, we refer readers to the previous 
discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 
43764 through 43766), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50053 
through 50055), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51485 
through 51487), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53273), the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 50512), and the FY 2015 IPPS/
LTCH PPS final rule (79 FR 49871).

C. Adoption of the MS-DRGs in FY 2008

    For information on the adoption of the MS-DRGs in FY 2008, we refer 
readers to the FY 2008 IPPS final rule

[[Page 49343]]

with comment period (72 FR 47140 through 47189).

D. FY 2016 MS-DRG Documentation and Coding Adjustment

1. Background on the Prospective MS-DRG Documentation and Coding 
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
    In the FY 2008 IPPS final rule with comment period (72 FR 47140 
through 47189), we adopted the MS-DRG patient classification system for 
the IPPS, effective October 1, 2007, to better recognize severity of 
illness in Medicare payment rates for acute care hospitals. The 
adoption of the MS-DRG system resulted in the expansion of the number 
of DRGs from 538 in FY 2007 to 745 in FY 2008. By increasing the number 
of MS-DRGs and more fully taking into account patient severity of 
illness in Medicare payment rates for acute care hospitals, MS-DRGs 
encourage hospitals to improve their documentation and coding of 
patient diagnoses.
    In the FY 2008 IPPS final rule with comment period (72 FR 47175 
through 47186), we indicated that the adoption of the MS-DRGs had the 
potential to lead to increases in aggregate payments without a 
corresponding increase in actual patient severity of illness due to the 
incentives for additional documentation and coding. In that final rule 
with comment period, we exercised our authority under section 
1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget 
neutrality by adjusting the national standardized amount, to eliminate 
the estimated effect of changes in coding or classification that do not 
reflect real changes in case-mix. Our actuaries estimated that 
maintaining budget neutrality required an adjustment of -4.8 percent to 
the national standardized amount. We provided for phasing in this -4.8 
percent adjustment over 3 years. Specifically, we established 
prospective documentation and coding adjustments of -1.2 percent for FY 
2008, -1.8 percent for FY 2009, and -1.8 percent for FY 2010.
    On September 29, 2007, Congress enacted the TMA [Transitional 
Medical Assistance], Abstinence Education, and QI [Qualifying 
Individuals] Programs Extension Act of 2007 (Pub. L. 110-90). Section 
7(a) of Public Law 110-90 reduced the documentation and coding 
adjustment made as a result of the MS-DRG system that we adopted in the 
FY 2008 IPPS final rule with comment period to -0.6 percent for FY 2008 
and -0.9 percent for FY 2009, and we finalized the FY 2008 adjustment 
through rulemaking, effective October 1, 2007 (72 FR 66886).
    For FY 2009, section 7(a) of Public Law 110-90 required a 
documentation and coding adjustment of -0.9 percent, and we finalized 
that adjustment through rulemaking effective October 1, 2008 (73 FR 
48447). The documentation and coding adjustments established in the FY 
2008 IPPS final rule with comment period, which reflected the 
amendments made by section 7(a) of Public Law 110-90, are cumulative. 
As a result, the -0.9 percent documentation and coding adjustment for 
FY 2009 was in addition to the -0.6 percent adjustment for FY 2008, 
yielding a combined effect of -1.5 percent.
2. Adjustment to the Average Standardized Amounts Required by Public 
Law 110-90
a. Prospective Adjustment Required by Section 7(b)(1)(A) of Public Law 
110-90
    Section 7(b)(1)(A) of Public Law 110-90 requires that, if the 
Secretary determines that implementation of the MS-DRG system resulted 
in changes in documentation and coding that did not reflect real 
changes in case-mix for discharges occurring during FY 2008 or FY 2009 
that are different than the prospective documentation and coding 
adjustments applied under section 7(a) of Public Law 110-90, the 
Secretary shall make an appropriate adjustment under section 
1886(d)(3)(A)(vi) of the Act. Section 1886(d)(3)(A)(vi) of the Act 
authorizes adjustments to the average standardized amounts for 
subsequent fiscal years in order to eliminate the effect of such coding 
or classification changes. These adjustments are intended to ensure 
that future annual aggregate IPPS payments are the same as the payments 
that otherwise would have been made had the prospective adjustments for 
documentation and coding applied in FY 2008 and FY 2009 reflected the 
change that occurred in those years.
b. Recoupment or Repayment Adjustments in FYs 2010 Through 2012 
Required by Section 7(b)(1)(B) Public Law 110-90
    If, based on a retroactive evaluation of claims data, the Secretary 
determines that implementation of the MS-DRG system resulted in changes 
in documentation and coding that did not reflect real changes in case-
mix for discharges occurring during FY 2008 or FY 2009 that are 
different from the prospective documentation and coding adjustments 
applied under section 7(a) of Public Law 110-90, section 7(b)(1)(B) of 
Public Law 110-90 requires the Secretary to make an additional 
adjustment to the standardized amounts under section 1886(d) of the 
Act. This adjustment must offset the estimated increase or decrease in 
aggregate payments for FYs 2008 and 2009 (including interest) resulting 
from the difference between the estimated actual documentation and 
coding effect and the documentation and coding adjustment applied under 
section 7(a) of Public Law 110-90. This adjustment is in addition to 
making an appropriate adjustment to the standardized amounts under 
section 1886(d)(3)(A)(vi) of the Act as required by section 7(b)(1)(A) 
of Public Law 110-90. That is, these adjustments are intended to recoup 
(or repay, in the case of underpayments) spending in excess of (or less 
than) spending that would have occurred had the prospective adjustments 
for changes in documentation and coding applied in FY 2008 and FY 2009 
matched the changes that occurred in those years. Public Law 110-90 
requires that the Secretary only make these recoupment or repayment 
adjustments for discharges occurring during FYs 2010, 2011, and 2012.
3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data
    In order to implement the requirements of section 7 of Public Law 
110-90, we performed a retrospective evaluation of the FY 2008 data for 
claims paid through December 2008 using the methodology first described 
in the FY 2009 IPPS/LTCH PPS final rule (73 FR 43768 and 43775) and 
later discussed in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 
43768 through 43772). We performed the same analysis for FY 2009 claims 
data using the same methodology as we did for FY 2008 claims (75 FR 
50057 through 50068). The results of the analysis for the FY 2011 IPPS/
LTCH PPS proposed and final rules, and subsequent evaluations in FY 
2012, supported that the 5.4 percent estimate accurately reflected the 
FY 2009 increases in documentation and coding under the MS-DRG system. 
We were persuaded by both MedPAC's analysis (as discussed in the FY 
2011 IPPS/LTCH PPS final rule (75 FR 50064 through 50065)) and our own 
review of the methodologies recommended by various commenters that the 
methodology we employed to determine the required documentation and 
coding adjustments was sound.
    As in prior years, the FY 2008, FY 2009, and FY 2010 MedPAR files 
are available to the public to allow independent analysis of the FY 
2008 and FY 2009 documentation and coding

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effects. Interested individuals may still order these files through the 
CMS Web site at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ by clicking on MedPAR Limited 
Data Set (LDS)-Hospital (National). This CMS Web page describes the 
file and provides directions and further detailed instructions for how 
to order.
    Persons placing an order must send the following: a Letter of 
Request, the LDS Data Use Agreement and Research Protocol (refer to the 
Web site for further instructions), the LDS Form, and a check (refer to 
the Web site for the required payment amount) to:

Mailing address if using the U.S. Postal Service: Centers for Medicare 
& Medicaid Services, RDDC Account, Accounting Division, P.O. Box 7520, 
Baltimore, MD 21207-0520.
Mailing address if using express mail: Centers for Medicare & Medicaid 
Services, OFM/Division of Accounting--RDDC, 7500 Security Boulevard, 
C3-07-11, Baltimore, MD 21244-1850.
4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by 
Section 7(b)(1)(A) of Public Law 110-90
    In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43767 
through 43777), we opted to delay the implementation of any 
documentation and coding adjustment until a full analysis of case-mix 
changes based on FY 2009 claims data could be completed. We refer 
readers to the FY 2010 IPPS/RY LTCH PPS final rule for a detailed 
description of our proposal, responses to comments, and finalized 
policy. After analysis of the FY 2009 claims data for the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50057 through 50073), we found a total 
prospective documentation and coding effect of 5.4 percent. After 
accounting for the -0.6 percent and the -0.9 percent documentation and 
coding adjustments in FYs 2008 and 2009, we found a remaining 
documentation and coding effect of 3.9 percent. As we have discussed, 
an additional cumulative adjustment of -3.9 percent would be necessary 
to meet the requirements of section 7(b)(1)(A) of Public Law 110-90 to 
make an adjustment to the average standardized amounts in order to 
eliminate the full effect of the documentation and coding changes that 
do not reflect real changes in case-mix on future payments. Unlike 
section 7(b)(1)(B) of Public Law 110-90, section 7(b)(1)(A) does not 
specify when we must apply the prospective adjustment, but merely 
requires us to make an ``appropriate'' adjustment. Therefore, as we 
stated in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50061), we 
believed the law provided some discretion as to the manner in which we 
applied the prospective adjustment of -3.9 percent. As we discussed 
extensively in the FY 2011 IPPS/LTCH PPS final rule, it has been our 
practice to moderate payment adjustments when necessary to mitigate the 
effects of significant downward adjustments on hospitals, to avoid what 
could be widespread, disruptive effects of such adjustments on 
hospitals. Therefore, we stated that we believed it was appropriate to 
not implement the -3.9 percent prospective adjustment in FY 2011 
because we finalized a -2.9 percent recoupment adjustment for that 
fiscal year. Accordingly, we did not propose a prospective adjustment 
under section 7(b)(1)(A) of Public Law 110-90 for FY 2011 (75 FR 23868 
through 23870). We noted that, as a result, payments in FY 2011 (and in 
each future fiscal year until we implemented the requisite adjustment) 
would be higher than they would have been if we had implemented an 
adjustment under section 7(b)(1)(A) of Public Law 110-90.
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51489 and 51497), we 
indicated that, because further delay of this prospective adjustment 
would result in a continued accrual of unrecoverable overpayments, it 
was imperative that we implement a prospective adjustment for FY 2012, 
while recognizing CMS' continued desire to mitigate the effects of any 
significant downward adjustments to hospitals. Therefore, we 
implemented a -2.0 percent prospective adjustment to the standardized 
amount instead of the full -3.9 percent.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53274 through 
53276), we completed the prospective portion of the adjustment required 
under section 7(b)(1)(A) of Public Law 110-90 by finalizing a -1.9 
percent adjustment to the standardized amount for FY 2013. We stated 
that this adjustment would remove the remaining effect of the 
documentation and coding changes that do not reflect real changes in 
case-mix that occurred in FY 2008 and FY 2009. We believed that it was 
imperative to implement the full remaining adjustment, as any further 
delay would result in an overstated standardized amount in FY 2013 and 
any future fiscal years until a full adjustment was made.
    We noted again that delaying full implementation of the prospective 
portion of the adjustment required under section 7(b)(1)(A) of Public 
Law 110-90 until FY 2013 resulted in payments in FY 2010 through FY 
2012 being overstated. These overpayments could not be recovered by CMS 
because section 7(b)(1)(B) of Public Law 110-90 limited recoupments to 
overpayments made in FY 2008 and FY 2009.
5. Recoupment or Repayment Adjustment Authorized by Section 7(b)(1)(B) 
of Public Law 110-90
    Section 7(b)(1)(B) of Public Law 110-90 requires the Secretary to 
make an adjustment to the standardized amounts under section 1886(d) of 
the Act to offset the estimated increase or decrease in aggregate 
payments for FY 2008 and FY 2009 (including interest) resulting from 
the difference between the estimated actual documentation and coding 
effect and the documentation and coding adjustments applied under 
section 7(a) of Public Law 110-90. This determination must be based on 
a retrospective evaluation of claims data. Our actuaries estimated that 
there was a 5.8 percentage point difference resulting in an increase in 
aggregate payments of approximately $6.9 billion. Therefore, as 
discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50062 through 
50067), we determined that an aggregate adjustment of -5.8 percent in 
FYs 2011 and 2012 would be necessary in order to meet the requirements 
of section 7(b)(1)(B) of Public Law 110-90 to adjust the standardized 
amounts for discharges occurring in FYs 2010, 2011, and/or 2012 to 
offset the estimated amount of the increase in aggregate payments 
(including interest) in FYs 2008 and 2009.
    It is often our practice to phase in payment rate adjustments over 
more than one year in order to moderate the effect on payment rates in 
any one year. Therefore, consistent with the policies that we have 
adopted in many similar cases, in the FY 2011 IPPS/LTCH PPS final rule, 
we made an adjustment to the standardized amount of -2.9 percent, 
representing approximately one-half of the aggregate adjustment 
required under section 7(b)(1)(B) of Public Law 110-90, for FY 2011. An 
adjustment of this magnitude allowed us to moderate the effects on 
hospitals in one year while simultaneously making it possible to 
implement the entire adjustment within the timeframe required under 
section 7(b)(1)(B) of Public Law 110-90 (that is, no later than FY 
2012). For FY 2012, in accordance with the timeframes set forth by 
section 7(b)(1)(B) of Public Law 110-90, and consistent with the 
discussion in the FY 2011 IPPS/LTCH PPS final rule, we completed the 
recoupment adjustment by implementing the remaining -2.9 percent 
adjustment, in addition to removing the effect of the -2.9 percent

[[Page 49345]]

adjustment to the standardized amount finalized for FY 2011 (76 FR 
51489 and 51498). Because these adjustments, in effect, balanced out, 
there was no year-to-year change in the standardized amount due to this 
recoupment adjustment for FY 2012. In the FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53276), we made a final +2.9 percent adjustment to the 
standardized amount, completing the recoupment portion of section 
7(b)(1)(B) of Public Law 110-90. We note that with this positive 
adjustment, according to our estimates, all overpayments made in FY 
2008 and FY 2009 have been fully recaptured with appropriate interest, 
and the standardized amount has been returned to the appropriate 
baseline.
6. Recoupment or Repayment Adjustment Authorized by Section 631 of the 
American Taxpayer Relief Act of 2012 (ATRA)
    Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law 
110-90 to require the Secretary to make a recoupment adjustment or 
adjustments totaling $11 billion by FY 2017. This adjustment represents 
the amount of the increase in aggregate payments as a result of not 
completing the prospective adjustment authorized under section 
7(b)(1)(A) of Public Law 110-90 until FY 2013. As discussed earlier, 
this delay in implementation resulted in overstated payment rates in 
FYs 2010, 2011, and 2012. The resulting overpayments could not have 
been recovered under Public Law 110-90.
    Similar to the adjustments authorized under section 7(b)(1)(B) of 
Public Law 110-90, the adjustment required under section 631 of the 
ATRA is a one-time recoupment of a prior overpayment, not a permanent 
reduction to payment rates. Therefore, we anticipated that any 
adjustment made to reduce payment rates in one year would eventually be 
offset by a single positive adjustment in FY 2018, once the necessary 
amount of overpayment was recovered. However, we note that section 414 
of the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015, 
Public Law 114-10, enacted on April 16, 2015, replaced the single 
positive adjustment we intended to make in FY 2018 with a 0.5 percent 
positive adjustment for each of FYs 2018 through 2023. The provision 
under section 414 of the MACRA does not impact our FY 2016 adjustment, 
and we will address this MACRA provision in future rulemaking.
    As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 
through 50517), our actuaries estimate that a -9.3 percent adjustment 
to the standardized amount would be necessary if CMS were to fully 
recover the $11 billion recoupment required by section 631 of the ATRA 
in FY 2014. It is often our practice to phase in payment rate 
adjustments over more than one year, in order to moderate the effect on 
payment rates in any one year. Therefore, consistent with the policies 
that we have adopted in many similar cases, and after consideration of 
the public comments we received, in the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50515 through 50517), we implemented a -0.8 percent 
recoupment adjustment to the standardized amount in FY 2014. We stated 
that if adjustments of approximately -0.8 percent are implemented in 
FYs 2014, 2015, 2016, and 2017, using standard inflation factors, we 
estimate that the entire $11 billion will be accounted for by the end 
of the statutory 4-year timeline. As estimates of any future 
adjustments are subject to slight variations in total savings, we did 
not provide for specific adjustments for FYs 2015, 2016, or 2017 at 
that time. We stated that we believed that this level of adjustment for 
FY 2014 was a reasonable and fair approach that satisfies the 
requirements of the statute while mitigating extreme annual 
fluctuations in payment rates.
    Consistent with the approach discussed in the FY 2014 IPPS/LTCH PPS 
final rule for recouping the $11 billion required by section 631 of the 
ATRA, in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49873 through 
49874), we implemented an additional -0.8 percent recoupment adjustment 
to the standardized amount for FY 2015. We estimated that this level of 
adjustment, combined with leaving the -0.8 percent adjustment made for 
FY 2014 in place, would recover up to $2 billion in FY 2015. When 
combined with the approximately $1 billion adjustment made in FY 2014, 
we estimated that approximately $8 billion would be left to recover 
under section 631 of the ATRA.
    Consistent with the approach discussed in the FY 2014 IPPS/LTCH PPS 
final rule for recouping the $11 billion required by section 631 of the 
ATRA, we proposed in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24342) to implement a -0.8 percent recoupment adjustment to the 
standardized amount for FY 2016. We estimated that this level of 
adjustment, combined with leaving the -0.8 percent adjustments made for 
FY 2014 and FY 2015 in place, would recover up to $3 billion in FY 
2016.
    Comment: Several commenters restated their previous position, as 
set forth in comments submitted in response to the FY 2014 and FY 2015 
IPPS/LTCH PPS proposed rules and summarized in the FY 2014 IPPS/LTCH 
PPS final rule, that CMS overstated the impact of documentation and 
coding effects for prior years. The commenters cited potential 
deficiencies in the CMS methodology and disagreed that the 
congressionally mandated adjustment is warranted. However, the majority 
of these commenters conceded that CMS is required by section 631 of the 
ATRA to recover $11 billion by FY 2017, and supported CMS' policy to 
phase in the adjustments over a 4-year period.
    Response: We refer readers to the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50515 through 50517) for our response to the commenters' 
position that CMS overstated the impact of documentation and coding 
effects. We appreciate the commenters' acknowledgement that we are 
required by section 631 of the ATRA to recover $11 billion by FY 2017.
    After consideration of the public comments we received, we are 
finalizing the proposal to make an additional -0.8 percent recoupment 
adjustment to the standardized amount for FY 2016. Taking into account 
the cumulative effects of this adjustment and the adjustments made in 
FYs 2014 and 2015, we currently estimate that approximately $5 to $6 
billion would be left to recover under section 631 of the ATRA by the 
end of FY 2016. As we explained in the FY 2014 and FY 2015 IPPS/LTCH 
PPS final rules, estimates of any future adjustments are subject to 
variations in total estimated savings. Therefore, we have not yet 
addressed the specific amount of the final adjustment required under 
section 631 of the ATRA for FY 2017. We intend to address this 
adjustment in the FY 2017 IPPS rulemaking. As stated earlier, we also 
note that section 414 of the MACRA (Pub. L. 114-10), enacted on April 
16, 2015, replaced the single positive adjustment we intended to make 
in FY 2018 with a 0.5 percent positive adjustment for each of FYs 2018 
through 2023. The provision under section 414 of the MACRA does not 
impact our FY 2016 recoupment adjustment, and we will address this 
MACRA provision in future rulemaking.

E. Refinement of the MS-DRG Relative Weight Calculation

1. Background
    Beginning in FY 2007, we implemented relative weights for DRGs 
based on cost report data instead of charge information. We refer 
readers to the FY 2007 IPPS final rule (71 FR 47882) for a detailed 
discussion of our final policy for calculating the cost-based DRG 
relative weights and to the

[[Page 49346]]

FY 2008 IPPS final rule with comment period (72 FR 47199) for 
information on how we blended relative weights based on the CMS DRGs 
and MS-DRGs.
    As we implemented cost-based relative weights, some public 
commenters raised concerns about potential bias in the weights due to 
``charge compression,'' which is the practice of applying a higher 
percentage charge markup over costs to lower cost items and services, 
and a lower percentage charge markup over costs to higher cost items 
and services. As a result, the cost-based weights would undervalue 
high-cost items and overvalue low-cost items if a single cost-to-charge 
ratio (CCR) is applied to items of widely varying costs in the same 
cost center. To address this concern, in August 2006, we awarded a 
contract to the Research Triangle Institute, International (RTI) to 
study the effects of charge compression in calculating the relative 
weights and to consider methods to reduce the variation in the CCRs 
across services within cost centers. For a detailed summary of RTI's 
findings, recommendations, and public comments that we received on the 
report, we refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR 
48452 through 48453). In addition, we refer readers to RTI's July 2008 
final report titled ``Refining Cost to Charge Ratios for Calculating 
APC and MS-DRG Relative Payment Weights'' (http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf).
    In the FY 2009 IPPS final rule (73 FR 48458 through 48467), in 
response to the RTI's recommendations concerning cost report 
refinements, we discussed our decision to pursue changes to the cost 
report to split the cost center for Medical Supplies Charged to 
Patients into one line for ``Medical Supplies Charged to Patients'' and 
another line for ``Implantable Devices Charged to Patients.'' We 
acknowledged, as RTI had found, that charge compression occurs in 
several cost centers that exist on the Medicare cost report. However, 
as we stated in the FY 2009 IPPS final rule, we focused on the CCR for 
Medical Supplies and Equipment because RTI found that the largest 
impact on the MS-DRG relative weights could result from correcting 
charge compression for devices and implants. In determining the items 
that should be reported in these respective cost centers, we adopted 
the commenters' recommendations that hospitals should use revenue codes 
established by the AHA's National Uniform Billing Committee to 
determine the items that should be reported in the ``Medical Supplies 
Charged to Patients'' and the ``Implantable Devices Charged to 
Patients'' cost centers. Accordingly, a new subscripted line for 
``Implantable Devices Charged to Patients'' was created in July 2009. 
This new subscripted cost center has been available for use for cost 
reporting periods beginning on or after May 1, 2009.
    As we discussed in the FY 2009 IPPS final rule (73 FR 48458) and in 
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519 
through 68527), in addition to the findings regarding implantable 
devices, RTI also found that the costs and charges of computed 
tomography (CT) scans, magnetic resonance imaging (MRI), and cardiac 
catheterization differ significantly from the costs and charges of 
other services included in the standard associated cost center. RTI 
also concluded that both the IPPS and the OPPS relative weights would 
better estimate the costs of those services if CMS were to add standard 
cost centers for CT scans, MRIs, and cardiac catheterization in order 
for hospitals to report separately the costs and charges for those 
services and in order for CMS to calculate unique CCRs to estimate the 
costs from charges on claims data. In the FY 2011 IPPS/LTCH PPS final 
rule (75 FR 50075 through 50080), we finalized our proposal to create 
standard cost centers for CT scans, MRIs, and cardiac catheterization, 
and to require that hospitals report the costs and charges for these 
services under new cost centers on the revised Medicare cost report 
Form CMS-2552-10. (We refer readers to the FY 2011 IPPS/LTCH PPS final 
rule (75 FR 50075 through 50080) for a detailed discussion of the 
reasons for the creation of standard cost centers for CT scans, MRIs, 
and cardiac catheterization.) The new standard cost centers for CT 
scans, MRIs, and cardiac catheterization are effective for cost 
reporting periods beginning on or after May 1, 2010, on the revised 
cost report Form CMS-2552-10.
    In the FY 2009 IPPS final rule (73 FR 48468), we stated that, due 
to what is typically a 3-year lag between the reporting of cost report 
data and the availability for use in ratesetting, we anticipated that 
we might be able to use data from the new ``Implantable Devices Charged 
to Patients'' cost center to develop a CCR for ``Implantable Devices 
Charged to Patients'' in the FY 2012 or FY 2013 IPPS rulemaking cycle. 
However, as noted in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 
FR 43782), due to delays in the issuance of the revised cost report 
Form CMS 2552-10, we determined that a new CCR for ``Implantable 
Devices Charged to Patients'' might not be available before FY 2013. 
Similarly, when we finalized the decision in the FY 2011 IPPS/LTCH PPS 
final rule to add new cost centers for CT scans, MRIs, and cardiac 
catheterization, we explained that data from any new cost centers that 
may be created will not be available until at least 3 years after they 
are first used (75 FR 50077). In preparation for the FY 2012 IPPS/LTCH 
PPS rulemaking, we checked the availability of data in the 
``Implantable Devices Charged to Patients'' cost center on the FY 2009 
cost reports, but we did not believe that there was a sufficient amount 
of data from which to generate a meaningful analysis in this particular 
situation. Therefore, we did not propose to use data from the 
``Implantable Devices Charged to Patients'' cost center to create a 
distinct CCR for ``Implantable Devices Charged to Patients'' for use in 
calculating the MS-DRG relative weights for FY 2012. We indicated that 
we would reassess the availability of data for the ``Implantable 
Devices Charged to Patients'' cost center for the FY 2013 IPPS/LTCH PPS 
rulemaking cycle and, if appropriate, we would propose to create a 
distinct CCR at that time.
    During the development of the FY 2013 IPPS/LTCH PPS proposed and 
final rules, hospitals were still in the process of transitioning from 
the previous cost report Form CMS-2552-96 to the new cost report Form 
CMS-2552-10. Therefore, we were able to access only those cost reports 
in the FY 2010 HCRIS with fiscal year begin dates on or after October 
1, 2009, and before May 1, 2010; that is, those cost reports on Form 
CMS-2552-96. Data from the Form CMS-2552-10 cost reports were not 
available because cost reports filed on the Form CMS-2552-10 were not 
accessible in the HCRIS. Further complicating matters was that, due to 
additional unforeseen technical difficulties, the corresponding 
information regarding charges for implantable devices on hospital 
claims was not yet available to us in the MedPAR file. Without the 
breakout in the MedPAR file of charges associated with implantable 
devices to correspond to the costs of implantable devices on the cost 
report, we believed that we had no choice but to continue computing the 
relative weights with the current CCR that combines the costs and 
charges for supplies and implantable devices. We stated in the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53281 through 53283) that when we do 
have the necessary data for supplies and implantable

[[Page 49347]]

devices on the claims in the MedPAR file to create distinct CCRs for 
the respective cost centers for supplies and implantable devices, we 
hoped that we would also have data for an analysis of creating distinct 
CCRs for CT scans, MRIs, and cardiac catheterization, which could then 
be finalized through rulemaking. In the FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53281), we stated that, prior to proposing to create these 
CCRs, we would first thoroughly analyze and determine the impacts of 
the data, and that distinct CCRs for these new cost centers would be 
used in the calculation of the relative weights only if they were first 
finalized through rulemaking.
    At the time of the development of the FY 2014 IPPS/LTCH PPS 
proposed rule (78 FR 27506 through 27507), we had a substantial number 
of hospitals completing all, or some, of these new cost centers on the 
FY 2011 Medicare cost reports, compared to prior years. We stated that 
we believed that the analytic findings described using the FY 2011 cost 
report data and FY 2012 claims data supported our original decision to 
break out and create new cost centers for implantable devices, MRIs, CT 
scans, and cardiac catheterization, and we saw no reason to further 
delay proposing to implement the CCRs of each of these cost centers. 
Therefore, beginning in FY 2014, we proposed a policy to calculate the 
MS-DRG relative weights using 19 CCRs, creating distinct CCRs from cost 
report data for implantable devices, MRIs, CT scans, and cardiac 
catheterization.
    We refer readers to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 
27507 through 27509) and final rule (78 FR 50518 through 50523) in 
which we presented data analyses using distinct CCRs for implantable 
devices, MRIs, CT scans, and cardiac catheterization. The FY 2014 IPPS/
LTCH PPS final rule also set forth our responses to public comments we 
received on our proposal to implement these CCRs. As explained in more 
detail in the FY 2014 IPPS/LTCH PPS final rule, we finalized our 
proposal to use 19 CCRs to calculate MS-DRG relative weights beginning 
in FY 2014--the then existing 15 cost centers and the 4 new CCRs for 
implantable devices, MRIs, CT scans, and cardiac catheterization. 
Therefore, beginning in FY 2014, we calculate the IPPS MS-DRG relative 
weights using 19 CCRs, creating distinct CCRs for implantable devices, 
MRIs, CT scans, and cardiac catheterization.
2. Discussion for FY 2016 and Summary of Public Comments Received in 
Response to Request on Nonstandard Cost Center Codes
    Consistent with the policy established beginning for FY 2014, we 
calculated the MS-DRG relative weights for FY 2016 using two data 
sources: The MedPAR file as the claims data source and the HCRIS as the 
cost report data source. We adjusted the charges from the claims to 
costs by applying the 19 national average CCRs developed from the cost 
reports. The description of the calculation of the 19 CCRs and the MS-
DRG relative weights for FY 2016 is included in section II.H.3. of the 
preamble of this final rule.
    In preparing to calculate the 19 national average CCRs developed 
from the cost reports, we reviewed the HCRIS data and noticed 
inconsistencies in hospitals' cost reporting and use of nonstandard 
cost center codes. In addition, we discovered that hospitals typically 
report the nonstandard codes with standard cost centers that are 
different from the standard cost centers to which CMS maps and ``rolls 
up'' each nonstandard code in compiling the HCRIS. As stated in the FY 
2016 IPPS/LTCH PPS proposed rule (80 FR 24344), we are concerned that 
inconsistencies in hospitals' use of nonstandard codes, coupled with 
differences in the way hospitals and CMS map these nonstandard codes to 
standard lines, may have implications for the calculation of the 19 
CCRs and the aspects of the IPPS that rely on the CCRs (for example, 
the calculation of the MS-DRG relative weights).
    The Medicare cost report Form CMS-2552-10, Worksheet A, includes 
preprinted cost center codes that reflect the standard cost center 
descriptions by category (General Service, Routine, and Ancillary) used 
in most hospitals. Each preprinted standard cost center is assigned a 
unique 5-digit code. The preprinted 5-digit codes provide standardized 
meaning for data analysis, and are automatically coded by CMS-approved 
cost report software. To accommodate hospitals that have additional 
cost centers that are sufficiently different from the preprinted 
standard cost centers, CMS identified additional cost centers known as 
``nonstandard'' cost centers. Each nonstandard cost center must be 
labeled appropriately and reported under a specific standard cost 
center. For example, under the standard cost center 
``Electrocardiology'' with its 5-digit code of 06900, there are six 
nonstandard cost centers (for EKG and EEG, Electromyography, 
Cardiopulmonary, Stress Test, Cardiology, and Holter Monitor), each 
with a unique 5-digit code.
    The instructions for the Medicare cost report Form CMS-2552-10 
explain the purpose and requirements related to the standard and 
nonstandard cost centers. Specifically, in CMS Pub. 15-2, Chapter 40, 
Section 4013, the instructions for Worksheet A of Form CMS-2552-10 
state:
    ``Cost center coding is a methodology for standardizing the meaning 
of cost center labels as used by health care providers on the Medicare 
cost report. Form CMS-2552-10 provides for preprinted cost center 
descriptions on Worksheet A. In addition, a space is provided for a 
cost center code. The preprinted cost center labels are automatically 
coded by CMS approved cost reporting software. These cost center 
descriptions are hereafter referred to as the standard cost centers. 
Additionally, nonstandard cost center descriptions have been identified 
through analysis of frequently used labels.
    The use of this coding methodology allows providers to continue to 
use labels for cost centers that have meaning within the individual 
institution. The five digit cost center codes that are associated with 
each provider label in their electronic file provide standardized 
meaning for data analysis. You are required to compare any added or 
changed label to the descriptions offered on the standard or 
nonstandard cost center tables. A description of cost center coding and 
the table of cost center codes are in Sec.  4095, Table 5.''
    Section 4095 of CMS Pub. 15-2 (pages 40-805 and 40-806) further 
provides that: ``Both the standard and nonstandard cost center 
descriptions along with their cost center codes are shown on Table 5 . 
. . . Cost center codes may only be used in designated lines in 
accordance with the classification of the cost center(s), i.e., lines 1 
through 23 may only contain cost center codes within the general 
service cost center category of both standard and nonstandard coding. 
For example, in the general service cost center category for Operation 
of Plant cost, line 7 and subscripts thereof should only contain cost 
center codes of 00700-00719 and nonstandard cost center codes. This 
logic must hold true for all other cost center categories, i.e., 
ancillary, inpatient routine, outpatient, other reimbursable, special 
purpose, and non- reimbursable cost centers.''
    Table 5 of Section 4095, Chapter 40, of CMS Pub. 15-2 (pages 40-807 
through 40-810) lists the electronic reporting specifications for each

[[Page 49348]]

standard cost center, its 5-digit code, and, separately, the 
nonstandard cost center descriptions and their 5-digit codes. While the 
nonstandard codes are categorized by General Service Cost Centers, 
Inpatient Routine Service Cost Centers, and Ancillary Service Cost 
Centers, among others, Table 5 does not map the nonstandard cost 
centers and codes to specific standard cost centers. In addition, the 
CMS-approved cost reporting software does not restrict the use of 
nonstandard codes to specific standard cost centers. Furthermore, the 
software does not prevent hospitals from manually entering in a name 
for a nonstandard cost center code that may be different from the name 
that CMS assigned to that nonstandard cost center code. For example, 
Table 5 specifies that the 5-digit code for the Ancillary Service 
nonstandard cost center ``Acupuncture'' is 03020. When CMS creates the 
HCRIS SAS files, CMS maps all codes 03020 to standard line 53, 
``Anesthesiology''.\1\ However, a review of the December 31, 2014 
update of the FY 2013 HCRIS SAS files, from which the proposed 19 CCRs 
for FY 2016 were calculated, revealed that, of the 3,172 times that 
nonstandard code 03020 was reported by hospitals, it is called 
``Acupuncture'' only 122 times. Instead, hospitals use various names 
for nonstandard code 03020, such as ``Cardiopulmonary,'' ``Sleep Lab,'' 
``Diabetes Center,'' or ``Wound Care''.
---------------------------------------------------------------------------

    \1\ To view how CMS rolls up the codes to create the HCRIS SAS 
files, we refer readers to http://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/Cost-Reports/Hospital-2010-form.html. On this page, click on ``Hospital-2010-
SAS.ZIP (SAS datasets and documentation)'', and from the zip file, 
choose the Excel spreadsheet ``2552-10 SAS FILE RECORD LAYOUT AND 
CROSSWALK TO 96.xlsx''. The second tab of this spreadsheet is ``NEW 
ROLLUPS'', and shows the standard and nonstandard 5-digit codes 
(columns B and C) that CMS rolls up to each standard line (column 
G).
---------------------------------------------------------------------------

    As noted above, the Ancillary Service standard cost center for 
``Anesthesiology'', line 53 of Worksheet A and subsequent worksheets of 
the Medicare cost report Form CMS-2552-10 (and its associated 
nonstandard cost center code 03020 ``Acupuncture'') is an example of a 
cost center that is subject to inconsistent reporting. Our review of 
the FY 2013 HCRIS as-submitted cost reports from which the proposed 19 
CCRs for FY 2016 were calculated revealed that, regardless of the 
actual name hospitals assigned to nonstandard code 03020 (for example, 
``Acupuncture'' or otherwise), hospitals reported this code almost 100 
percent of the time on standard line 76, ``Other Ancillary,'' and never 
on standard line 53, ``Anesthesiology.'' Yet, as noted above, CMS (and 
previously HCFA, under earlier versions of the Medicare cost report), 
in creating the HCRIS database, has had the longstanding practice of 
mapping and rolling up all instances of nonstandard code 03020 to 
standard line 53, ``Anesthesiology,'' not to standard line 76, ``Other 
Ancillary. Therefore, the version of the HCRIS SAS files created by 
CMS, which CMS uses for ratesetting purposes, may differ somewhat from 
the as-submitted cost reports of hospitals because CMS moves various 
nonstandard cost centers based on cost center codes, not cost center 
descriptions, from the standard cost centers in which hospitals report 
them and places them in different standard cost centers based on CMS' 
roll-up specifications.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24345), we 
highlighted the discrepancy in the reporting of nonstandard code 03020 
``Acupuncture'' because the placement of nonstandard code 03020 and its 
related costs and charges seem to have the most significant 
implications for the calculation of one of the 19 CCRs, the Anesthesia 
CCR. As stated in section II.H.3. of the preamble of the proposed rule 
(80 FR 24413), the proposed FY 2016 CCR for Anesthesia was 0.108. We 
calculated this proposed CCR based on the December 31, 2014 update of 
the FY 2013 HCRIS, with the nonstandard cost center codes of 03020 
through 03029 rolled up to standard line 53, ``Anesthesiology.'' That 
is, under the CMS' HCRIS specifications, we rolled up the following 5-
digit codes to standard line 53, ``Anesthesiology'': \2\ standard codes 
for ``Anesthesiology'' 05300 through 05329; and nonstandard codes for 
``Acupuncture'' 03020 through 03029. For simulation purposes, we also 
created a version of the December 31, 2014 update of the FY 2013 HCRIS 
which retained nonstandard codes 03020 through 03029 on standard line 
76, ``Other Ancillary,'' where hospitals actually reported these codes 
on their as-submitted FY 2013 cost reports. When all reported uses of 
nonstandard codes 03020 through 03029 remain on standard line 76, 
``Other Ancillary,'' we calculated that the Anesthesia CCR would be 
0.084 (instead of 0.108 as proposed in section II.H.3. of the preamble 
of the FY 2016 IPPS/LTCH PPS proposed rule). We also looked at the 
effect on the other 18 CCRs. In the version of HCRIS we created for 
simulation purposes, by keeping the nonstandard cost center codes in 
standard line 76, ``Other Ancillary,'' where hospitals typically report 
them, rather than remapping them according to CMS specifications, three 
other CCRs also were affected, although not quite as significantly as 
the Anesthesia CCR. As proposed in section II.H.3. of the preamble of 
the FY 2016 IPPS/LTCH PPS proposed rule, the proposed FY 2016 
Cardiology CCR was 0.119. However, when all cardiology-related 
nonstandard codes were rolled up to standard line 76, ``Other 
Ancillary'', and not to standard line 69, ``Electrocardiology'' as 
under CMS' usual practice, the Cardiology CCR was 0.113. In addition, 
as proposed in section II.H.3. of the preamble of the FY 2016 IPPS/LTCH 
PPS proposed rule, the proposed FY 2016 Radiology CCR was 0.159. 
However, when all radiology-related nonstandard codes were rolled up to 
standard line 76, ``Other Ancillary'', and not to standard lines 54 
(Radiology-Diagnostic), 55 (Radiology-Therapeutic), and 56 
(Radioisotope) as under CMS' usual practice, the Radiology CCR was 
0.161. Most notably, the CCR that was most impacted was the ``Other 
Services'' CCR. As proposed in section II.H.3. of the preamble of the 
FY 2016 proposed rule, the ``Other Services'' CCR was 0.367. However, 
if all nonstandard cost center codes remained in line 76, ``Other 
Ancillary'' as hospitals have reported them in their FY 2013 as-
submitted cost reports, instead of CMS applying its usual practice of 
rolling up these lines to the applicable ``Electrocardiology'' and 
``Radiology'' standard cost centers, among others, the ``Other 
Services'' CCR was 0.291. We note that we observed minimal or no 
differences in the remaining 15 CCRs, when their associated nonstandard 
cost centers were rolled up to their specific standard cost centers, 
versus being rolled up to the standard line 76, ``Other Ancillary.''
---------------------------------------------------------------------------

    \2\ Ibid.
---------------------------------------------------------------------------

    The differences in these CCRs computed from the HCRIS that was 
compiled by applying CMS' current rollup procedures of assigning 
nonstandard codes to specific standard cost centers, as compared to 
following hospitals' general practice of reporting nonstandard codes 
``en masse'' on line 76, ``Other Ancillary,'' have implications for the 
aspects of the IPPS that rely on the CCRs (for example, the calculation 
of the MS-DRG relative weights). In the FY 2016 IPPS/LTCH PPS proposed 
rule (80 FR 24345), we discussed that some questions arise: whether 
CMS' procedures for mapping and rolling up nonstandard cost centers to 
specific standard cost centers should be updated; whether hospital 
reporting practices are imprecise; or whether there is a combination of 
both of these

[[Page 49349]]

questions. CMS' rollup procedures were developed many years ago based 
on historical analysis of hospitals' cost reporting practices and 
health care services furnished. It may be that it would be appropriate 
for CMS to reevaluate its rollup procedures based on hospitals' more 
current cost reporting practices and contemporary health care services 
provided. However, one factor complicating the determination of the 
most accurate standard cost centers to which each respective 
nonstandard cost center should be mapped is hospitals' own inconsistent 
reporting practices. For example, it may be determined that CMS should 
no longer be mapping and rolling up nonstandard cost center 
``Acupuncture'' and its associated 5-digit codes 03020 through 03029 to 
standard cost center line 53, ``Anesthesiology.'' However, determining 
which other standard line ``Acupuncture'' and its associated 5-digit 
codes 03020 through 03029 should be mapped to is unclear, given that, 
as mentioned above, out of the 3,172 times that codes 03020 through 
03029 were reported in the FY 2013 HCRIS file, hospitals called these 
codes ``Acupuncture'' only 122 times, and instead called these codes a 
variety of other names (such as Cardiopulmonary, Sleep Lab, Wound Care, 
Diabetes Center, among others). Therefore, without being able to 
determine the true nature of the services that were actually provided, 
it is difficult to know which standard cost center to map these 
services. That is, the question arises as to whether the service 
provided was acupuncture because a hospital reported code 03020, or 
whether the service provided was cardiopulmonary, which was the name a 
hospital assigned to code 03020. Furthermore, if the service provided 
was in fact cardiopulmonary, then, as Table 5 of Section 4095 of CMS 
Pub. 15-2 indicates, the correct nonstandard code for cardiopulmonary 
is 03160, not 03020. A related question would be, if the hospital 
provided cardiopulmonary services, which are clearly related to 
cardiology, why did the hospital report those costs and charges on line 
76, ``Other Ancillary,'' instead of subscripting standard line 69, 
``Electrocardiology,'' and reporting the cardiopulmonary costs and 
charges there.
    In summary, we stated in the FY 2016 IPPS/LTCH PPS proposed rule 
that we believe that the differences between the standard cost centers 
to which CMS assigns nonstandard codes when CMS rolls up cost report 
data to create the HCRIS SAS database, and the standard cost centers to 
which hospitals tend to assign and use nonstandard codes, coupled with 
the inconsistencies found in hospitals' use and naming of the 
nonstandard codes, have implications for the aspects of the IPPS that 
rely on the CCRs. For example, we have explained above and provided 
examples of how the CCRs used to calculate the MS-DRG relative weights 
could change, based on where certain nonstandard codes are reported and 
rolled up in the cost reports. However, before considering changes to 
our longstanding practices, in the proposed rule, we solicited public 
comments from stakeholders as to how to improve the use of nonstandard 
cost center codes. We indicated that one option might be for CMS to 
allow only certain nonstandard codes to be used with certain standard 
cost centers, meaning that CMS might require that the CMS-approved cost 
reporting software ``lock in'' those nonstandard codes with their 
assigned standard cost centers. For example, if a hospital wishes to 
subscript a standard cost center, the cost reporting software might 
allow the hospital to choose only from a predetermined set of 
nonstandard codes. Therefore, for example, if a hospital wished to 
report Cardiopulmonary costs and charges on its cost report, the only 
place that the hospital could do that under this approach would be from 
a drop down list of cardiology-related services on standard line 69, 
``Electrocardiology,'' and not on another line (not even line 76, 
``Other Ancillary''). We stated that some flexibility could be 
maintained, but within certain limits, in consideration of unique 
services that hospitals might provide.
    Below we summarize the public comments that we received in response 
to our solicitation of comments on nonstandard cost center codes.
    Comment: Several commenters expressed concern that issues related 
to reporting of costs and charges in the nonstandard cost centers could 
affect the validity of the CCRs used to develop the relative weights. 
The commenters requested that CMS provide more cost reporting 
instruction so that the accuracy and validity of the CCRs could be 
improved, through more detailed examples of how cost report and claims 
data are used for ratesetting, identifying what revenue codes and 
services should be associated with specific cost centers, and providing 
detailed instructions regarding cost allocation methods. The commenters 
believed that these types of actions would resolve some of the 
inconsistencies in hospital cost reporting. Several commenters 
supported more specific guidance and data processing on cost reporting 
and supported CMS' idea to ``lock in'' certain nonstandard codes with 
specific cost centers in the cost reporting softwares, but wanted to 
retain flexibility in terms of available options.
    Commenters requested that CMS work with stakeholders through 
methods such as additional engagement with the provider community and 
convening a technical workgroup to receive stakeholder input. Several 
commenters requested that CMS provide sufficient advance notice when 
cost reporting process changes are made, noting that it would take time 
for hospitals to implement changes to their internal cost reporting 
processes. The commenters were generally supportive of efforts to 
improve the cost reporting process and cost estimation accuracy. One 
commenter stated that inconsistencies in reporting of nonstandard cost 
centers compound the problems the commenter raised in earlier public 
comments regarding allocation of capital costs and the new CCRs for 
MRIs and CT scans. Other commenters stated generally that the use of 
distinct CCRs for MRI and CT scans produces ``payment rates that lack 
face validity'' and recommended that CMS not finalize the use of the 
MRI and CT scan CCRs.
    Response: We appreciate the input that stakeholders have provided 
in response to the request for comment on how to improve the use of 
nonstandard cost center codes. As discussed in the FY 2016 IPPS/LTCH 
PPS proposed rule (80 FR 24344 through 24346), we noticed 
inconsistencies in hospital cost reporting of nonstandard cost centers 
and were concerned about the implication that some of these 
discrepancies might have on the aspects of the IPPS that rely on CCRs. 
However, we did not propose any changes to the methodology or data 
sources for the FY 2016 CCRs and relative weights.
    We appreciate the request that CMS provide more detailed 
instructions regarding appropriate cost reporting methodologies. We 
believe that the desire for more specific direction in how to report 
should be balanced by the need for flexibility in cost reporting based 
on each hospital's own internal charge structure. That balance also 
applies to cost allocation methodologies. As discussed in the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50523) and in the FY 2011 IPPS/LTCH PPS 
final rule (75 FR 50077 through 50079), we encouraged hospitals over 
the past several years to use the most precise cost reporting methods 
in response to the new cost report lines such as the MRI and CT scan 
standard

[[Page 49350]]

cost centers, which, in most cases, corresponded to the recommended 
cost allocation statistic. We believe that more precise cost allocation 
could mitigate concerns related to the accuracy of the MRI and CT scan 
CCRs. However, we recognized that hospitals have varying resources and 
capability for assigning costs and charges on the cost report, which is 
why in most cases we have allowed greater flexibility. As commenters 
noted, an instance in which we have specifically provided guidance was 
in connection with the decision to split the cost center for Medical 
Supplies Charged to Patients into one line for ``Medical Supplies 
Charged to Patients'' and another line for ``Implantable Devices 
Charged to Patients,'' where we listed the revenue codes for which 
charges would properly be associated with these two cost centers (we 
refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR 48462 
through 48463). For that specific change to address charge compression 
in the ``Medical Supplies'' cost center, the separation between the 
types of services associated with each cost center is more distinct and 
therefore more easily identifiable by revenue code, which may not be 
true of all nonstandard and standard cost centers. Regarding the 
comments stating that use of distinct CCRs for MRI and CT scans produce 
``payment rates that lack face validity'' and that CMS not finalize use 
of the MRI and CT scan CCRs, we note that we did not make any proposals 
regarding the use of the MRI and CT scans in particular in the relative 
weights calculation for FY 2016. As we have done since FY 2014, we are 
using the MRI and CT scan CCRs to calculate the IPPS relative weights 
for FY 2016. We also note that we have previously addressed stakeholder 
concerns related to the CT scan and MRI standard cost centers in 
setting the IPPS relative weights. For a detailed discussion of the CT 
scan and MRI standard cost centers, we refer readers to the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50520 through 50523), and the FY 2011 
IPPS/LTCH PPS final rule (75 FR 50077 through 50079).
    We appreciate the comments that stakeholders submitted and will 
continue to explore ways in which we can improve the accuracy of the 
cost report data and calculated CCRs used in the cost estimation 
process. To the extent possible, we will continue to seek stakeholder 
input in efforts to limit the impact on providers. In the interim, 
while we are considering these public comments, as we proposed, we are 
using the 19 CCRs for FY 2016 (listed in section II.H.3. of the 
preamble of this final rule) that were calculated from the March 2015 
update of the FY 2013 HCRIS, created in accordance with CMS' current 
longstanding procedures for mapping and rolling up nonstandard cost 
center codes. As we did with the FY 2015 IPPS/LTCH PPS final rule, we 
are providing the version of the HCRIS from which we calculated these 
19 CCRs on the FY 2016 IPPS Final Rule Home Page at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2016-IPPS-Final-Rule-Home-Page.html.\3\
---------------------------------------------------------------------------

    \3\ Ibid.
---------------------------------------------------------------------------

F. Adjustment to MS-DRGs for Preventable Hospital-Acquired Conditions 
(HACs), Including Infections for FY 2016

1. Background
    Section 1886(d)(4)(D) of the Act addresses certain hospital-
acquired conditions (HACs), including infections. This provision is 
part of an array of Medicare tools that we are using to promote 
increased quality and efficiency of care. Under the IPPS, hospitals are 
encouraged to treat patients efficiently because they receive the same 
DRG payment for stays that vary in length and in the services provided, 
which gives hospitals an incentive to avoid unnecessary costs in the 
delivery of care. In some cases, conditions acquired in the hospital do 
not generate higher payments than the hospital would otherwise receive 
for cases without these conditions. To this extent, the IPPS encourages 
hospitals to avoid complications.
    However, the treatment of these conditions can generate higher 
Medicare payments in two ways. First, if a hospital incurs 
exceptionally high costs treating a patient, the hospital stay may 
generate an outlier payment. However, because the outlier payment 
methodology requires that hospitals experience large losses on outlier 
cases before outlier payments are made, hospitals have an incentive to 
prevent outliers. Second, under the MS-DRG system that took effect in 
FY 2008 and that has been refined through rulemaking in subsequent 
years, certain conditions can generate higher payments even if the 
outlier payment requirements are not met. Under the MS-DRG system, 
there are currently 261 sets of MS-DRGs that are split into 2 or 3 
subgroups based on the presence or absence of a complication or 
comorbidity (CC) or a major complication or comorbidity (MCC). The 
presence of a CC or an MCC generally results in a higher payment.
    Section 1886(d)(4)(D) of the Act specifies that, by October 1, 
2007, the Secretary was required to select, in consultation with the 
Centers for Disease Control and Prevention (CDC), at least two 
conditions that: (a) Are high cost, high volume, or both; (b) are 
assigned to a higher paying MS-DRG when present as a secondary 
diagnosis (that is, conditions under the MS-DRG system that are CCs or 
MCCs); and (c) could reasonably have been prevented through the 
application of evidence-based guidelines. Section 1886(d)(4)(D) of the 
Act also specifies that the list of conditions may be revised, again in 
consultation with the CDC, from time to time as long as the list 
contains at least two conditions.
    Effective for discharges occurring on or after October 1, 2008, 
under the authority of section 1886(d)(4)(D) of the Act, Medicare no 
longer assigns an inpatient hospital discharge to a higher paying MS-
DRG if a selected condition is not present on admission (POA). Thus, if 
a selected condition that was not POA manifests during the hospital 
stay, it is considered a HAC and the case is paid as though the 
secondary diagnosis was not present. However, even if a HAC manifests 
during the hospital stay, if any nonselected CC or MCC appears on the 
claim, the claim will be paid at the higher MS-DRG rate. In addition, 
Medicare continues to assign a discharge to a higher paying MS-DRG if a 
selected condition is POA. When a HAC is not POA, payment can be 
affected in a manner shown in the diagram below.

[[Page 49351]]

[GRAPHIC] [TIFF OMITTED] TR17AU15.000

2. HAC Selection
    Beginning in FY 2007, we have set forth proposals, and solicited 
and responded to public comments, to implement section 1886(d)(4)(D) of 
the Act through the IPPS annual rulemaking process. For specific 
policies addressed in each rulemaking cycle, including a detailed 
discussion of the collaborative interdepartmental process and public 
input regarding selected and potential candidate HACs, we refer readers 
to the following rules: The FY 2007 IPPS proposed rule (71 FR 24100) 
and final rule (71 FR 48051 through 48053); the FY 2008 IPPS proposed 
rule (72 FR 24716 through 24726) and final rule with comment period (72 
FR 47200 through 47218); the FY 2009 IPPS proposed rule (73 FR 23547) 
and final rule (73 FR 48471); the FY 2010 IPPS/RY 2010 LTCH PPS 
proposed rule (74 FR 24106) and final rule (74 FR 43782); the FY 2011 
IPPS/LTCH PPS proposed rule (75 FR 23880) and final rule (75 FR 50080); 
the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25810 through 25816) and 
final rule (76 FR 51504 through 51522); the FY 2013 IPPS/LTCH PPS 
proposed rule (77 FR 27892 through 27898) and final rule (77 FR 53283 
through 53303); the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27509 
through 27512) and final rule (78 FR 50523 through 50527), and the FY 
2015 IPPS/LTCH PPS proposed rule (79 FR 28000 through 28003) and final 
rule (79 FR 49876 through 49880). A complete list of the 14 current 
categories of HACs is included on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Hospital-Acquired_Conditions.html.
3. Present on Admission (POA) Indicator Reporting
    Collection of POA indicator data is necessary to identify which 
conditions were acquired during hospitalization for the HAC payment 
provision as well as for broader public health uses of Medicare data. 
In previous rulemaking, we provided both CMS and CDC Web site resources 
that are available to hospitals for assistance in this reporting 
effort. For detailed information regarding these sites and materials, 
including the application and use of POA indicators, we refer the 
reader to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 through 
51507).
    Currently, as we have discussed in the prior rulemaking cited under 
section II.I.2. of the preamble of this final rule, the POA indicator 
reporting requirement only applies to IPPS hospitals and Maryland 
hospitals because they are subject to this HAC provision. Non-IPPS 
hospitals, including CAHs, LTCHs, IRFs, IPFs, cancer hospitals, 
children's hospitals, RNHCIs, and the Department of Veterans Affairs/
Department of Defense hospitals, are exempt from POA reporting.
    There are currently four POA indicator reporting options, ``Y'', 
``W'', ``N'', and ``U'', as defined by the ICD-9-CM Official Guidelines 
for Coding and Reporting. We note that prior to January 1, 2011, we 
also used a POA indicator reporting option ``1''. However, beginning on 
or after January 1, 2011, hospitals were required to begin reporting 
POA indicators using the 5010 electronic transmittal standards format. 
The 5010 format removes the need to report a POA indicator of ``1'' for 
codes that are exempt from POA reporting. We issued CMS instructions on 
this reporting change as a One-Time Notification, Pub. No. 100-20, 
Transmittal No. 756, Change Request 7024, effective on August 13, 2010, 
which can be located at the following link on the CMS Web site: http://www.cms.gov/manuals/downloads/Pub100_20.pdf. The current POA indicators 
and their descriptors are shown in the chart below:

------------------------------------------------------------------------
         Indicator                            Descriptor
------------------------------------------------------------------------
Y..........................  Indicates that the condition was present on
                              admission.
W..........................  Affirms that the hospital has determined
                              that, based on data and clinical judgment,
                              it is not possible to document when the
                              onset of the condition occurred.
N..........................  Indicates that the condition was not
                              present on admission.
U..........................  Indicates that the documentation is
                              insufficient to determine if the condition
                              was present at the time of admission.
------------------------------------------------------------------------


[[Page 49352]]

    Under the HAC payment policy, we treat HACs coded with ``Y'' and 
``W'' indicators as POA and allow the condition on its own to cause an 
increased payment at the CC and MCC level. We treat HACs coded with 
``N'' and ``U'' indicators as Not Present on Admission (NPOA) and do 
not allow the condition on its own to cause an increased payment at the 
CC and MCC level. We refer readers to the following rules for a 
detailed discussion of POA indicator reporting: The FY 2009 IPPS 
proposed rule (73 FR 23559) and final rule (73 FR 48486 through 48487); 
the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24106) and final 
rule (74 FR 43784 through 43785); the FY 2011 IPPS/LTCH PPS proposed 
rule (75 FR 23881 through 23882) and final rule (75 FR 50081 through 
50082); the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25812 through 
25813) and final rule (76 FR 51506 through 51507); the FY 2013 IPPS/
LTCH PPS proposed rule (77 FR 27893 through 27894) and final rule (77 
FR 53284 through 53285); the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 
27510 through 27511) and final rule (78 FR 50524 through 50525), and 
the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28001 through 28002) and 
final rule (79 FR 49877 through 49878).
    In addition, as discussed previously in the FY 2013 IPPS/LTCH PPS 
final rule (77 FR 53324), the 5010 format allows the reporting and, 
effective January 1, 2011, the processing of up to 25 diagnoses and 25 
procedure codes. As such, it is necessary to report a valid POA 
indicator for each diagnosis code, including the principal diagnosis 
and all secondary diagnoses up to 25.
4. HACs and POA Reporting in Preparation for Transition to ICD-10-CM 
and ICD-10-PCS
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 and 51507), in 
preparation for the transition to the ICD-10-CM and ICD-10-PCS code 
sets, we indicated that further information regarding the use of the 
POA indicator with the ICD-10-CM/ICD-10-PCS classifications as they 
pertain to the HAC policy would be discussed in future rulemaking.
    At the March 5, 2012 and the September 19, 2012 meetings of the 
ICD-9-CM Coordination and Maintenance Committee, an announcement was 
made with regard to the availability of the ICD-9-CM HAC list 
translation to ICD-10-CM and ICD-10-PCS code sets. Participants were 
informed that the list of the ICD-9-CM selected HACs had been 
translated into codes using the ICD-10-CM and ICD-10-PCS classification 
system. It was recommended that the public review this list of ICD-10-
CM/ICD-10-PCS code translations of the selected HACs available on the 
CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We encouraged the public to submit 
comments on these translations through the HACs Web page using the CMS 
ICD-10-CM/PCS HAC Translation Feedback Mailbox that was set up for this 
purpose under the Related Links section titled ``CMS HAC Feedback.'' We 
also encouraged readers to review the educational materials and draft 
code sets available for ICD-10-CM/PCS on the CMS Web site at: http://www.cms.gov/ICD10/. Lastly, we provided information regarding the ICD-
10 MS-DRG Conversion Project on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/icd10_hacs.html.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50525), we stated 
that the final HAC list translation from ICD-9-CM to ICD-10-CM/ICD-10-
PCS would be subject to formal rulemaking. We again encouraged readers 
to review the educational materials and updated draft code sets 
available for ICD-10-CM/ICD-10-PCS on the CMS Web site at: http://www.cms.gov/ICD10/. In addition, we stated that the draft ICD-10-CM 
Coding Guidelines could be viewed on the CDC Web site at: http://www.cdc.gov/nchs/icd/icd10cm.htm.
    However, prior to engaging in rulemaking for the FY 2015 DRA HAC 
program, on April 1, 2014, the Protecting Access to Medicare Act of 
2014 (PAMA) (Pub. L. 113-93) was enacted, which specified that the 
Secretary may not adopt ICD-10 prior to October 1, 2015. Accordingly, 
the U.S. Department of Health and Human Services released a final rule 
in the Federal Register on August 4, 2014 (79 FR 45128 through 45134) 
that included a new compliance date that requires the use of ICD-10 
beginning October 1, 2015. The August 4, 2014 final rule is available 
for viewing on the Internet at: http://www.gpo.gov/fdsys/pkg/FR-2014-08-04/pdf/2014-18347.pdf. That final rule also requires HIPAA covered 
entities to continue to use ICD-9-CM through September 30, 2015. 
Further information on the ICD-10 rules can be found on the CMS Web 
site at: http://www.cms.gov/Medicare/Coding/ICD10/Statute_Regulations.html.
    As described in section II.F.5. of the preamble of this final rule, 
we are implementing the HAC list translations from ICD-9-CM to ICD-10-
CM/ICD-10-PCS in this FY 2016 IPPS/LTCH PPS final rule.
5. Changes to the HAC Program for FY 2016
    As discussed in section II.G. 1. a. of the preamble of this final 
rule, for FY 2016, we are implementing the ICD-10 MS-DRGs Version 33 as 
the replacement logic for the ICD-9-CM MS-DRGs Version 32. As part of 
our DRA HAC update for FY 2016, we proposed to implement the ICD-10-CM/
PCS Version 33 HAC list to replace the ICD-9-CM Version 32 HAC list.
    CMS prepared the ICD-10 MS-DRGs Version 32 based on the FY 2015 MS-
DRGs (Version 32) that we finalized in the FY 2015 IPPS/LTCH PPS final 
rule. In November 2014, we posted a Definitions Manual of the ICD-10 
MS-DRGs Version 32 on the ICD-10 MS-DRG Conversion Project Web site at: 
http://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. The HAC code list translations from ICD-9-CM to ICD-10-
CM/PCS are located in Appendix I of the ICD-10-CM/PCS MS-DRG Version 32 
Definitions Manual. The link to this Manual (available in both text and 
HTML formats) is located in the Downloads section of the ICD-10 MS-DRG 
Conversion Project Web site.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24348 through 
24349), we solicited public comments on how well the ICD-10-CM/PCS 
Version 32 HAC list replicates the ICD-9-CM Version 32 HAC list. We did 
not receive any public comments on our list of ICD-10 translations for 
the HAC list. Therefore, we are finalizing our proposal to implement 
the ICD-10-CM/PCS Version 33 HAC list to replace the ICD-9-CM Version 
32 HAC list.
    With respect to the current categories of the HACs, in the FY 2016 
IPPS/LTCH PPS proposed rule, we did not propose to add or remove any 
categories for FY 2016.
    Comment: Two commenters suggested that CMS expand the current HAC 
category of Iatrogenic Pneumothorax with Venous Catheterization to 
include Iatrogenic Pneumothorax with Thoracentesis and to also add 
Accidental Puncture/Bleeding with Paracentesis as a HAC category. The 
commenters cited various studies and asserted that both of these 
conditions satisfy the established criteria of being high cost, high 
volume, or both; being assigned to a higher paying MS-DRG when present 
as a secondary diagnosis (that is, conditions under the MS-DRG system 
that are CCs or MCCs); and could reasonably have been prevented through 
the application of evidence-based guidelines. Both commenters also 
listed a series of ICD-10-CM and ICD-10-PCS

[[Page 49353]]

codes that they requested CMS to consider for inclusion in each of 
these recommended new HAC categories. The commenters believed that 
adding these two conditions would improve patient care and result in 
cost savings to the Medicare program.
    Response: We recognize and appreciate the commenters' 
recommendations for refinements to the HAC list. We also thank the 
commenters for their commitment to working with CMS on reducing 
complications resulting in better patient care and cost savings. In the 
FY 2015 IPPS/LTCH PPS final rule (79 FR 49879), we responded to similar 
comments and noted that we would take them under consideration for 
future rulemaking. While we did not propose to expand or add these 
specific HAC categories (Iatrogenic Pneumothorax with Thoracentesis and 
Accidental Puncture/Bleeding with Paracentesis) for FY 2016, in 
response to a public comment received last year, we did engage our 
contractor, RTI, to begin researching available evidence-based 
guidelines for these conditions. As discussed in section II.F.7. of the 
preamble to this final rule, RTI has completed their annual evidence-
based guidelines report and, in addition, has developed a separate 
excerpt report that summarizes the two conditions recommended by the 
commenters under consideration. We encourage readers to review the 
separate document titled, ``Evidence-based Guidelines Pertaining to 
Select Thoracentesis- and Paracentesis-Related Conditions,'' which is 
available via the Internet on the CMS Hospital-Acquired Conditions Web 
page in the ``Downloads'' section at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/index.html?redirect=/
HospitalAcqCond/ We reiterate that we continue to encourage public 
dialogue about refinements to the HAC list through written stakeholder 
comments.
    We were unable to fully evaluate each of these two recommended 
conditions against all the established criteria, as well as review the 
references the commenters submitted, or perform detailed analysis of 
the ICD-10 codes that the commenters listed in time for discussion in 
this FY 2016 IPPS/LTCH PPS final rule. However, we intend to consider 
these public comments as we develop proposed changes to the HAC-POA 
program for FY 2017.
    Comment: One commenter urged CMS to remove the Falls and Trauma HAC 
category from the HAC-POA program. The commenter stated that the 
statutory criterion that a condition could reasonably have been 
prevented through the application of evidence-based guidelines is not 
met for preventing falls. The commenter also stated that this HAC may 
lead to unintended consequences such as ``creating an epidemic of 
immobility in hospitals'' and excessive orders for bed rest and motion 
detection devices. The commenter recommended that CMS develop quality 
measures and incentivize hospitals to create Acute Care for Elders 
(ACE) units that focus on this specific population as another option. 
According to the commenter, studies of the ACE initiative determined 
better outcomes. For example, the commenter noted results of the ACE 
program model indicated a reduction in falls, delirium, and functional 
decline for patients, as well as shorter lengths of stay in a hospital, 
a decrease in the number of discharges to a nursing home, a reduction 
in 30-day readmissions, and reduced health care costs.
    Response: We acknowledge the commenter's comments regarding the 
Falls and Trauma HAC category. With respect to the commenter's 
statement that one of the statutory criteria (that is, could reasonably 
have been prevented through the application of evidence-based 
guidelines) is not being met for the prevention of falls, we note that, 
as mentioned in response to an earlier comment, our contractor, RTI, 
has completed the 2015 Report for Evidence-Based Guidelines, which is 
available via the Internet on the CMS Hospital-Acquired Conditions Web 
page in the ``Downloads'' section at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/index.html?redirect=/
HospitalAcqCond/. We further note that evidence-based guidelines for 
falls prevention exist and refer the reader to the findings in this 
report directly related to falls. We also point out that, while the 
commenter requested the removal of the entire Falls and Trauma HAC 
category, falls are only one component (or condition) in the HAC 
category. The Falls and Trauma HAC category also includes conditions 
related to trauma, such as intracranial injuries, crushing injuries, 
burns, and other injuries (for example, frostbite, heat stroke, 
drowning, and suffocation). Therefore, we do not agree with the 
commenter's suggestion to remove the Falls and Trauma HAC category from 
the HAC-POA program.
    In response to the commenter's recommendation that CMS establish 
quality measures and incentive payments for hospitals, we point out 
that currently, under various CMS quality reporting programs, there are 
measures specifically related to falls. On October 6, 2014, the 
Improving Medicare Post-Acute Care Transformation Act of 2014 (the 
IMPACT Act) (Pub. L. 113-185) was enacted, which specified under 
section 1899B(c)(1) of the Act that the Secretary shall require 
postacute care providers to report data on quality measures relating to 
functional status, skin integrity, medication reconciliation and 
incidence of major falls. Prior to the IMPACT Act, the NQF #0674 
measure, Percent of Residents Experiencing One or More Falls with Major 
Injury (Long Stay), was finalized in the LTCHQR Program and the IRF QR 
Program. As such, we believe these measures specified in the IMPACT Act 
align with the CMS Quality Strategy,\4\ which incorporates the three 
broad aims of the National Quality Strategy \5\:
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    \4\ Available at: http://www.coms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.html.
    \5\ Available at: http://www.ahrq.gov/workingforquality/nqs/nqs2011annlrpt.html.
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     Better Care: Improve the overall quality of care by making 
healthcare more patient-centered, reliable, accessible and safe;
     Healthy People, Healthy Communities: Improve the health of 
the U.S. population by supporting proven interventions to address 
behavioral, social and environmental determinants of health in addition 
to delivering higher-quality care; and
     Affordable Care: Reduce the cost of quality healthcare for 
individuals, families, employers, and government.
    Comment: One commenter requested that CMS incorporate untreated 
malnutrition, including disease-related malnutrition, as a HAC 
category. The commenter indicated there are three common types of 
malnutrition diagnoses that can be attributed to adults in healthcare 
settings: (1) Starvation-relation malnutrition; (2) chronic disease-
related malnutrition; and (3) acute disease or injury-related 
malnutrition. The commenter also noted that hospital-acquired 
malnutrition from inadequate feeding practices is widespread. According 
to the commenter, screening patients for the detection of malnutrition 
allows for further follow-up sessions if warranted. In addition, the 
commenter stated that, through the process of early detection, the 
prevention and treatment for disease-related malnutrition will lead to 
improved outcomes such as patients acquiring fewer complications, 
hospitalizations, and readmissions.
    The commenter suggested that CMS also advocate for the creation of 
quality measures that encourage nutrition screening, assessment, and 
intervention to be included in various quality

[[Page 49354]]

reporting programs or other agency initiatives that focus on measuring 
quality of care.
    Response: We appreciate the commenter's suggestion. As stated 
previously, we did not propose to add or remove any HAC categories for 
FY 2016. Therefore, we will consider this topic for future rulemaking. 
We encourage the commenter to submit the specific list of conditions, 
including the ICD-10 coded data identifying the various types of 
malnutrition that the commenter is recommending as a candidate 
condition, along with any additional supporting documentation, for the 
other established criteria for a HAC as referenced earlier in this 
section.
    With regard to the commenter's recommendation to develop quality 
measures related to malnutrition in other quality reporting programs, 
we note that the quality reporting programs that involve measures are 
separate and distinct from the Deficit Reduction Act (DRA) HAC program. 
We refer the reader to section VII. of this FY 2016 IPPS/LTCH PPS final 
rule for information related to those programs.
    We also refer readers to section II.F.6. of the FY 2008 IPPS final 
rule with comment period (72 FR 47202 through 47218) and to section 
II.F.7. of the FY 2009 IPPS final rule (73 FR 48774 through 48491) for 
detailed discussion supporting our determination regarding each of the 
current conditions. We refer readers to the FY 2013 IPPS/LTCH PPS 
proposed rule (77 FR 27892 through 27898) and final rule (77 FR 53285 
through 53292) for the HAC policy for FY 2013, the FY 2014 IPPS/LTCH 
PPS proposed rule (78 FR 27509 through 27512) and final rule (78 FR 
50523 through 50527) for the HAC policy for FY 2014, and the FY 2015 
IPPS/LTCH PPS proposed rule (79 FR 28000 through 28003) and final rule 
(79 FR 49876 through 49880) for the HAC policy for FY 2015.
    After consideration of the public comments we received, as we 
proposed, we are not adding or removing any HAC categories for FY 2016. 
However, as described more fully in section III.F.7. of the preamble of 
this final rule, we will continue to monitor contemporary evidence-
based guidelines for selected, candidate, and previously considered 
HACs that provide specific recommendations for the prevention of the 
corresponding conditions in the acute hospital setting and may use this 
information to inform future rulemaking. In addition, we continue to 
encourage public dialogue about refinements to the HAC list through 
written stakeholder comments.
6. RTI Program Evaluation
    On September 30, 2009, a contract was awarded to RTI to evaluate 
the impact of the Hospital-Acquired Condition-Present on Admission 
(HAC-POA) provisions on the changes in the incidence of selected 
conditions, effects on Medicare payments, impacts on coding accuracy, 
unintended consequences, and infection and event rates. This was an 
intra-agency project with funding and technical support from CMS, OPHS, 
AHRQ, and CDC. The evaluation also examined the implementation of the 
program and evaluated additional conditions for future selection. The 
contract with RTI ended on November 30, 2012. Summary reports of RTI's 
analysis of the FYs 2009, 2010, and 2011 Med PAR data files for the 
HAC-POA program evaluation were included in the FY 2011 IPPS/LTCH PPS 
final rule (75 FR 50085 through 50101), the FY 2012 IPPS/LTCH PPS final 
rule (76 FR 51512 through 51522), and the FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53292 through 53302). Summary and detailed data also were 
made publicly available on the CMS Web site at: http://www.cms.gov/HospitalAcqCond/01_Overview.asp and the RTI Web site at: http://www.rti.org/reports/cms/.
    In addition to the evaluation of HAC and POA Med PAR claims data, 
RTI also conducted analyses on readmissions due to HACs, the 
incremental costs of HACs to the health care system, a study of 
spillover effects and unintended consequences, as well as an updated 
analysis of the evidence-based guidelines for selected and previously 
considered HACs. Reports on these analyses have been made publicly 
available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/index.html.
7. RTI Reports on Evidence-Based Guidelines
    The RTI program evaluation included a report that provided 
references for all evidence-based guidelines available for each of the 
selected, candidate, and previously considered HACs that provided 
specific recommendations for the prevention of the corresponding 
conditions. Guidelines were primarily identified using the AHRQ 
National Guidelines Clearing House (NGCH) and the CDC, along with 
relevant professional societies. Guidelines published in the United 
States were used, if available. In the absence of U.S. guidelines for a 
specific condition, international guidelines were included.
    RTI prepared a final report to summarize its findings regarding 
these guidelines. This report is titled ``Evidence-Based Guidelines for 
Selected, Candidate, and Previously Considered Hospital-Acquired 
Conditions'' and can be found on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Downloads/Evidence-Based-Guidelines.pdf.
    Subsequent to this final report, RTI was awarded a new Evidence-
Based Guidelines Monitoring contract. Under this monitoring contract, 
RTI annually provides a summary report of the contemporary evidence-
based guidelines for selected, candidate, and previously considered 
HACs that provide specific recommendations for the prevention of the 
corresponding conditions in the acute care hospital setting. We 
received RTI's 2015 report and are making it available to the public on 
the CMS Hospital-Acquired Conditions Web page in the ``Downloads'' 
section at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/index.html?redirect=/HospitalAcqCond/.

G. Changes to Specific MS-DRG Classifications

1. Discussion of Changes to Coding System and Basis for MS-DRG Updates
a. Conversion of MS-DRGs to the International Classification of 
Diseases, 10th Revision (ICD-10)
    Providers use the code sets under the ICD-9-CM coding system to 
report diagnoses and procedures for Medicare hospital inpatient 
services under the MS-DRG system. A later coding edition, the ICD-10 
coding system, includes the International Classification of Diseases, 
10th Revision, Clinical Modification (ICD-10-CM) for diagnosis coding 
and the International Classification of Diseases, 10th Revision, 
Procedure Coding System (ICD-10-PCS) for inpatient hospital procedure 
coding, as well as the Official ICD-10-CM and ICD-10-PCS Guidelines for 
Coding and Reporting. The ICD-10 coding system was initially adopted 
for transactions conducted on or after October 1, 2013, as described in 
the Health Insurance Portability and Accountability Act of 1996 (HIPAA) 
Administrative Simplification: Modifications to Medical Data Code Set 
Standards to Adopt ICD-10-CM and ICD-10-PCS Final Rule published in the 
Federal Register on January 16, 2009 (74 FR 3328 through 3362) 
(hereinafter referred to as the ``ICD-10-CM and ICD-10-PCS final 
rule''). However, the Secretary of

[[Page 49355]]

Health and Human Services issued a final rule that delayed the 
compliance date for ICD-10 from October 1, 2013, to October 1, 2014. 
That final rule, entitled ``Administrative Simplification: Adoption of 
a Standard for a Unique Health Plan Identifier; Addition to the 
National Provider Identifier Requirements; and a Change to the 
Compliance Date for ICD-10-CM and ICD-10-PCS Medical Data Code Sets,'' 
CMS-0040-F, was published in the Federal Register on September 5, 2012 
(77 FR 54664) and is available for viewing on the Internet at: http://www.gpo.gov/fdsys/pkg/FR-2012-09-05/pdf/2012-21238.pdf. On April 1, 
2014, the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 
113-93) was enacted, which specified that the Secretary may not adopt 
ICD-10 prior to October 1, 2015. Accordingly, the U.S. Department of 
Health and Human Services released a final rule in the Federal Register 
on August 4, 2014 (79 FR 45128 through 45134) that included a new 
compliance date that requires the use of ICD-10 beginning October 1, 
2015. The August 4, 2014 final rule is available for viewing on the 
Internet at: http://www.gpo.gov/fdsys/pkg/FR-2014-08-04/pdf/2014-18347.pdf. That final rule also requires HIPAA covered entities to 
continue to use ICD-9-CM through September 30, 2015.
    The anticipated move to ICD-10 necessitated the development of an 
ICD-10-CM/ICD-10-PCS version of the MS-DRGs. CMS began a project to 
convert the ICD-9-CM-based MS-DRGs to ICD-10 MS-DRGs. In response to 
the FY 2011 IPPS/LTCH PPS proposed rule, we received public comments on 
the creation of the ICD-10 version of the MS-DRGs, which will be 
implemented at the same time as ICD-10 (75 FR 50127 and 50128). While 
we did not propose an ICD-10 version of the MS-DRGs in the FY 2011 
IPPS/LTCH PPS proposed rule, we noted that we have been actively 
involved in converting current MS-DRGs from ICD-9-CM codes to ICD-10 
codes and sharing this information through the ICD-10 (previously ICD-
9-CM) Coordination and Maintenance Committee. We undertook this early 
conversion project to assist other payers and providers in 
understanding how to implement their own conversion projects. We posted 
ICD-10 MS-DRGs based on Version 26.0 (FY 2009) of the MS-DRGs. We also 
posted a paper that describes how CMS went about completing this 
project and suggestions for other payers and providers to follow. 
Information on the ICD-10 MS-DRG conversion project can be found on the 
ICD-10 MS-DRG Conversion Project Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We have 
continued to keep the public updated on our maintenance efforts for 
ICD-10-CM and ICD-10-PCS coding systems, as well as the General 
Equivalence Mappings that assist in conversion through the ICD-10 
(previously ICD-9-CM) Coordination and Maintenance Committee. 
Information on these committee meetings can be found on the CMS Web 
site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html.
    During FY 2011, we developed and posted Version 28 of the ICD-10 
MS-DRGs based on the FY 2011 MS-DRGs (Version 28) that we finalized in 
the FY 2011 IPPS/LTCH PPS final rule on the CMS Web site. This ICD-10 
MS-DRGs Version 28 also included the CC Exclusion List and the ICD-10 
version of the hospital-acquired conditions (HACs), which was not 
posted with Version 26. We also discussed this update at the September 
15-16, 2010 and the March 9-10, 2011 meetings of the ICD-9-CM 
Coordination and Maintenance Committee. The minutes of these two 
meetings are posted on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html.
    We reviewed public comments on the ICD-10 MS-DRGs Version 28 and 
made updates as a result of these comments. We called the updated 
version the ICD-10 MS-DRGs Version 28-R1. We posted a Definitions 
Manual of ICD-10 MS-DRGs Version 28-R1 on our ICD-10 MS-DRG Conversion 
Project Web site. To make the review of Version 28-R1 updates easier 
for the public, we also made available pilot software on a CD ROM that 
could be ordered through the National Technical Information Service 
(NTIS). A link to the NTIS ordering page was provided on the CMS ICD-10 
MS-DRGs Web page. We stated that we believed that, by providing the 
ICD-10 MS-DRGs Version 28-R1 Pilot Software (distributed on CD ROM), 
the public would be able to more easily review and provide feedback on 
updates to the ICD-10 MS-DRGs. We discussed the updated ICD-10 MS-DRGs 
Version 28-R1 at the September 14, 2011 ICD-9-CM Coordination and 
Maintenance Committee meeting. We encouraged the public to continue to 
review and provide comments on the ICD-10 MS-DRGs so that CMS could 
continue to update the system.
    In FY 2012, we prepared the ICD-10 MS-DRGs Version 29, based on the 
FY 2012 MS-DRGs (Version 29) that we finalized in the FY 2012 IPPS/LTCH 
PPS final rule. We posted a Definitions Manual of ICD-10 MS-DRGs 
Version 29 on our ICD-10 MS-DRG Conversion Project Web site. We also 
prepared a document that describes changes made from Version 28 to 
Version 29 to facilitate a review. The ICD-10 MS-DRGs Version 29 was 
discussed at the ICD-9-CM Coordination and Maintenance Committee 
meeting on March 5, 2012. Information was provided on the types of 
updates made. Once again, the public was encouraged to review and 
comment on the most recent update to the ICD-10 MS-DRGs.
    CMS prepared the ICD-10 MS-DRGs Version 30 based on the FY 2013 MS-
DRGs (Version 30) that we finalized in the FY 2013 IPPS/LTCH PPS final 
rule. We posted a Definitions Manual of the ICD-10 MS-DRGs Version 30 
on our ICD-10 MS-DRG Conversion Project Web site. We also prepared a 
document that describes changes made from Version 29 to Version 30 to 
facilitate a review. We produced mainframe and computer software for 
Version 30, which was made available to the public in February 2013. 
Information on ordering the mainframe and computer software through 
NTIS was posted on the ICD-10 MS-DRG Conversion Project Web site. The 
ICD-10 MS-DRGs Version 30 computer software facilitated additional 
review of the ICD-10 MS-DRGs conversion.
    We provided information on a study conducted on the impact of 
converting MS-DRGs to ICD-10. Information on this study is summarized 
in a paper entitled ``Impact of the Transition to ICD-10 on Medicare 
Inpatient Hospital Payments.'' This paper was posted on the CMS ICD-10 
MS-DRGs Conversion Project Web site and was distributed and discussed 
at the September 15, 2010 ICD-9-CM Coordination and Maintenance 
Committee meeting. The paper described CMS' approach to the conversion 
of the MS-DRGs from ICD-9-CM codes to ICD-10 codes. The study was 
undertaken using the ICD-9-CM MS-DRGs Version 27 (FY 2010), which was 
converted to the ICD-10 MS-DRGs Version 27. The study estimated the 
impact on aggregate payment to hospitals and the distribution of 
payments across hospitals. The impact of the conversion from ICD-9-CM 
to ICD-10 on Medicare MS-DRG hospital payments was estimated using FY 
2009 Medicare claims data. The study found a hospital payment increase 
of 0.05 percent using the ICD-10 MS-DRGs Version 27.
    CMS provided an overview of this hospital payment impact study at 
the March 5, 2012 ICD-9-CM Coordination and Maintenance Committee 
meeting.

[[Page 49356]]

This presentation followed presentations on the creation of ICD-10 MS-
DRGs Version 29. A summary report of this meeting can be found on the 
CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html. At the March 2012 meeting, CMS 
announced that it would produce an update on this impact study based on 
an updated version of the ICD-10 MS-DRGs. This update of the impact 
study was presented at the March 5, 2013 ICD-9-CM Coordination and 
Maintenance Committee meeting. The study found that moving from an ICD-
9-CM-based system to an ICD-10 MS-DRG replicated system would lead to 
DRG reassignments on only 1 percent of the 10 million MedPAR sample 
records used in the study. Ninety-nine percent of the records did not 
shift to another MS-DRG when using an ICD-10 MS-DRG system. For the 1 
percent of the records that shifted, 45 percent of the shifts were to a 
higher weighted MS-DRG, while 55 percent of the shifts were to lower 
weighted MS-DRGs. The net impact across all MS-DRGs was a reduction by 
4/10000 or minus 4 pennies per $100. The updated paper is posted on the 
CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Downloads'' section. 
Information on the March 5, 2013 ICD-9-CM Coordination and Maintenance 
Committee meeting can be found on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html. This update of the impact paper and the ICD-
10 MS-DRG Version 30 software provided additional information to the 
public who were evaluating the conversion of the MS-DRGs to ICD-10 MS-
DRGs.
    CMS prepared the ICD-10 MS-DRGs Version 31.0 based on the FY 2014 
MS-DRGs (Version 31) that we finalized in the FY 2014 IPPS/LTCH PPS 
final rule. In November 2013, we posted a Definitions Manual of the 
ICD-10 MS-DRGs Version 31 on the ICD-10 MS-DRG Conversion Project Web 
site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We also prepared a document that described 
changes made from Version 30 to Version 31 to facilitate a review. We 
produced mainframe and computer software for Version 31, which was made 
available to the public in December 2013. Information on ordering the 
mainframe and computer software through NTIS was posted on the CMS Web 
site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Related Links'' section. This ICD-
10 MS-DRGs Version 31 computer software facilitated additional review 
of the ICD-10 MS-DRGs conversion. We encouraged the public to submit to 
CMS any comments on areas where they believed the ICD-10 MS-DRGs did 
not accurately reflect grouping logic found in the ICD-9-CM MS-DRGs 
Version 31.
    We reviewed public comments received and developed an update of 
ICD-10 MS-DRGs Version 31, which we called ICD-10 MS-DRGs Version 31.0-
R. We made available a Definitions Manual of the ICD-10 MS-DRGs Version 
31.0-R on the ICD-10 MS-DRG Conversion Project Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We also prepared a document that describes changes made 
from Version 31 to Version 31-R to facilitate a review. We will 
continue to share ICD-10-MS-DRG conversion activities with the public 
through this Web site.
    CMS prepared the ICD-10 MS-DRGs Version 32 based on the FY 2015 MS-
DRGs (Version 32) that we finalized in the FY 2015 IPPS/LTCH PPS final 
rule. In November 2014, we made available a Definitions Manual of the 
ICD-10 MS DRGs Version 32 on the ICD-10 MS-DRG Conversion Project Web 
site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We also prepared a document that described 
changes made from Version 31-R to Version 32 to facilitate a review. We 
produced mainframe and computer software for Version 32, which was made 
available to the public in January 2015. Information on ordering the 
mainframe and computer software through NTIS was made available on the 
CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Related Links'' section. This 
ICD-10 MS-DRGs Version 32 computer software facilitated additional 
review of the ICD-10 MS-DRGs conversion. We encouraged the public to 
submit to CMS any comments on areas where they believed the ICD-10 MS-
DRGs did not accurately reflect grouping logic found in the ICD-9-CM 
MS-DRGs Version 32. We discuss five requests from the public to update 
the ICD-10 MS-DRGs Version 32 to better replicate the ICD-9-CM MS-DRGs 
in section II.G.3., 4., and 5. of the preamble of this FY 2016 IPPS/
LTCH PPS final rule. In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24351), we proposed to implement the MS-DRG code logic in the ICD-10 
MS-DRGs Version 32 along with any finalized updates to the ICD-10 MS-
DRGs Version 32 for the final ICD-10 MS-DRGs Version 33. In the 
proposed rule, we proposed the ICD-10 MS-DRGs Version 33 as the 
replacement logic for the ICD-9-CM based MS-DRGs Version 32 as part of 
the proposed MS-DRG updates for FY 2016. We invited public comments on 
how well the ICD-10 MS-DRGs Version 32 replicates the logic of the MS-
DRGs Version 32 based on ICD-9-CM codes.
    Comment: One commenter addressed an ICD-10 MS-DRG replication issue 
regarding the procedure code designation and MS-DRG assignment of two 
ICD-10-PCS codes in the ICD-10 MS-DRGs Version 32 Definitions Manual 
under Appendix E--Operating Room Procedures and Procedure Code MS-DRG 
Index. The commenter agreed with CMS that the two ICD-10-PCS codes 
identified in the FY 2016 IPPS/LTCH PPS proposed rule, 02HQ30Z 
(Insertion of pressure sensor monitoring device into right pulmonary 
artery, percutaneous approach) and 02HR30Z (Insertion of pressure 
sensor monitoring device into left pulmonary artery, percutaneous 
approach), were appropriate translations for ICD-9-CM procedure code 
38.26 (Insertion of implantable wireless pressure sensor without lead 
for intracardiac or great vessel hemodynamic monitoring), which 
identifies the CardioMEMSTM HF Monitoring System (80 FR 
24426). However, the commenter noted that, under the ICD-9-CM based MS-
DRGs Version 32 logic, procedure code 38.26 is designated as an 
operating room (O.R.) procedure for MS-DRG assignment and group to MS-
DRG 264 (Other Circulatory O.R. Procedures), while under the ICD-10 
based MS-DRGs Version 32 logic, the two ICD-10-PCS code translations 
are not recognized as O.R. procedures for purposes of MS-DRG 
assignment. Therefore, the commenter requested that the two ICD-10-PCS 
codes be designated as O.R. procedures within Appendix E of the ICD-10 
MS-DRG Definitions Manual and group to ICD-10 MS-DRG 264 to accurately 
replicate the ICD-9-CM MS-DRG Version 32 logic.
    Response: We agree with the commenter that this is an ICD-10 MS-DRG 
replication error. ICD-10-PCS codes 02HQ30Z and 02HR30Z, along with the 
other ICD-10-PCS codes describing the insertion of a pressure sensor 
monitoring device that are also appropriate translations for ICD-9-CM 
procedure code 38.26, should be designated as O.R. procedures within 
Appendix E of the ICD-10 MS-DRG

[[Page 49357]]

Definitions Manual and assigned to ICD-10 MS-DRG 264 to accurately 
replicate the ICD-9-CM MS-DRGs Version 32 logic. These other ICD-10-PCS 
codes describe the insertion of a pressure sensor monitoring device 
utilizing an open approach or a percutaneous endoscopic approach (for 
the right or left pulmonary artery). Therefore, to be consistent with 
the comparable ICD-10-PCS code translations describing a percutaneous 
approach and to accurately replicate the ICD-9-CM MS-DRGs Version 32 
logic for ICD-9-CM procedure code 38.26, the ICD-10-PCS codes listed 
below that describe the insertion of a pressure sensor monitoring 
device utilizing an open approach or a percutaneous endoscopic approach 
(for the right or left pulmonary artery) should also be designated as 
O.R. procedures and assigned to ICD-10 MS-DRG 264.
    After consideration of the public comments we received, as final 
policy for the FY 2016 ICD-10 MS-DRGs Version 33, we are designating 
the following ICD-10-PCS codes as O.R. procedures and assigning them to 
ICD-10 MS-DRG 264:
     02HQ00Z (Insertion of pressure sensor monitoring device 
into right pulmonary artery, open approach);
     02HQ30Z (Insertion of pressure sensor monitoring device 
into right pulmonary artery, percutaneous approach);
     02HQ40Z (Insertion of pressure sensor monitoring device 
into right pulmonary artery, percutaneous endoscopic approach);
     02HR00Z (Insertion of pressure sensor monitoring device 
into left pulmonary artery, open approach);
     02HR30Z (Insertion of pressure sensor monitoring device 
into left pulmonary artery, percutaneous approach); and
     02HR40Z (Insertion of pressure sensor monitoring device 
into left pulmonary artery, percutaneous endoscopic approach).
    Comment: One commenter addressed an ICD-10 MS-DRG replication issue 
concerning excisional debridements of deep pressure ulcers of the 
ankle. The commenter recommended that the following two ICD-10-PCS 
codes be added to ICD-10 MS-DRG 581 (Other Skin, Subcutaneous Tissue 
and Breast Procedures without CC/MCC) to accurately replicate the ICD-
9-CM MS-DRG logic: ICD-10-PCS procedure code 0LBT0ZZ (Excision of left 
ankle tendon, open approach) and ICD-10-PCS procedure code 0LBS0ZZ 
(Excision of right ankle tendon, open approach). The commenter stated 
that the ICD-9-CM procedure codes describing the excisional 
debridements of pressure ulcers that extend down into the ankle tendon 
are currently assigned to MS-DRG 581. However, the ICD-10-PCS codes 
capturing these procedures are not in the ICD-10-PCS MS-DRG 581.
    Response: We agree with the commenter that this is an ICD-10 MS-DRG 
replication error. ICD-9-CM code 83.39 (Excision of lesion of other 
soft tissue) captures this procedure and is assigned to ICD-9 MS-DRGs 
579, 580, and 581 (Other Skin, Subcutaneous Tissue and Breast 
Procedures with MCC, with CC, and without CC/MCC, respectively). 
Therefore, ICD-10-PCS codes 0LBT0ZZ and 0LBS0ZZ also should be assigned 
to ICD-10 MS-DRGs 579, 580, and 581.
    After consideration of the public comments received, we are 
assigning ICD-10-PCS procedure codes 0LBT0ZZ (Excision of left ankle 
tendon, open approach) and 0LBS0ZZ (Excision of right ankle tendon, 
open approach) to ICD-10 MS-DRGs 579, 580, and 581 (Other Skin, 
Subcutaneous Tissue and Breast Procedures with MCC, with CC, and 
without CC/MCC, respectively).
    Comment: One commenter addressing an ICD-10 MS-DRG replication 
issue requested that CMS add the following four post-delivery procedure 
codes to the ICD-10 version of MS-DRGs 774 and 775 (Vaginal Delivery 
with and without Complicating Diagnoses, respectively) under the ``Only 
Operating Room Procedures'' section. The commenter stated that these 
codes are currently assigned to the ICD-9-CM version of MS-DRGs 774 and 
775.
     0HBJXZZ (Excision of left upper leg skin, external 
approach);
     0DQR0ZZ (Repair anal sphincter, open approach (3rd degree 
obstetrical laceration repair);
     OUQJXZZ (Repair clitoris, external approach); and
     0UBMXZZ (Excision of vulva, external approach).
    The following table shows the equivalent ICD-9-CM codes provided by 
the requestor.

------------------------------------------------------------------------
       ICD-10-PCS Procedure code             ICD-9-CM Procedure code
------------------------------------------------------------------------
0UBMXZZ (Excision of vulva, external     71.3 (Other local excision or
 approach).                               destruction of vulva and
                                          perineum).
0DQR0ZZ (Repair anal sphincter, open     75.61(Repair of current
 approach (3rd degree obstetrical         obstetric laceration of rectum
 laceration repair).                      and sphincter ani).
0UQJXZZ (Repair clitoris, external       75.69 (Repair of current
 approach).                               obstetric laceration).
0HBJXZZ (Excision of left upper leg      86.3 (Local excision/
 skin, external approach).                destruction of lesion/tissue
                                          of skin and subcutaneous
                                          tissues).
------------------------------------------------------------------------

    Response: We examined the list of post-delivery procedure codes in 
ICD-9 MS-DRGs 774 and 775 under the ``Only Operating Room Procedures'' 
section and found that ICD-9-CM procedure code 71.3 is included. 
Therefore, we agree with the commenter that this oversight is a 
replication error and that ICD-10-PCS procedure code 0UBMXZZ should be 
assigned to ICD-10 MS-DRGs 774 and 775 under the ``Only Operating Room 
Procedures'' section. However, with regard to ICD-9-CM procedure codes 
75.61, 75.69, and 86.3, when we examined the list of post-delivery 
procedure codes in MS-DRGs 774 and 775 under the ``Only Operating Room 
Procedures'' section, we found that they were not included. Therefore, 
we disagree with adding ICD-10-PCS codes 0DQR0ZZ, 0UQJXZZ, and 0HBJXZZ 
to ICD-10 MS-DRGs 774 and 775 under the ``Only operating room 
Procedures'' section because these procedures are not currently 
captured in ICD-9 MS-DRGs 774 and 775. The omission of these three ICD-
10-PCS codes is not an ICD-10 MS-DRG replication error.
    After consideration of the public comments received, we are 
assigning ICD-10-PCS code 0UBMXZZ (Excision of vulva, external 
approach) to ICD-10 MS-DRGs 774 and 775 (Vaginal Delivery with and 
without Complicating Diagnoses, respectively) under the ``Only 
Operating Room Procedures'' section.
b. Basis for FY 2016 MS-DRG Updates
    CMS encourages input from our stakeholders concerning the annual 
IPPS updates when that input is made available to us by December 7 of 
the year prior to the next annual proposed rule update. For example, to 
be considered for any updates or changes in FY 2016, comments and 
suggestions should have been submitted by December 7, 2014. The 
comments that were submitted in a timely manner for

[[Page 49358]]

FY 2016 are discussed below in this section.
    Following are the changes we proposed to the MS-DRGs and our 
finalized policies for FY 2016. We invited public comments on each of 
the MS-DRG classification proposed changes described below, as well as 
our proposals to maintain certain existing MS-DRG classifications, 
which also are discussed below. In some cases, we proposed changes to 
the MS-DRG classifications based on our analysis of claims data. In 
other cases, we proposed to maintain the existing MS-DRG classification 
based on our analysis of claims data. For the FY 2016 proposed rule, 
our MS-DRG analysis was based on claims data from the December 2014 
update of the FY 2014 MedPAR file, which contains hospital bills 
received through September 30, 2014, for discharges occurring through 
September 30, 2014. In our discussion of the MS-DRG reclassification 
changes that follows, we refer to our analysis of claims data from the 
``December 2014 update of the FY 2014 MedPAR file.''
    As explained in previous rulemaking (76 FR 51487), in deciding 
whether to propose and to make further modification to the MS-DRGs for 
particular circumstances brought to our attention, we consider whether 
the resource consumption and clinical characteristics of the patients 
with a given set of conditions are significantly different than the 
remaining patients in the MS-DRG. We evaluate patient care costs using 
average costs and lengths of stay and rely on the judgment of our 
clinical advisors to decide whether patients are clinically distinct or 
similar to other patients in the MS-DRG. In evaluating resource costs, 
we consider both the absolute and percentage differences in average 
costs between the cases we select for review and the remainder of cases 
in the MS-DRG. We also consider variation in costs within these groups; 
that is, whether observed average differences are consistent across 
patients or attributable to cases that are extreme in terms of costs or 
length of stay, or both. Furthermore, we consider the number of 
patients who will have a given set of characteristics and generally 
prefer not to create a new MS-DRG unless it would include a substantial 
number of cases.
    In our examination of the claims data, we apply the following 
criteria established in FY 2008 (72 FR 47169) to determine if the 
creation of a new complication or comorbidity (CC) or major 
complication or comorbidity (MCC) subgroup within a base MS-DRG is 
warranted:
     A reduction in variance of costs of at least 3 percent.
     At least 5 percent of the patients in the MS-DRG fall 
within the CC or MCC subgroup.
     At least 500 cases are in the CC or MCC subgroup.
     There is at least a 20-percent difference in average costs 
between subgroups.
     There is a $2,000 difference in average costs between 
subgroups.
    In order to warrant creation of a CC or MCC subgroup within a base 
MS-DRG, the subgroup must meet all five of the criteria.
2. MDC 1 (Diseases and Disorders of the Nervous System): Endovascular 
Embolization (Coiling) Procedures
    We received a request again this year to change the MS-DRG 
assignment for endovascular embolization (coiling) procedures. This 
topic was discussed previously in the FY 2015 IPPS/LTCH PPS proposed 
rule (79 FR 28005 through 28006) and in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 49883 through 49886). For FY 2015, we did not change the 
MS-DRG assignment for endovascular embolization (coiling) procedures.
    After issuance of the FY 2015 IPPS/LTCH PPS final rule, we received 
a modified request from the commenter asking that CMS consider 
establishing four new MS-DRGs:
     Recommended MS-DRG XXX (Endovascular Intracranial 
Embolization Procedures with Principal Diagnosis of Hemorrhage);
     Recommended MS-DRG XXX (Endovascular Intracranial 
Embolization Procedures without Principal Diagnosis of Hemorrhage with 
MCC);
     Recommended MS-DRG XXX (Endovascular Intracranial 
Embolization Procedures without Principal Diagnosis of Hemorrhage with 
CC); and
     Recommended MS-DRG XXX (Endovascular Intracranial 
Embolization Procedures without Principal Diagnosis of Hemorrhage 
without CC/MCC).
    The requestor stated that establishing these new suggested MS-DRGs 
will promote clinical cohesiveness and resource comparability. The 
requestor stated that endovascular intracranial and endovascular 
embolization procedures are not similar to the open craniotomy 
procedures with which they are currently grouped. The requestor 
asserted that the differences in costs between endovascular 
intracranial procedures and open craniotomy procedures are significant, 
reflecting, for instance, the use of an operating suite versus an 
interventional vascular catheterization laboratory suite, intensive 
care and other costs.
    In conjunction with the recommended new MS-DRGs, the requestor 
recommended that the following ICD-9-CM codes, which include 
endovascular embolization procedures and additional intracranial 
procedures, be removed from MS-DRG 020 (Intracranial Vascular 
Procedures with Principal Diagnosis of Hemorrhage with MCC); MS-DRG 021 
(Intracranial Vascular Procedures with Principal Diagnosis of 
Hemorrhage with CC); MS-DRG 022 (Intracranial Vascular Procedures with 
Principal Diagnosis of Hemorrhage without CC/MCC); MS-DRG 023 
(Craniotomy with Major Device Implant/Acute Complex CNS Principal 
Diagnosis with MCC or Chemo Implant); MS-DRG 024 (Craniotomy with Major 
Device Implant/Acute Complex CNS Principal Diagnosis without MCC); MS-
DRG 025 (Craniotomy & Endovascular Intracranial Procedures with MCC); 
MS-DRG 026 (Craniotomy & Endovascular Intracranial Procedures with CC); 
and MS-DRG 027 (Craniotomy & Endovascular Intracranial Procedures 
without CC/MCC):
     00.62 (Percutaneous angioplasty of intracranial vessel);
     39.72 (Endovascular (total) embolization or occlusion of 
head and neck vessels);
     39.74 (Endovascular removal of obstruction from head and 
neck vessel(s));
     39.75 (Endovascular embolization or occlusion of vessel(s) 
of head or neck using bare coils);
     39.76 (Endovascular embolization or occlusion of vessel(s) 
of head or neck using bioactive coils); and
     39.79 (Other endovascular procedures on other vessels).
    The requestor asked that the four new requested MS-DRGs be created 
using these procedure codes. The requestor suggested that the first 
requested new MS-DRG would be MS-DRG XXX (Endovascular Intracranial 
Embolization Procedures with Principal Diagnosis of Hemorrhage). The 
principal diagnoses for hemorrhage would include the same hemorrhage 
codes in the current MS-DRGs 020, 021, and 022, which are as follows:
     094.87 (Syphilitic ruptured cerebral aneurysm);
     430 (Subarachnoid hemorrhage);
     431 (Intracerebral hemorrhage);
     432.0 (Nontraumatic extradural hemorrhage);
     432.1 (Subdural hemorrhage); and
     432.9 (Unspecified intracranial hemorrhage).
    For this first new requested MS-DRG, the requestor suggested that 
only the

[[Page 49359]]

following endovascular embolization procedure codes would be assigned:
     39.72 (Endovascular (total) embolization or occlusion of 
head and neck vessels);
     39.75 (Endovascular embolization or occlusion of vessel(s) 
of head or neck using bare coils); and
     39.76 (Endovascular embolization or occlusion of vessel(s) 
of head or neck using bioactive coils).
    The requestor recommended that the three additional new MS-DRGs 
would consist of a new base MS-DRG subdivided into three severity 
levels as follows:
     Recommended MS-DRG XXX (Endovascular Intracranial 
Embolization Procedures without Principal Diagnosis of Hemorrhage with 
MCC);
     Recommended MS-DRG XXX (Endovascular Intracranial 
Embolization Procedures without Principal Diagnosis of Hemorrhage with 
CC); and
     Recommended MS-DRG XXX (Endovascular Intracranial 
Embolization Procedures without Principal Diagnosis of Hemorrhage 
without CC/MCC).
    The requestor suggested that these three new recommended MS-DRGs 
would have endovascular embolization procedures as well as additional 
percutaneous and endovascular procedures as listed below:
     00.62 (Percutaneous angioplasty of intracranial vessel);
     39.72 (Endovascular (total) embolization or occlusion of 
head and neck vessels);
     39.74 (Endovascular removal of obstruction from head and 
neck vessel(s));
     39.75 (Endovascular embolization or occlusion of vessel(s) 
of head or neck using bare coils);
     39.76 (Endovascular embolization or occlusion of vessel(s) 
of head or neck using bioactive coils); and
     39.79 (Other endovascular procedures on other vessels).
    ICD-10-PCS provides the following more detailed codes for 
endovascular embolization, which are assigned to MS-DRGs 020, 021, 022, 
023, 024, 025, 026, and 027 in the ICD-10 MS-DRGs Version 32:

 ICD-10-PCS Codes for Endovascular Embolization Assigned to MS-DRGs 020
                Through 027 in ICD-10 MS-DRGs Version 32
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
03LG3BZ..................  Occlusion of intracranial artery with
                            bioactive intraluminal device, percutaneous
                            approach.
03LG3DZ..................  Occlusion of intracranial artery with
                            intraluminal device, percutaneous approach.
03LG4BZ..................  Occlusion of intracranial artery with
                            bioactive intraluminal device, percutaneous
                            endoscopic approach.
03LG4DZ..................  Occlusion of intracranial artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03LH3BZ..................  Occlusion of right common carotid artery with
                            bioactive intraluminal device, percutaneous
                            approach.
03LH3DZ..................  Occlusion of right common carotid artery with
                            intraluminal device, percutaneous approach.
03LH4BZ..................  Occlusion of right common carotid artery with
                            bioactive intraluminal device, percutaneous
                            endoscopic approach.
03LH4DZ..................  Occlusion of right common carotid artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03LJ3BZ..................  Occlusion of left common carotid artery with
                            bioactive intraluminal device, percutaneous
                            approach.
03LJ3DZ..................  Occlusion of left common carotid artery with
                            intraluminal device, percutaneous approach.
03LJ4BZ..................  Occlusion of left common carotid artery with
                            bioactive intraluminal device, percutaneous
                            endoscopic approach.
03LJ4DZ..................  Occlusion of left common carotid artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03LK3BZ..................  Occlusion of right internal carotid artery
                            with bioactive intraluminal device,
                            percutaneous approach.
03LK3DZ..................  Occlusion of right internal carotid artery
                            with intraluminal device, percutaneous
                            approach.
03LK4BZ..................  Occlusion of right internal carotid artery
                            with bioactive intraluminal device,
                            percutaneous endoscopic approach.
03LK4DZ..................  Occlusion of right internal carotid artery
                            with intraluminal device, percutaneous
                            endoscopic approach.
03LL3BZ..................  Occlusion of left internal carotid artery
                            with bioactive intraluminal device,
                            percutaneous approach.
03LL3DZ..................  Occlusion of left internal carotid artery
                            with intraluminal device, percutaneous
                            approach.
03LL4BZ..................  Occlusion of left internal carotid artery
                            with bioactive intraluminal device,
                            percutaneous endoscopic approach.
03LL4DZ..................  Occlusion of left internal carotid artery
                            with intraluminal device, percutaneous
                            endoscopic approach.
03LM3BZ..................  Occlusion of right external carotid artery
                            with bioactive intraluminal device,
                            percutaneous approach.
03LM3DZ..................  Occlusion of right external carotid artery
                            with intraluminal device, percutaneous
                            approach.
03LM4BZ..................  Occlusion of right external carotid artery
                            with bioactive intraluminal device,
                            percutaneous endoscopic approach.
03LM4DZ..................  Occlusion of right external carotid artery
                            with intraluminal device, percutaneous
                            endoscopic approach.
03LN3BZ..................  Occlusion of left external carotid artery
                            with bioactive intraluminal device,
                            percutaneous approach.
03LN3DZ..................  Occlusion of left external carotid artery
                            with intraluminal device, percutaneous
                            approach.
03LN4BZ..................  Occlusion of left external carotid artery
                            with bioactive intraluminal device,
                            percutaneous endoscopic approach.
03LN4DZ..................  Occlusion of left external carotid artery
                            with intraluminal device, percutaneous
                            endoscopic approach.
03LP3BZ..................  Occlusion of right vertebral artery with
                            bioactive intraluminal device, percutaneous
                            approach.
03LP3DZ..................  Occlusion of right vertebral artery with
                            intraluminal device, percutaneous approach.
03LP4BZ..................  Occlusion of right vertebral artery with
                            bioactive intraluminal device, percutaneous
                            endoscopic approach.
03LP4DZ..................  Occlusion of right vertebral artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03LQ3BZ..................  Occlusion of left vertebral artery with
                            bioactive intraluminal device, percutaneous
                            approach.
03LQ3DZ..................  Occlusion of left vertebral artery with
                            intraluminal device, percutaneous approach.
03LQ4BZ..................  Occlusion of left vertebral artery with
                            bioactive intraluminal device, percutaneous
                            endoscopic approach.
03LQ4DZ..................  Occlusion of left vertebral artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03LR3DZ..................  Occlusion of face artery with intraluminal
                            device, percutaneous approach.
03LR4DZ..................  Occlusion of face artery with intraluminal
                            device, percutaneous endoscopic approach.
03LS3DZ..................  Occlusion of right temporal artery with
                            intraluminal device, percutaneous approach.
03LS4DZ..................  Occlusion of right temporal artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03LT3DZ..................  Occlusion of left temporal artery with
                            intraluminal device, percutaneous approach.
03LT4DZ..................  Occlusion of left temporal artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03VG3BZ..................  Restriction of intracranial artery with
                            bioactive intraluminal device, percutaneous
                            approach.
03VG3DZ..................  Restriction of intracranial artery with
                            intraluminal device, percutaneous approach.
03VG4BZ..................  Restriction of intracranial artery with
                            bioactive intraluminal device, percutaneous
                            endoscopic approach.
03VG4DZ..................  Restriction of intracranial artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03VH3BZ..................  Restriction of right common carotid artery
                            with bioactive intraluminal device,
                            percutaneous approach.

[[Page 49360]]

 
03VH3DZ..................  Restriction of right common carotid artery
                            with intraluminal device, percutaneous
                            approach.
03VH4BZ..................  Restriction of right common carotid artery
                            with bioactive intraluminal device,
                            percutaneous endoscopic approach.
03VH4DZ..................  Restriction of right common carotid artery
                            with intraluminal device, percutaneous
                            endoscopic approach.
03VJ3BZ..................  Restriction of left common carotid artery
                            with bioactive intraluminal device,
                            percutaneous approach.
03VJ3DZ..................  Restriction of left common carotid artery
                            with intraluminal device, percutaneous
                            approach.
03VJ4BZ..................  Restriction of left common carotid artery
                            with bioactive intraluminal device,
                            percutaneous endoscopic approach.
03VJ4DZ..................  Restriction of left common carotid artery
                            with intraluminal device, percutaneous
                            endoscopic approach.
03VK3BZ..................  Restriction of right internal carotid artery
                            with bioactive intraluminal device,
                            percutaneous approach.
03VK3DZ..................  Restriction of right internal carotid artery
                            with intraluminal device, percutaneous
                            approach.
03VK4BZ..................  Restriction of right internal carotid artery
                            with bioactive intraluminal device,
                            percutaneous endoscopic approach.
03VK4DZ..................  Restriction of right internal carotid artery
                            with intraluminal device, percutaneous
                            endoscopic approach.
03VL3BZ..................  Restriction of left internal carotid artery
                            with bioactive intraluminal device,
                            percutaneous approach.
03VL3DZ..................  Restriction of left internal carotid artery
                            with intraluminal device, percutaneous
                            approach.
03VL4BZ..................  Restriction of left internal carotid artery
                            with bioactive intraluminal device,
                            percutaneous endoscopic approach.
03VL4DZ..................  Restriction of left internal carotid artery
                            with intraluminal device, percutaneous
                            endoscopic approach.
03VM3BZ..................  Restriction of right external carotid artery
                            with bioactive intraluminal device,
                            percutaneous approach.
03VM3DZ..................  Restriction of right external carotid artery
                            with intraluminal device, percutaneous
                            approach.
03VM4BZ..................  Restriction of right external carotid artery
                            with bioactive intraluminal device,
                            percutaneous endoscopic approach.
03VM4DZ..................  Restriction of right external carotid artery
                            with intraluminal device, percutaneous
                            endoscopic approach.
03VN3BZ..................  Restriction of left external carotid artery
                            with bioactive intraluminal device,
                            percutaneous approach.
03VN3DZ..................  Restriction of left external carotid artery
                            with intraluminal device, percutaneous
                            approach.
03VN4BZ..................  Restriction of left external carotid artery
                            with bioactive intraluminal device,
                            percutaneous endoscopic approach.
03VN4DZ..................  Restriction of left external carotid artery
                            with intraluminal device, percutaneous
                            endoscopic approach.
03VP3BZ..................  Restriction of right vertebral artery with
                            bioactive intraluminal device, percutaneous
                            approach.
03VP3DZ..................  Restriction of right vertebral artery with
                            intraluminal device, percutaneous approach.
03VP4BZ..................  Restriction of right vertebral artery with
                            bioactive intraluminal device, percutaneous
                            endoscopic approach.
03VP4DZ..................  Restriction of right vertebral artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03VQ3BZ..................  Restriction of left vertebral artery with
                            bioactive intraluminal device, percutaneous
                            approach.
03VQ3DZ..................  Restriction of left vertebral artery with
                            intraluminal device, percutaneous approach.
03VQ4BZ..................  Restriction of left vertebral artery with
                            bioactive intraluminal device, percutaneous
                            endoscopic approach.
03VQ4DZ..................  Restriction of left vertebral artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03VR3DZ..................  Restriction of face artery with intraluminal
                            device, percutaneous approach.
03VR4DZ..................  Restriction of face artery with intraluminal
                            device, percutaneous endoscopic approach.
03VS3DZ..................  Restriction of right temporal artery with
                            intraluminal device, percutaneous approach.
03VS4DZ..................  Restriction of right temporal artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03VT3DZ..................  Restriction of left temporal artery with
                            intraluminal device, percutaneous approach.
03VT4DZ..................  Restriction of left temporal artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03VU3DZ..................  Restriction of right thyroid artery with
                            intraluminal device, percutaneous approach.
03VU4DZ..................  Restriction of right thyroid artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03VV3DZ..................  Restriction of left thyroid artery with
                            intraluminal device, percutaneous approach.
03VV4DZ..................  Restriction of left thyroid artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
------------------------------------------------------------------------

    For this request, as discussed in the FY 2016 IPPS/LTCH PPS 
proposed rule, we first examined claims data for all intracranial 
vascular procedure cases with a principal diagnosis of hemorrhage 
reported in MS-DRGs 020, 021, and 022 in the December 2014 update of 
the FY 2014 MedPAR file. The table below shows our findings. We found a 
total of 1,755 cases with an average length of stay ranging from 8.28 
days to 16.84 days and average costs ranging from $36,998 to $71,665 in 
MS-DRGs 020, 021, and 022.

                     Intracranial Vascular Procedures With Principal Diagnosis of Hemorrhage
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 020 (with MCC)--All cases................................           1,285           16.84         $71,655
MS-DRG 021 (with CC)--All cases.................................             372           13.82          52,143
MS-DRG 022 (without CC/MCC)--All cases..........................              98            8.28          36,998
----------------------------------------------------------------------------------------------------------------

    Next, we examined claims data on the first part of the request, 
which was to create a new MS-DRG for endovascular intracranial 
embolization procedure cases with a principal diagnosis of hemorrhage 
that are currently assigned to MS-DRGs 020, 021, and 022. Our findings 
for the first part of this multi-part request are shown in the table 
below.

[[Page 49361]]



            Endovascular Intracranial Embolization Procedures With Principal Diagnosis of Hemorrhage
----------------------------------------------------------------------------------------------------------------
                                                                                 Average length
                            MS-DRG                             Number of cases      of stay       Average costs
----------------------------------------------------------------------------------------------------------------
Requested new combined MS-DRG................................           1,275             15.6          $67,831
----------------------------------------------------------------------------------------------------------------

    The requestor suggested that this new requested base MS-DRG would 
not be subdivided by severity levels. Using the requested code logic, 
cases with a principal diagnosis of hemorrhage and procedure codes 
39.72 (Endovascular (total) embolization or occlusion of head and neck 
vessels), 39.75 (Endovascular embolization or occlusion of vessel(s) of 
head or neck using bare coils), and 39.76 (Endovascular embolization or 
occlusion of vessel(s) of head or neck using bioactive coils) would be 
moved out of MS-DRGs 020, 021, and 022 and into a single new MS-DRG 
with no severity levels.
    As can be seen in the table above, the average costs for the new 
requested combined MS-DRG would be $67,831. The average costs for 
current MS-DRGs 020, 021, and 022 were $71,655, $52,143, and $36,998, 
respectively. Based on these findings, if we established this requested 
new MS-DRG, payments for those cases at the highest severity level (MS-
DRG 020, which had average costs of $71,655) would be reduced.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24351 through 
24356), we stated that we believe that maintaining the current MS-DRG 
assignment for these types of procedures is appropriate. Our clinical 
advisors stated that the current grouping of procedures within MS-DRGs 
020, 021, and 022 reflects patients who are unique in terms of 
utilization and complexity based on the three severity levels, which 
are specifically designed to capture clinical differences in these 
patients, and these factors support maintaining the current structure. 
Therefore, we did not propose to move cases with a principal diagnosis 
of hemorrhage and procedure codes 39.72, 39.75, and 39.76 out of MS-
DRGs 020, 021, and 022 and create a new base MS-DRG. We invited public 
comments on this proposal.
    As discussed earlier in this section, the requestor also 
recommended the creation of a new set of MS-DRGs for endovascular 
intracranial embolization procedures without a principal diagnosis of 
hemorrhage with MCC, with CC, and without CC/MCC. For these requested 
new MS-DRGs, the requestor suggested assignment of endovascular 
embolization procedures as well as certain other percutaneous and 
endovascular procedures. The complete list of endovascular intracranial 
embolization procedures developed by the requestor is as follows:
     00.62 (Percutaneous angioplasty of intracranial vessel);
     39.72 (Endovascular (total) embolization or occlusion of 
head and neck vessels);
     39.74 (Endovascular removal of obstruction from head and 
neck vessel(s));
     39.75 (Endovascular embolization or occlusion of vessel(s) 
of head or neck using bare coils);
     39.76 (Endovascular embolization or occlusion of vessel(s) 
of head or neck using bioactive coils); and
     39.79 (Other endovascular procedures on other vessels)
    The following table shows our findings from examination of claims 
data on endovascular intracranial procedures without a principal 
diagnosis of hemorrhage reported in MS-DRGs 023 through 027 from the 
December 2014 update of the FY 2014 MedPAR file.

                 Endovascular Intracranial Procedures Without Principal Diagnosis of Hemorrhage
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 023--All cases...........................................           5,615           10.96         $37,784
MS-DRG 023--Cases with endovascular intracranial procedure                 1,510            8.88          39,666
 without diagnosis of hemorrhage................................
MS-DRG 024--All cases...........................................           1,848            5.93          26,195
MS-DRG 024--Cases with endovascular intracranial procedure                   867            5.80          27,975
 without diagnosis of hemorrhage................................
MS-DRG 025--All cases...........................................          16,949            9.35          29,970
MS-DRG 025--Cases with endovascular intracranial procedure                   650            8.52          44,082
 without diagnosis of hemorrhage................................
MS-DRG 026--All cases...........................................           8,075            6.09          21,414
MS-DRG 026--Cases with endovascular intracranial procedure                   778            3.07          26,594
 without diagnosis of hemorrhage................................
MS-DRG 027--All cases...........................................           9,883            3.15          16,613
MS-DRG 027--Cases with endovascular intracranial procedure                 1,793            1.66          22,244
 without diagnosis of hemorrhage................................
----------------------------------------------------------------------------------------------------------------

    As can be seen from this table, if we created a new set of MS-DRGs 
recommended by the requester, most of the cases would have to be moved 
out of MS-DRGs 023 and 027. The 1,510 cases that would have to be moved 
out of MS-DRG 023 have average costs of $39,666 compared to average 
costs of $37,784 for all cases in MS-DRG 023. The average costs for 
these cases are not significantly different from the average costs for 
all cases in MS-DRG 023. The average length of stay for the cases with 
endovascular intracranial procedure without a diagnosis of hemorrhage 
in MS-DRG 023 is 8.88 compared to 10.96 days for all cases in MS-DRG 
023. In the proposed rule, we stated that we believe that these data 
support the current MS-DRG assignment for MS-DRG 023. The 1,793 cases 
that would have to be moved out of MS-DRG 027 have average costs of 
$22,244 compared to the average costs of $16,613 for all cases in MS-
DRG 027. While the average costs for these cases are higher than for 
all cases in MS-DRG 027, one would

[[Page 49362]]

expect some procedures within an MS-DRG to have higher average costs 
and other procedures to have lower average costs than the overall 
average costs. Cases within the MS-DRGs describing endovascular 
intracranial procedures are grouped together based on similar clinical 
and resource criteria. Some cases will have average costs that are 
higher than the overall average costs for cases in the MS-DRG, while 
other cases will have lower average costs. These differences in average 
costs are found within all MS-DRGs. The average length of stay of MS-
DRG 027 cases with endovascular intracranial procedure without a 
diagnosis of hemorrhage is 1.66 days as compared to 3.15 days for all 
cases in MS-DRG 027. Therefore, while the average costs are higher for 
the cases with endovascular intracranial procedure without a diagnosis 
of hemorrhage than for all cases in MS-DRG 027, the length of stay is 
shorter.
    The 867 cases that would have to be moved out of MS-DRG 024 have 
average costs of $27,975 compared to average costs for all cases in MS-
DRG 024 of $26,195. The average costs for these cases are not 
significantly different than the average costs for all cases in MS-DRG 
024. The average length of stay for the 867 cases that would have to be 
moved out of MS-DRG 024 is 5.80 compared to 5.93 for all cases in MS-
DRG 024. Therefore, the lengths of stay for the cases also are quite 
similar in MS-DRG 024. In the FY 2016 IPPS/LTCH PPS proposed rule, we 
stated that we determined that these data findings support maintaining 
the current MS-DRG assignment of these procedures in MS-DRG 024.
    MS-DRGs 025 and 026 show the smallest number of cases that would 
have to be moved to the requested new MS-DRGs, but these cases have 
larger differences in average costs. The average costs of cases that 
would have to be moved out of MS-DRG 025 are $44,082 compared to 
$29,970 for all cases in MS-DRG 025. The average length of stay for the 
MS-DRG 025 cases with endovascular intracranial procedure without a 
diagnosis of hemorrhage is 8.52 days as compared to 9.35 days for all 
cases in MS-DRG 025. Therefore, the lengths of stay are similar for 
cases in MS-DRG 025. The average costs of cases that would have to be 
moved out of MS-DRG 026 are $26,594 compared to $21,414 for all cases. 
The average length of stay for cases that would have to be moved out of 
MS-DRG 026 is 3.07 days compared to 6.09 days for all cases in MS-DRG 
026, or almost half as long as for all cases in MS-DRG 026. As stated 
earlier, the average costs for cases that would be moved out of MS-DRGs 
023, 024, 025, 026, and 027 under this request are higher than the 
average costs for all cases in these MS-DRGs, with most of the cases 
coming out of MS-DRGs 023 and 027. The average costs for these 
particular cases in MS-DRG 023 are not significantly different from the 
average costs for all cases in MS-DRG 023. In addition, while the 
average costs are higher for the cases with an endovascular 
intracranial procedure without a diagnosis of hemorrhage than for all 
cases in MS-DRG 027, the length of stay is shorter. We determined that 
the overall data do not support making the requested MS-DRG updates to 
MS-DRGs 023, 024, 025, 026, and 027 and creating three new MS-DRGs. 
Therefore, we did not propose to make changes to the current structure 
for MS-DRGs 023 through 027.
    In summary, our clinical advisors reviewed each aspect of this 
multi-part request and advised us that the endovascular embolization 
procedures are appropriately assigned to MS-DRGs 020 through 027. They 
did not support removing the procedures (procedure codes 39.72, 39.75, 
and 39.76) from MS-DRGs 020, 021, and 022 and creating a single MS-DRG 
for endovascular intracranial embolization procedures with a principal 
diagnosis of hemorrhage with no severity levels. Our clinical advisors 
stated that the current MS-DRG grouping of three severity levels 
captures differences in clinical severity, average costs, and length of 
stay for these patients appropriately. Our clinical advisors also 
recommended maintaining the current MS-DRG assignments for endovascular 
embolization and other percutaneous and endovascular procedures within 
MS-DRGs 023 through 027. They stated that these procedures are all 
clinically similar to others in these MS-DRGs. In addition, they stated 
that the surgical techniques are all designed to correct the same 
clinical problem, and they advised against moving a select number of 
those procedures out of MS-DRGs 023 through 027.
    Based on the findings from our data analysis and the 
recommendations from our clinical advisors, in the FY 2016 IPPS/LTCH 
PPS proposed rule (80 FR 24356), we did not propose to create the four 
new MS-DRGs for endovascular intracranial embolization and other 
endovascular procedures recommended by the requestor. We proposed to 
maintain the current MS-DRG structure for MS-DRGs 020 through 027.
    We invited public comments on these two proposals.
    Comment: A number of commenters supported the proposal to maintain 
the current MS-DRG structure for MS-DRGs 020 through 027 and not to 
create four new MS-DRGs for endovascular intracranial embolization and 
other endovascular procedures. The commenters stated that the proposal 
was reasonable, given the data and information provided.
    One commenter disagreed with the proposal. The commenter stated 
that the data demonstrate that the cost of endovascular coil cases 
consistently exceeds the overall average cost of all cases within each 
of the MS-DRGs to which these procedures are currently assigned. 
Moreover, the commenter believed that it was inappropriate to minimize 
the clinical complexity of these procedures compared to other 
procedures in the current MS-DRGs.
    Response: We appreciate the commenters' support for our proposal to 
maintain the current MS-DRG structure for MS-DRGs 020 through 027 and 
not to create four new MS-DRGs for endovascular intracranial 
embolization and other endovascular procedures. In response to the 
commenter who disagreed with the proposal, as stated earlier in this 
section, while we recognize that the average costs of these cases are 
higher than the average costs of all cases in MS-DRGs 023 through 027, 
one would expect some procedures within an MS-DRG to have higher 
average costs and other procedures to have lower average costs than the 
overall average costs. Cases within the MS-DRGs describing endovascular 
intracranial procedures are grouped together based on similar clinical 
and resource criteria. Some cases will have average costs that are 
higher than the overall average costs for cases in the MS-DRG, while 
other cases will have lower average costs. Our clinical advisors 
recommended maintaining the current MS-DRG assignments for endovascular 
embolization and other percutaneous and endovascular procedures within 
MS-DRGs 023 through 027. They continue to believe that these procedures 
are all clinically similar to others in these MS-DRGs and that the 
surgical techniques are all designed to correct the same clinical 
problem, and continue to advise against moving a select number of those 
procedures out of MS-DRGs 020 through 027. Our clinical advisors stated 
that the endovascular intracranial embolizations and other endovascular 
procedures address the same clinical problems as other procedures 
assigned to MS-DRGs 020 through 027. Therefore, the cases in MS-DRGs 
020 through 027 are clinically similar.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the

[[Page 49363]]

current MS-DRG structure for MS-DRGs 020 through 027 and not to create 
four new MS-DRGs for endovascular intracranial embolization and other 
endovascular procedures.
3. MDC 5 (Diseases and Disorders of the Circulatory System)
    a. Adding Severity Levels to MS-DRGs 245 Through 251
    During the comment period for the FY 2015 IPPS/LTCH PPS proposed 
rule, we received a comment that recommended establishing severity 
levels for MS-DRG 245 (AICD Generator Procedures) and including 
additional severity levels for MS-DRG 246 (Percutaneous Cardiovascular 
Procedure with Drug-Eluting Stent with MCC or 4+ Vessels/Stents); MS-
DRG 247 (Percutaneous Cardiovascular Procedure with Drug-Eluting Stent 
without MCC); MS-DRG 248 (Percutaneous Cardiovascular Procedure with 
Non-Drug-Eluting Stent with MCC or 4+ Vessels/Stents); MS-DRG 249 
(Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent 
without MCC); MS-DRG 250 (Percutaneous Cardiovascular Procedure without 
Coronary Artery Stent with MCC); and MS-DRG 251 (Percutaneous 
Cardiovascular Procedure without Coronary Artery Stent without MCC).
    We considered this public comment to be outside of the scope of the 
FY 2015 IPPS/LTCH PPS proposed rule. Therefore, we did not address this 
comment in the FY 2015 IPPS/LTCH PPS final rule. However, we indicated 
that we would consider the public comment for possible proposals in 
future rulemaking as part of our annual review process.
    For the FY 2016 IPPS/LTCH PPS proposed rule, we received a 
separate, but related, request involving most of these same MS-DRGs. 
Therefore, for the FY 2016 IPPS/LTCH PPS proposed rule, we conducted a 
simultaneous analysis of claims data to address both the FY 2015 public 
comment request and the related FY 2016 request. We discuss both of 
these requests below.
b. Percutaneous Intracardiac Procedures
    We received a request to remove the cardiac ablation and other 
specified cardiovascular procedures from the following MS-DRGs, and to 
create new MS-DRGs to classify these procedures:
     MS-DRG 246 (Percutaneous Cardiovascular Procedure with 
Drug-Eluting Stent with MCC or 4+ Vessels/Stents);
     MS-DRG 247 (Percutaneous Cardiovascular Procedure with 
Drug-Eluting Stent without MCC);
     MS-DRG 248 (Percutaneous Cardiovascular Procedure with 
Non-Drug-Eluting Stent with MCC or 4+ Vessels/Stents);
     MS-DRG 249 (Percutaneous Cardiovascular Procedure with 
Non-Drug-Eluting Stent without MCC);
     MS-DRG 250 (Percutaneous Cardiovascular Procedure without 
Coronary Artery Stent with MCC); and
     MS-DRG 251 (Percutaneous Cardiovascular Procedure without 
Coronary Artery Stent without MCC).
    The commenter stated that, historically, the MS-DRGs listed above 
appropriately reflected the differential cost of percutaneous 
transluminal coronary angioplasty (PTCA) procedures with and without 
stents. The commenter noted that PTCA procedures with drug eluting 
stents were previously paid the highest, followed by PTCA procedures 
with bare metal stents and PTCA procedures with no stents, 
respectively. However, the commenter believed that, in recent years, 
the opposite has begun to occur and cases reporting a PTCA procedure 
without a stent are being paid more than cases reporting a PTCA 
procedure with a stent. The commenter further noted that cardiac 
ablation procedures and PTCA procedures without stents are currently 
assigned to the same MS-DRGs, notwithstanding that the procedures have 
different clinical objectives and patient diagnoses. The commenter 
indicated that cardiac ablation procedures are performed on patients 
with multiple distinct cardiac arrhythmias to alter electrical 
conduction systems of the heart, and PTCA procedures are performed on 
patients with coronary atherosclerosis to open blocked coronary 
arteries. The commenter also noted that cardiac ablation procedures are 
performed in the heart chambers by cardiac electrophysiologists, 
require significantly more resources, and require longer periods of 
time to complete. Conversely, PTCA procedures are performed in the 
coronary vessels by interventional cardiologists, require the use of 
less equipment, and require a shorter period of time to complete. 
Therefore, the commenter suggested that CMS create new MS-DRGs for 
percutaneous intracardiac procedures to help improve clinical 
homogeneity by differentiating percutaneous intracardiac procedures 
(performed within the heart chambers) from percutaneous intracoronary 
procedures (performed within the coronary vessels). The commenter 
further believed that creating new MS-DRGs for these procedures would 
also better reflect the resource cost of specialized equipment used for 
more complex structures of electrical conduction systems when 
performing cardiac ablation procedures.
    The following ICD-9-CM procedure codes identify and describe the 
cardiac ablation procedures and the other percutaneous intracardiac 
procedures that are currently classified under MS-DRGs 246 through 251 
and that the commenter recommended that CMS assign to the newly created 
MS-DRGs:
     35.52 (Repair of atrial septal defect with prosthesis, 
closed technique);
     35.96 (Percutaneous balloon valvuloplasty);
     35.97 (Percutaneous mitral valve repair with implant);
     37.26 (Catheter based invasive electrophysiologic 
testing);
     37.27 (Cardiac mapping);
     37.34 (Excision or destruction of other lesion or tissue 
of heart, endovascular approach);
     37.36 (Excision, destruction, or exclusion of left atrial 
appendage (LAA)); and
     37.90 (Insertion of left atrial appendage device).
    There are a number of ICD-10-PCS code translations that provide 
more detailed and specific information for each of the ICD-9-CM 
procedure codes listed above that also are currently classified under 
MS-DRGs 246 through 251 based on the GROUPER Version 32 ICD-10 MS-DRGs. 
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 
35.52 are shown in the following table.

     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 35.52
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02U53JZ..................  Supplement atrial septum with synthetic
                            substitute, percutaneous approach.
02U54JZ..................  Supplement atrial septum with synthetic
                            substitute, percutaneous endoscopic
                            approach.
------------------------------------------------------------------------


[[Page 49364]]

    The comparable ICD-10-PCS code translations for ICD-9-CM procedure 
code 35.96 are shown in the following table.

        ICD-10-PCS Translations for ICD-9-CM Procedure Code 35.96
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
027F34Z..................  Dilation of aortic valve with drug-eluting
                            intraluminal device, percutaneous approach.
027F3DZ..................  Dilation of aortic valve with intraluminal
                            device, percutaneous approach.
027F3ZZ..................  Dilation of aortic valve, percutaneous
                            approach.
027F44Z..................  Dilation of aortic valve with drug-eluting
                            intraluminal device, percutaneous endoscopic
                            approach.
027F4DZ..................  Dilation of aortic valve with intraluminal
                            device, percutaneous endoscopic approach.
027F4ZZ..................  Dilation of aortic valve, percutaneous
                            endoscopic approach.
027G34Z..................  Dilation of mitral valve with drug-eluting
                            intraluminal device, percutaneous approach.
027G3DZ..................  Dilation of mitral valve with intraluminal
                            device, percutaneous approach.
027G3ZZ..................  Dilation of mitral valve, percutaneous
                            approach.
027G44Z..................  Dilation of mitral valve with drug-eluting
                            intraluminal device, percutaneous endoscopic
                            approach.
027G4DZ..................  Dilation of mitral valve with intraluminal
                            device, percutaneous endoscopic approach.
027G4ZZ..................  Dilation of mitral valve, percutaneous
                            endoscopic approach.
027H34Z..................  Dilation of pulmonary valve with drug-eluting
                            intraluminal device, percutaneous approach.
027H3DZ..................  Dilation of pulmonary valve with intraluminal
                            device, percutaneous approach.
027H3ZZ..................  Dilation of pulmonary valve, percutaneous
                            approach.
027H44Z..................  Dilation of pulmonary valve with drug-eluting
                            intraluminal device, percutaneous endoscopic
                            approach.
027H4DZ..................  Dilation of pulmonary valve with intraluminal
                            device, percutaneous endoscopic approach.
027H4ZZ..................  Dilation of pulmonary valve, percutaneous
                            endoscopic approach.
027J34Z..................  Dilation of tricuspid valve with drug-eluting
                            intraluminal device, percutaneous approach.
027J3DZ..................  Dilation of tricuspid valve with intraluminal
                            device, percutaneous approach.
027J3ZZ..................  Dilation of tricuspid valve, percutaneous
                            approach.
027J44Z..................  Dilation of tricuspid valve with drug-eluting
                            intraluminal device, percutaneous endoscopic
                            approach.
027J4DZ..................  Dilation of tricuspid valve with intraluminal
                            device, percutaneous endoscopic approach.
027J4ZZ..................  Dilation of tricuspid valve, percutaneous
                            endoscopic approach.
------------------------------------------------------------------------

    The ICD-10-PCS code translation for ICD-9-CM procedure code 35.97 
is 02UG3JZ (Supplement mitral valve with synthetic substitute, 
percutaneous approach).
    The ICD-10-PCS code translation for ICD-9-CM procedure code 37.26 
is 4A023FZ (Measurement of cardiac rhythm, percutaneous approach).
    The comparable ICD-10-PCS code translations for ICD-9-CM procedure 
code 37.27 are shown in the following table.

     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.27
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02K83ZZ..................  Map conduction mechanism, percutaneous
                            approach.
02K84ZZ..................  Map conduction mechanism, percutaneous
                            endoscopic approach.
------------------------------------------------------------------------

    The comparable ICD-10-PCS code translations for ICD-9-CM procedure 
code 37.34 are shown in the following table:

     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.34
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02553ZZ..................  Destruction of atrial septum, percutaneous
                            approach.
02563ZZ..................  Destruction of right atrium, percutaneous
                            approach.
02573ZZ..................  Destruction of left atrium, percutaneous
                            approach.
02583ZZ..................  Destruction of conduction mechanism,
                            percutaneous approach.
02593ZZ..................  Destruction of chordae tendineae,
                            percutaneous approach.
025F3ZZ..................  Destruction of aortic valve, percutaneous
                            approach.
025G3ZZ..................  Destruction of mitral valve, percutaneous
                            approach.
025H3ZZ..................  Destruction of pulmonary valve, percutaneous
                            approach.
025J3ZZ..................  Destruction of tricuspid valve, percutaneous
                            approach.
025K3ZZ..................  Destruction of right ventricle, percutaneous
                            approach.
025L3ZZ..................  Destruction of left ventricle, percutaneous
                            approach.
025M3ZZ..................  Destruction of ventricular septum,
                            percutaneous approach.
02B53ZZ..................  Excision of atrial septum, percutaneous
                            approach.
02B63ZZ..................  Excision of right atrium, percutaneous
                            approach.
02B73ZZ..................  Excision of left atrium, percutaneous
                            approach.
02B83ZZ..................  Excision of conduction mechanism,
                            percutaneous approach.
02B93ZZ..................  Excision of chordae tendineae, percutaneous
                            approach.

[[Page 49365]]

 
02BF3ZZ..................  Excision of aortic valve, percutaneous
                            approach.
02BG3ZZ..................  Excision of mitral valve, percutaneous
                            approach.
02BH3ZZ..................  Excision of pulmonary valve, percutaneous
                            approach.
02BJ3ZZ..................  Excision of tricuspid valve, percutaneous
                            approach.
02BM3ZZ..................  Excision of ventricular septum, percutaneous
                            approach.
02T83ZZ..................  Resection of conduction mechanism,
                            percutaneous approach.
------------------------------------------------------------------------

    The comparable ICD-10-PCS code translations for ICD-9-CM procedure 
code 37.36 are shown in the following table:

     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.36
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02573ZK..................  Destruction of left atrial appendage,
                            percutaneous approach.
02574ZK..................  Destruction of left atrial appendage,
                            percutaneous endoscopic approach.
02B73ZK..................  Excision of left atrial appendage,
                            percutaneous approach.
02B74ZK..................  Excision of left atrial appendage,
                            percutaneous endoscopic approach.
02L73ZK..................  Occlusion of left atrial appendage,
                            percutaneous approach.
02L74ZK..................  Occlusion of left atrial appendage,
                            percutaneous endoscopic approach.
------------------------------------------------------------------------

    The comparable ICD-10-PCS code translations for ICD-9-CM procedure 
code 37.90 are shown in the following table:

     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.90
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02L73CK..................  Occlusion of left atrial appendage with
                            extraluminal device, percutaneous approach.
02L73DK..................  Occlusion of left atrial appendage with
                            intraluminal device, percutaneous approach.
02L74CK..................  Occlusion of left atrial appendage with
                            extraluminal device, percutaneous endoscopic
                            approach.
02L74DK..................  Occlusion of left atrial appendage with
                            intraluminal device, percutaneous endoscopic
                            approach.
------------------------------------------------------------------------

    The ICD-10-PCS code translations listed above, along with their 
respective MS-DRG assignments, can be found in the ICD-10 MS-DRGs 
Version 32 Definitions Manual posted on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html.
    As mentioned earlier, we received a separate, but related, request 
to add severity levels to MS-DRGs 246 through 251. We address this 
request at the end of this section.
    To address the first of these separate, but related, requests, we 
reviewed claims data for MS-DRGs 246 through 251 from the December 2014 
update of the FY 2014 MedPAR file. Our findings are shown in the 
following table:

                           Percutaneous Cardiovascular MS-DRGs With and Without Stents
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 246--All cases...........................................          30,617            5.52         $23,855
MS-DRG 246--Cases with procedure codes 35.52, 35.96, 35.97,                  244            9.69          34.099
 37.26, 37.27, 37.34, 37.36, and 37.90..........................
MS-DRG 247--All cases...........................................          79,639            2.69          15,671
MS-DRG 247--Cases with procedure codes 35.52, 35.96, 35.97,                  260            5.20          25,797
 37.26, 37.27, 37.34, 37.36, and 37.90..........................
MS-DRG 248--All cases...........................................           9,310            6.37          22,504
MS-DRG 248--Cases with procedure codes 35.52, 35.96, 35.97,                  125           10.76          33,521
 37.26, 37.27, 37.34, 37.36, and 37.90..........................
MS-DRG 249--All cases...........................................          16,273            3.08          14,066
MS-DRG 249--Cases with procedure codes 35.52, 35.96, 35.97,                   81            5.12          23,710
 37.26, 37.27, 37.34, 37.36, and 37.90..........................
MS-DRG 250--All cases...........................................           9,275            7.07          22,902
MS-DRG 250--Cases with procedure codes 35.52, 35.96, 35.97,                5,826            7.90          24,841
 37.26, 37.27, 37.34, 37.36, and 37.90..........................
MS-DRG 251--All cases...........................................          20,945            3.25          15,757

[[Page 49366]]

 
MS-DRG 251--Cases with procedure codes 35.52, 35.96, 35.97,               14,436            3.39          17,290
 37.26, 37.27, 37.34, 37.36, and 37.90..........................
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, there were a total of 30,617 cases in 
MS-DRG 246, with an average length of stay of 5.52 days and average 
costs of $23,855. For cases reporting a percutaneous intracardiac 
procedure in MS-DRG 246 (ICD-9-CM procedure codes 35.52, 35.96, 35.97, 
37.26, 37.27, 37.34, 37.36, and 37.90), there were a total of 244 
cases, with an average length of stay of 9.69 days and average costs of 
$34,099. For MS-DRGs 247 through 251, a similar pattern was identified; 
the data reflected that the average costs are higher and the average 
length of stay is greater for cases reporting a percutaneous 
intracardiac procedure in comparison to the average costs and average 
length of stay for all of the cases in their respective MS-DRGs.
    As reflected in the following table, a further analysis of the data 
showed that percutaneous intracardiac procedures represent a total of 
20,972 cases in MS-DRGs 246 through 251, with a greater average length 
of stay (4.79 days versus 3.62 days) and higher average costs ($19,810 
versus $17,532) in comparison to all of the remaining cases in MS-DRGs 
246 through 251.

                       Summary of Percutaneous Cardiovascular DRGs With and Without Stents
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRGs 246 through 251--Cases with procedure codes 35.52,                20,972            4.79         $19,810
 35.96, 35.97, 37.26, 37.27, 37.34, 37.36, and 37.90............
MS-DRGs 246 through 251--Cases without procedure codes 35.52,            145,087            3.62          17,532
 35.96, 35.97, 37.26, 37.27, 37.34, 37.36, and 37.90............
----------------------------------------------------------------------------------------------------------------

    We stated in the FY 2016 IPPS/LTCH PPS proposed rule that the 
results of these data analyses support removing procedures performed 
within the heart chambers using intracardiac techniques from MS-DRGs 
246 through 251, and assigning these procedures to separate MS-DRGs. 
The results of these data analyses also supported subdividing these MS-
DRGs using the ``with MCC'' and ``without MCC'' severity levels based 
on the application of the criteria established in the FY 2008 IPPS 
final rule (72 FR 47169), and described in section II.G.1.b. of the 
preamble of the proposed rule, that must be met to warrant the creation 
of a CC or an MCC subgroup within a base MS-DRG. Our clinical advisors 
also agreed that this differentiation would improve the clinical 
homogeneity of these MS-DRGs by separating percutaneous intracardiac 
procedures (performed within the heart chambers) from percutaneous 
intracoronary procedures (performed within the coronary vessels). In 
addition, we believe that creating these new MS-DRGs would better 
reflect the resource cost of specialized equipment used to perform more 
complex structures of electrical conduction systems during cardiac 
ablation procedures. Therefore, for FY 2016, we proposed to create two 
new MS-DRGs to classify percutaneous intracardiac procedures (80 
FR24359). Specifically, we proposed to create MS-DRG 273, entitled 
``Percutaneous Intracardiac Procedures with MCC,'' and MS-DRG 274, 
entitled ``Percutaneous Intracardiac Procedures without MCC,'' and to 
assign the procedures performed within the heart chambers using 
intracardiac techniques to the two proposed new MS-DRGs. We proposed 
that existing percutaneous intracoronary procedures with and without 
stents continue to be assigned to the other MS-DRGs to reflect that 
those procedures are performed within the coronary vessels and require 
fewer resources.
    The table below represents the distribution of cases, average 
length of stay, and average costs for these proposed two new MS-DRGs.

                          Proposed New MS-DRGs for Percutaneous Intracardiac Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
Proposed MS-DRG 273 with MCC....................................           6,195            8.03         $25,380
Proposed MS-DRG 274 without MCC.................................          14,777            3.44          17,475
----------------------------------------------------------------------------------------------------------------

    We invited public comments on our proposal to create the two new 
MS-DRGs for percutaneous intracardiac procedures for FY 2016. In 
addition, we invited public comments on the ICD-10-PCS code 
translations that were presented earlier in this section and our 
proposal to assign these procedure codes to the proposed new MS-DRGs 
273 and 274.
    Comment: Several commenters supported the proposal to create 
proposed new MS-DRG 273 and MS-DRG 274 to improve clinical homogeneity 
and better reflect resource costs. The commenters stated that the 
proposal was reasonable, given the data and information provided. The 
commenters also agreed with the proposed ICD-10-PCS code translations 
and assignment of those codes to the proposed new MS-DRGs.
    Several commenters commended CMS for conducting the analysis and 
continuing to make further refinements to the MS-DRGs. One commenter 
specifically expressed appreciation for CMS' display of cost and length 
of stay data in the analysis, in addition to the clinical factors that 
support

[[Page 49367]]

differentiation of intracardiac procedures from intracoronary 
procedures. This commenter recommended that, if the two proposed MS-
DRGs are finalized, CMS continue to monitor them after ICD-10 
implementation in an effort to mitigate potential unintended 
consequences. The commenter also suggested that, in the future, 
additional procedure codes may warrant assignment to the proposed new 
MS-DRGs. Another commenter stated that adopting the proposal to create 
the new MS-DRGs will lead to more appropriate payment.
    Response: We appreciate the commenters' support. We agree that 
creating these new MS-DRGs will better reflect utilization of resources 
and clinical cohesiveness for intracardiac procedures in comparison to 
intracoronary procedures, as well as provide for appropriate payment 
for the procedures.
    Comment: One commenter supported the proposal but also requested 
that CMS provide additional information on how the payment rate will be 
adjusted for the remaining existing MS-DRGs (246 through 251) following 
the creation of proposed new MS-DRGs 273 and 274.
    Response: We thank the commenter for its support. For payment rate 
updates to all of the MS-DRGs for FY 2016, we refer readers to Table 5 
associated with this final rule (which is available via the Internet on 
the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html).
    After consideration of the public comments we received, we are 
finalizing our proposal to create MS-DRGs 273 (Percutaneous 
Intracardiac Procedures with MCC) and MS-DRG 274 (Percutaneous 
Intracardiac Procedures without MCC) for the FY 2016 ICD-10 MS-DRGs 
Version 33.
    As mentioned earlier in this section, we received a similar request 
in response to the FY 2015 IPPS/LTCH PPS proposed rule to add severity 
levels to MS-DRGs 246 through 251. We considered this public comment to 
be outside of the scope of the FY 2015 IPPS/LTCH PPS proposed rule. 
Therefore, we did not address this comment in the FY 2015 IPPS/LTCH PPS 
final rule. However, we indicated that we would consider the public 
comment for possible proposals in future rulemaking as part of our 
annual review process. Specifically, the commenter recommended 
including additional severity levels for MS-DRGs 246 through 251 and 
establishing severity levels for MS-DRG 245 (AICD Generator 
Procedures).
    For our data analysis for this recommendation, we examined claims 
data from the December 2014 update of the FY 2014 MedPAR file to 
determine if including additional severity levels in MS-DRGs 246 
through 251 was warranted. During our analysis, we applied the criteria 
established in the FY 2008 IPPS final rule (72 FR 47169), as described 
in section II.G.1.b. of the preamble of the proposed rule. As shown in 
the table below, we collapsed MS-DRGs 246 through 251 into base MS-DRGs 
(MS-DRGs 246, 248, and 250) by suggested severity level and applied the 
criteria.

        Percutaneous Cardiovascular MS-DRG With and Without Stent Procedures by Suggested Severity Level
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
Suggested MS-DRG 246 with MCC...................................          30,617            5.52         $23,855
Suggested MS-DRG 246 with CC....................................          45,313            2.96          16,233
Suggested MS-DRG 246 without CC/MCC.............................          34,326            2.33          14,928
Suggested MS-DRG 248 with MCC...................................           9,310            6.37          22,504
Suggested MS-DRG 248 with CC....................................           9,510            3.49          14,798
Suggested MS-DRG 248 without CC/MCC.............................           6,763            2.51          13,037
Suggested MS-DRG 250 with MCC...................................           9,275            7.07          22,903
Suggested MS-DRG 250 with CC....................................          11,653            3.80          16,113
Suggested MS-DRG 250 without CC/MCC.............................           9,292            2.56          15,310
----------------------------------------------------------------------------------------------------------------

    We found that the criterion that there be a $2,000 difference in 
average costs between subgroups was not met. Specifically, between the 
``with CC'' and ``without CC/MCC'' subgroups for base MS-DRG 246, the 
difference in average costs was only $1,305; for base MS-DRG 248, the 
difference in average costs was only $1,761; and for base MS-DRG 250, 
the difference in average costs was only $803. The results of the data 
analysis of MS-DRGs 246 through 251 confirmed, and our clinical 
advisors agreed, that the existing 2-way severity level splits for 
these MS-DRGs (with MCC and without MCC) are appropriate, as displayed 
in the table below.

                           Percutaneous Cardiovascular MS-DRGs With and Without Stents
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 246--All cases...........................................          30,617            5.52         $23,855
MS-DRG 247--All cases...........................................          79,639            2.69          15,671
MS-DRG 248--All cases...........................................           9,310            6.37          22,504
MS-DRG 249--All cases...........................................          16,273            3.08          14,066
MS-DRG 250--All cases...........................................           9,275            7.07          22,903
MS-DRG 251--All cases...........................................          20,945            3.25          15,757
----------------------------------------------------------------------------------------------------------------

    Therefore, we did not propose to further subdivide the severity 
levels for MS-DRGs 246 through 251. We invited public comments on our 
proposal not to create additional severity levels for MS-DRGs 246 
through 251.
    Comment: Several commenters supported the proposal not to create 
additional severity levels for MS-DRGs 246 through 251. The commenters 
stated that the proposal was reasonable,

[[Page 49368]]

given the data and information provided.
    Response: We appreciate the commenters' support. Therefore, we are 
finalizing our proposal to not create additional severity levels for 
MS-DRGs 246-251 for the FY 2016 ICD-10 MS-DRGs Version 33.
    Using the same MedPAR claims data for FY 2014, we separately 
examined cases in MS-DRG 245 to determine whether to subdivide this MS-
DRG into severity levels. As displayed in the table below, the results 
of the FY 2014 data analysis showed there were a total of 1,699 cases, 
with an average length of stay of 5.49 days and average costs of 
$34,287, in MS-DRG 245.

                                            AICD Generator Procedures
----------------------------------------------------------------------------------------------------------------
                                                                                 Average length
                            MS-DRG                             Number of cases      of stay       Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 245--All cases........................................           1,699             5.49          $34,287
----------------------------------------------------------------------------------------------------------------

    We applied the five criteria established in the FY 2008 IPPS final 
rule (72 FR 47169), as described in section II.G.1.b. of the preamble 
of the proposed rule, to determine if it was appropriate to subdivide 
MS-DRG 245 into severity levels. The table below illustrates our 
findings.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
      AICD Generator procedures by suggested severity level            cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
Suggested MS-DRG 245 with MCC...................................             542            8.15         $40,004
Suggested MS-DRG 245 with CC....................................             939            4.51         $32,237
Suggested MS-DRG 245 without CC/MCC.............................             218            3.12         $28,907
----------------------------------------------------------------------------------------------------------------

    Based on the analysis of the FY 2014 claims data for MS-DRG 245, 
the results supported creating a ``with MCC'' and a ``without MCC'' 
severity level split. However, our clinical advisors indicated that it 
would not be clinically appropriate to add severity levels based on an 
isolated year's data fluctuation because this could lead to a lack of 
stability in MS-DRG payments. We agreed with our clinical advisors and 
noted that we annually conduct an analysis of base MS-DRGs to evaluate 
if additional severity levels are warranted. This analysis includes 2 
years of MedPAR claims data to specifically compare data results from 1 
year to the next to avoid making determinations about whether 
additional severity levels are warranted based on an isolated year's 
data fluctuation. Generally, in past years, for our review of requests 
to add or establish severity levels, in our analysis of the most recent 
claims data, there was at least one criterion that was not met. 
Therefore, it was not necessary to further analyze data beyond 1 year. 
However, the results of our analysis of claims data in the December 
2014 update of the FY 2014 MedPAR file for this particular request 
involving MS-DRG 245 demonstrate that all five criteria to establish 
subgroups were met, and, therefore, it was necessary to also examine 
the FY 2013 MedPAR claims data file.
    The results of our analysis from the December 2013 update of the FY 
2013 claims data for MS-DRG 245 are shown in the table below.

                                            AICD Generator Procedures
----------------------------------------------------------------------------------------------------------------
                                                                                 Average length
                            MS-DRG                             Number of cases      of stay       Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 245--All cases........................................           1,850             4.81          $33,272
----------------------------------------------------------------------------------------------------------------

    The FY 2013 claims data for MS-DRG 245 did not support creating any 
severity levels because the data did not meet one or more of the five 
required criteria for creating new severity levels. The data did not 
meet the requirement for a 3-way severity level split (with MCC, with 
CC, and without CC/MCC) or a 2-way severity level split (with MCC and 
without MCC) because there were not at least 500 cases in the MCC 
subgroup. While the data did meet this particular criterion for the 2-
way severity level split of ``with CC/MCC'' and ``without CC/MCC'' 
because there were at least 500 cases in the CC subgroup, the data did 
not meet the criterion that there be at least a 20-percent difference 
in average costs between subgroups, as shown in the table below.

                                            AICD Generator Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
               MS-DRG by suggested severity level                      cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 245 with MCC.............................................              44            7.32         $39,536
MS-DRG 245 with CC..............................................           1,118            4.26         $31,786
MS-DRG 245 without CC/MCC.......................................             288            3.10         $29,383
----------------------------------------------------------------------------------------------------------------

    As stated previously, we believe that 2 years of data showing that 
the requested CC or MCC subgroup meets all five of the established 
criteria for creating severity levels are needed in order to support a 
proposal to add

[[Page 49369]]

severity levels for MS-DRG 245. Our clinical advisors also agreed that 
it would not be clinically appropriate to add severity levels based on 
an isolated year's data fluctuation because this could lead to a lack 
of stability in payments. Therefore, we did not propose to add severity 
levels for MS-DRG 245 for FY 2016. We invited public comments on the 
results of our analysis and our proposal not to create severity levels 
for MS-DRG 245.
    Comment: Several commenters supported the proposal not to create 
severity levels for MS-DRG 245. The commenters stated that the proposal 
was reasonable, given the data and information provided. One commenter 
specifically noted that it understood the rationale of CMS' proposal 
based on analysis of the FY 2013 and FY 2014 data fluctuation. However, 
the commenter recommended that a followup analysis be conducted for the 
FY 2017 IPPS/LTCH PPS proposed rule.
    Response: We appreciate the commenters' support. We intend to 
conduct a followup analysis for MS-DRG 245 in the FY 2017 IPPS/LTCH PPS 
proposed rule as the commenter recommended.
    After consideration of the public comments we received, we are 
finalizing our proposal not to create severity levels for MS-DRG 245 in 
FY 2016.
c. Zilver[supreg] PTX Drug-Eluting Peripheral Stent (Zilver[supreg] 
PTX[supreg])
    The Zilver[supreg] PTX Drug-Eluting Peripheral Stent 
(Zilver[supreg] PTX[supreg]) was approved for new technology add-on 
payments in FY 2014 (78 FR 50583 through 50585). Cases involving the 
Zilver[supreg] PTX[supreg] that are eligible for new technology add-on 
payments are identified by ICD-9-CM procedure code 00.60 (Insertion of 
drug-eluting stent(s) of superficial femoral artery).
    We received a request from the manufacturer for an extension of new 
technology add-on payments for Zilver[supreg] PTX[supreg] in FY 2016. 
In the request, the manufacturer asked CMS to consider three options 
for procedure code 00.60 for FY 2016. The first option was to extend 
the new technology add-on payment through FY 2016. The request to 
extend the new technology add-on payment is addressed in section 
II.I.3.e. of the preamble of the proposed rule and this final rule. The 
second option was to establish a new family of MS-DRGs for procedures 
involving drug-eluting stents used in the peripheral (noncoronary) 
vasculature. The third option was to assign all Zilver[supreg] 
PTX[supreg] cases to MS-DRG 252 even if there is no MCC (which would 
necessitate revising the MS-DRG title to ``Other Vascular Procedures).
    ICD-10-PCS provides the following more detailed procedure codes for 
the insertion of drug-eluting stents of superficial femoral artery:
     047K04Z (Dilation of right femoral artery with drug-
eluting intraluminal device, open approach);
     047K34Z (Dilation of right femoral artery with drug-
eluting intraluminal device, percutaneous approach);
     047K44Z (Dilation of right femoral artery with drug-
eluting intraluminal device, percutaneous endoscopic approach);
     047L04Z (Dilation of left femoral artery with drug-eluting 
intraluminal device, open approach);
     047L34Z (Dilation of left femoral artery with drug-eluting 
intraluminal device, percutaneous approach); and
     047L44Z (Dilation of left femoral artery with drug-eluting 
intraluminal device, percutaneous endoscopic approach).
    We examined claims data for cases involving the drug-eluting 
peripheral stent procedures reported in the December 2014 update of the 
FY 2014 MedPAR file for MS-DRGs 252, 253, and 254 (Other Vascular 
Procedures with MCC, with CC and without CC/MCC, respectively). The 
following table illustrates our findings.

                                    Drug-Eluting Peripheral Stent Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 252--All cases...........................................          30,696            7.89         $23,935
MS-DRG 252--Cases with procedure code 00.60.....................             133            9.08          32,623
MS-DRG 253--All cases...........................................          34,746            5.68          19,030
MS-DRG 253--Cases with procedure code 00.60.....................             353            4.99          25,396
MS-DRG 254--All cases...........................................          15,394            2.99          12,629
MS-DRG 254--Cases with procedure code 00.60.....................             115            2.62          21,461
----------------------------------------------------------------------------------------------------------------

    Our findings showed that there were only 601 peripheral angioplasty 
cases with a drug-eluting stent reported. Of the 601 peripheral 
angioplasty cases with a drug-eluting stent, 133 cases were in MS-DRG 
252, 353 cases were in MS-DRG 253, and 115 cases were in MS-DRG 254. 
The average costs for the drug-eluting stent cases in MS-DRGs 252, 253, 
and 254 were $32,623, $25,396, and $21,461, respectively. The average 
costs for all cases in MS-DRGs 252, 253, and 254 were $23,935, $19,030, 
and $12,629, respectively. The average costs for the drug-eluting stent 
cases in MS-DRG 253 ($25,396) were higher than the average costs for 
all cases in MS-DRG 252 ($23,935). However, the average costs for the 
drug-eluting stent cases in MS-DRG 254 ($21,461) were lower than the 
average costs for all cases in MS-DRG 252 ($23,935).
    We determined that the small number of cases (601) did not provide 
justification to create a new set of MS-DRGs specifically for 
angioplasty of peripheral arteries using drug-eluting stents. In 
addition, the data did not support assigning all the drug-eluting stent 
cases to the highest severity level (MS-DRG 252), even when there is 
not an MCC, because the average costs for the drug-eluting stent cases 
in MS-DRG 254 ($21,461) were lower than the average costs for all cases 
in MS-DRG 252 ($23,935). The average length of stay for drug-eluting 
stent cases in MS-DRG 254 was 2.62 days compared to 7.89 days for all 
cases in MS-DRG 252. Cases are grouped together based on similar 
clinical and resource criteria.
    Our clinical advisors recommended making no MS-DRG updates for 
peripheral angioplasty cases with a drug-eluting stent and considered 
the current MS-DRG assignment appropriate. Our clinical advisors agreed 
that the small number of peripheral angioplasty cases with a drug-
eluting stent does not support creating a new MS-DRG for this specific 
type of treatment. They stated that the cases are clinically similar to 
other cases within MS-DRGs 252, 253, and 254. Considering the data for 
peripheral angioplasty cases with a drug-eluting stent found reported 
in MS-DRGs 252, 253, and 254 and the input from our clinical advisors, 
in the FY 2016 IPPS/

[[Page 49370]]

LTCH proposed rule (80 FR 24362), we did not propose to make any MS-DRG 
updates for peripheral angioplasty cases with a drug-eluting stent. We 
proposed to maintain the current MS-DRG assignments for these cases in 
MS-DRGs 252, 253, and 254. We invited public comments on our proposal.
    Comment: A number of commenters supported the proposal to maintain 
the current MS-DRG assignments for peripheral angioplasty cases with a 
drug-eluting stent in MS-DRGs 252, 253, and 254. The commenters stated 
that the proposal was reasonable, given the data and information 
provided.
    One commenter, the manufacturer, expressed concern with the 
proposal and asked CMS to reconsider its recommendation for denying the 
request that all Zilver[supreg] PTX[supreg] cases be assigned to MS-DRG 
252 even if there were no MCC. The commenter stated that it is true 
that assignment of all drug-eluting cases to MS-DRG 252 would result in 
an overpayment for cases with a drug-eluting stent that currently are 
assigned to MS-DRG 254. However, the commenter stated that these cases 
represent only 19 percent of the drug-eluting stent cases, and that the 
overpayment of these cases would be modest because the average cost of 
drug-eluting stent cases in MS-DRG 254 is only $2,500 less than the 
average cost of all cases in MS-DRG 252. The commenter stated that 
there would be an underpayment for all the drug-eluting stent cases if 
the cases continue to be assigned to MS-DRGs 252, 253, and 254. The 
commenter stated that implementing its original request would allow 
more adequate payment to hospitals using the Zilver[supreg] PTX[supreg] 
technology and thus remove a potential financial barrier to Medicare 
providers desiring to provide access of this technology to their 
patients.
    Another commenter asserted that it understood CMS' concern that the 
agency could be overpaying for uncomplicated cases by assigning all 
drug-eluting stent cases to MS-DRG 252, even if they did not have a 
MCC. However, the commenter stated that CMS is underpaying all drug-
eluting stent cases by maintaining the current MS-DRG assignments for 
these procedures. The commenter expressed concern regarding patient 
access to this technology.
    Response: We appreciate the commenters' support for our proposal to 
maintain the current MS-DRG for drug-eluting stent cases in MS-DRGs 
252, 253, and 254. Our clinical advisors have also reexamined this 
issue and continue to advise us that the cases reporting procedure code 
00.60 are appropriately classified within MS-DRG 252, 253, or 254.
    In regard to the commenters who disagreed with our proposal, as 
stated earlier, the data do not support assigning all the drug-eluting 
stent cases to the highest severity level (MS-DRG 252), even when there 
is not an MCC. We note that while the average costs for MS-DRG 254 
(lowest severity level) may only represent 19 percent of the drug-
eluting stent cases as shown in the table above, the MS-DRGs are 
comprised of a distinct structure with respect to the types of patients 
within each severity level. This structure is based on an organizing 
principle that patients at the MCC level, the highest severity level, 
are those patients who are generally sicker, consume an increased 
utilization of resources, and require more complex services. 
Disregarding this structure solely for the purpose of increasing 
payment for patients who are not similar in terms of their severity of 
illness and resource utilization would be inconsistent with how the MS-
DRGs are otherwise defined within the classification system.
    In addition, as the requester pointed out in its own comments, ``it 
is the nature of a MS-DRG system that there will be variations in cost 
between different hospitalizations that fall into the same MS-DRG or 
MS-DRGs--each MS-DRG will have some cases that are higher and some 
cases that are lower than the average costs for the entire MS-DRG.'' We 
believe that the higher average costs for the drug-eluting stent cases 
can be attributed to the cost of the device and not necessarily because 
the patients receiving these stents are more severely ill.
    With regard to the commenters' concerns regarding patient access to 
the technology with the expiration of the new technology add-on 
payment, we would expect that hospitals that now have experience with 
the technology and have observed favorable clinical outcomes for their 
patients would nonetheless consider the technology to be worth the 
investment. Accordingly, we will continue to monitor cases with the 
Zilver[supreg] PTX[supreg] technology to determine if modifications are 
warranted to the MS-DRG structure in future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the current structure for MS-DRG 
assignments for procedures involving drug-eluting stents in MS-DRG 252, 
253, or 254 for FY 2016.
    d. Percutaneous Mitral Valve Repair System--Proposed Revision of 
ICD-10-PCS Version 32 Logic
    We received a comment which brought to our attention that the ICD-
10 MS-DRGs Version 32 assignment for ICD-10-PCS procedure code 02UG3JZ 
(Supplement mitral valve with synthetic substitute, percutaneous 
approach) does not accurately replicate the ICD-9-CM MS-DRGs Version 
32, which assigns this procedure code to the following MS-DRGs:
     MS-DRG 231 (Coronary Bypass with PTCA with MCC);
     MS-DRG 232 (Coronary Bypass with PTCA without MCC);
     MS-DRG 246 (Percutaneous Cardiovascular Procedure with 
Drug-Eluting Stent with MCC or 4+ Vessels/Stents);
     MS DRG 247 (Percutaneous Cardiovascular Procedure with 
Drug-Eluting Stent without MCC);
     MS-DRG 248 (Percutaneous Cardiovascular Procedure with 
Non-Drug-Eluting Stent with MCC or 4+ Vessels/Stents);
     MS DRG 249 (Percutaneous Cardiovascular Procedure with 
Non-Drug-Eluting Stent without MCC);
     MS-DRG 250 (Percutaneous Cardiovascular Procedure without 
Coronary Artery Stent with MCC); and
     MS-DRG 251 (Percutaneous Cardiovascular Procedure without 
Coronary Artery Stent without MCC).
    We agree with the commenter that the ICD-10 MS-DRGs logic should be 
consistent with the ICD-9 MS-DRGs logic; that is, the ICD-10 MS-DRGs 
Version 32 should replicate the ICD-9-CM MS-DRGs Version 32. Therefore, 
in the FY 2016 IPPS/LTCH PPS proposed rule, for the proposed FY 2016 
ICD-10 MS-DRGs Version 33, we proposed to assign ICD-10-PCS procedure 
code 02UG3JZ to MS-DRGs 231 and 232 and MS-DRGs 246 through 251 (80 FR 
24362). We invited public comments on this proposal.
    Comment: Several commenters agreed with the proposal to assign ICD-
10-PCS procedure code 02UG3JZ to ICD-10 MS-DRGs 231 and 232 and MS-DRGs 
246 through 251 to accurately replicate the ICD-9-CM MS-DRGs Version 32 
logic. The commenters also noted that, as discussed in the FY 2016 
IPPS/LTCH PPS proposed rule (80 FR 24356 through 24359), for the FY 
2016 ICD-10 MS-DRGs Version 33, CMS proposed to create two new ICD-10 
MS-DRGs which include ICD-10-PCS procedure code 02UG3JZ. The commenters 
recognized that, if proposed new MS-DRGs 273 and 274 (Percutaneous 
Intracardiac Procedures with and without MCC, respectively) were 
finalized for FY 2016, ICD-10-PCS procedure code 02UG3JZ would then 
group to those new MS-DRGs. The

[[Page 49371]]

commenters requested that CMS confirm the MS-DRG assignment.
    Response: We appreciate the commenters' support for our proposal to 
accurately replicate the assignment of ICD-10-PCS procedure code 
02UG3JZ under the ICD-10 MS-DRGs. As discussed earlier in section 
III.G.3.a. of this final rule, we are finalizing our proposal to create 
ICD-10 MS-DRGs 273 and 274 (Percutaneous Intracardiac Procedures with 
and without MCC, respectively). After consideration of the public 
comments we received, we are confirming as final policy for the FY 2016 
ICD-10 MS-DRGs Version 33 that ICD-10-PCS procedure code 02UG3JZ 
(Supplement mitral valve with synthetic substitute, percutaneous 
approach) is assigned to new ICD-10 MS-DRGs 273 and 274 and will 
continue to be assigned to MS-DRGs 231 and 232 (Coronary Bypass with 
PTC with MCC and without MCC, respectively).
e. Major Cardiovascular Procedures: Zenith[supreg] Fenestrated 
Abdominal Aortic Aneurysm (AAA) Graft
    New technology add-on payments for the Zenith[supreg] Fenestrated 
Abdominal Aortic Aneurysm (AAA) Graft (Zenith[supreg] F. Graft) will 
end on September 30, 2015. Cases involving the Zenith[supreg] F. Graft 
are identified by ICD-9-CM procedure code 39.78 (Endovascular 
implantation of branching or fenestrated graft(s) in aorta) in MS-DRGs 
237 and 238 (Major Cardiovascular Procedures with and without MCC, 
respectively). For additional information on the Zenith[supreg] F. 
Graft, we refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 
49921 through 49922).
    We received a request to reassign procedures described by ICD-9-CM 
procedure code 39.78 to the highest severity level in MS-DRGs 237 and 
238, including in instances when there is not an MCC present, or to 
create a new MS-DRG that would contain all endovascular aneurysm repair 
procedures. We note that, in addition to ICD-9-CM procedure code 39.78, 
ICD-9-CM procedure code 39.71 (Endovascular implantation of other graft 
in abdominal aorta) also describes endovascular aneurysm repair 
procedures.
    There are a number of ICD-10-PCS code translations that provide 
more detailed and specific information for each of ICD-9-CM codes 39.71 
and 39.78 that also currently group to MS-DRGs 237 and 238 in the ICD-
10 MS-DRGs Version 32. The comparable ICD-10-PCS code translations for 
ICD-9-CM procedure code 39.71 and 39.78 are shown in the following 
tables:

     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.71
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
04U03JZ..................  Supplement abdominal aorta with synthetic
                            substitute, percutaneous approach.
04U04JZ..................  Supplement abdominal aorta with synthetic
                            substitute, percutaneous endoscopic
                            approach.
04V03DZ..................  Restriction of abdominal aorta with
                            intraluminal device, percutaneous approach.
04V04DZ..................  Restriction of abdominal aorta with
                            intraluminal device, percutaneous endoscopic
                            approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.78
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
04V03DZ..................  Restriction of abdominal aorta with
                            intraluminal device, percutaneous approach.
04V04DZ..................  Restriction of abdominal aorta with
                            intraluminal device, percutaneous endoscopic
                            approach.
------------------------------------------------------------------------
Note: As discussed later in this section, the FY 2016 IPPS/LTCH PPS
  proposed rule listed the dilation codes ICD-10-PCS 04793DZ through
  04754DZ as possible translations for ICD-9-CM procedure code 39.78.
  For this final rule, we are only listing those codes that as
  ``standalone'' procedures are assigned to new MS-DRGs 268 and 269.

    We analyzed claims data reporting ICD-9-CM procedure code 39.78 for 
cases assigned to MS-DRGs 237 and 238 in the December 2014 update of 
the FY 2014 MedPAR file. We found a total of 18,340 cases, with an 
average length of stay of 9.46 days and average costs of $36,355 in MS-
DRG 237. We found 332 cases reporting ICD-9-CM procedure code 39.78, 
with an average length of stay of 8.46 days and average costs of 
$51,397 in MS-DRG 237. For MS-DRG 238, we found a total of 32,227 
cases, with an average length of stay of 3.72 days and average costs of 
$25,087. We found 1,927 cases reporting ICD-9-CM procedure code 39.78, 
with an average length of stay of 2.52 days and average costs of 
$31,739 in MS-DRG 238.

                                       Zenith Fenestrated Graft Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 237--All cases...........................................          18,340            9.46         $36,355
MS-DRG 237--Cases with procedure code 39.78.....................             332            8.46          51,397
MS-DRG 238--All cases...........................................          32,227            3.72          25,087
MS-DRG 238--Cases with procedure code 39.78.....................           1,927            2.52          31,739
----------------------------------------------------------------------------------------------------------------

    As illustrated in the table above, the results of the data analysis 
indicate that the average costs for cases reporting procedure code 
39.78 assigned to MS-DRG 238 were higher than the average costs for all 
cases in MS-DRG 238 ($31,739 compared to $25,087). In addition, the 
average costs for the 1,927 cases reporting procedure code 39.78 
assigned to MS-DRG 238 were $4,616 less than the costs of all cases 
assigned to MS-DRG 237. We determined that moving cases reporting 
procedure code 39.78 from MS-DRG 238 to MS-DRG 237 would result in 
overpayments. We

[[Page 49372]]

also noted that the average length of stay for the 1,927 cases 
reporting procedure code 39.78 in MS-DRG 238 was 2.52 days in 
comparison to the average length of stay for all cases in MS-DRG 237 of 
9.46 days. Our clinical advisors did not agree with moving cases 
reporting procedure code 39.78 to a higher severity level (with MCC) 
MS-DRG.
    We believe that the higher average costs could be attributed to the 
cost of the device. The Zenith[supreg] F. Graft is the only fenestrated 
graft device currently approved by the FDA. Therefore, this 
manufacturer is able to set its own costs in the market. We pointed out 
that the IPPS is not designed to pay solely for the cost of devices. 
More importantly, moving cases that greatly differ in their severity of 
illness and complexity of resources into a higher severity level MS-
DRG, in the absence of an MCC, would conflict with the objective of the 
MS-DRGs, which is to maintain homogeneous subgroups that are different 
from one another in terms of utilization of resources, that have enough 
volume to be meaningful, and that improve our ability to explain 
variance in resource use (72 FR 47169). Therefore, we did not propose 
to reassign all cases reporting procedure code 39.78 from MS-DRG 238 to 
MS-DRG 237, as the commenter requested.
    However, we recognized that the results of the data analysis also 
demonstrated that the average costs for cases reporting ICD-9-CM 
procedure code 39.78 are higher in both MS-DRG 237 and MS-DRG 238 in 
comparison to all cases in each respective MS-DRG. As these higher 
average costs could be attributable to the cost of the device, we noted 
the commenter's concern that the end of the new technology add-on 
payment for Zenith[supreg] F. Graft, effective September 30, 2015, may 
result in reduced payment to hospitals and potentially lead to issues 
involving access to care for the subset of beneficiaries who would 
benefit from treatment with the Zenith[supreg] F. Graft. We continued 
to review the data to explore other alternatives as we analyzed 
additional claims data in response to the second part of the request 
from the commenter; that is, to create a new MS-DRG that would contain 
all endovascular aneurysm repair procedures.
    In our evaluation of the claims data in response to the request to 
create a new MS-DRG, we again reviewed claims data from the December 
2014 update of the FY 2014 MedPAR file. We began our analysis by 
examining claims data for cases reporting ICD-9-CM procedure codes 
39.71 and 39.78 assigned to MS-DRGs 237 and 238. Our findings are shown 
in the table below.

                                     Endovascular Abdominal Aorta Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 237--All cases...........................................          18,340            9.46         $36,355
MS-DRG 237--Cases with procedure codes 39.71 and 39.78..........           2,425            8.34          47,363
MS-DRG 238--All cases...........................................          32,227            3.72          25,087
MS-DRG 238--Cases with procedure codes 39.71 and 39.78..........          16,502            2.27          28,998
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, the average costs for cases involving 
endovascular abdominal aorta aneurysm repair procedures assigned to MS-
DRG 237 were higher than the average costs of all cases assigned to MS-
DRGs 237. The average costs for cases reporting ICD-9-CM procedure 
codes 39.71 and 39.78 assigned to MS-DRG 237 were $47,363 compared to 
the average costs of $36,355 for all cases assigned to MS-DRG 237 and 
$25,087 for all cases assigned to MS-DRG 238. Similarly, the average 
costs for cases reporting ICD-9-CM procedure codes 39.71 and 39.78 
assigned to MS-DRG 238 were higher than the average costs of all cases 
assigned to MS-DRG 238 ($28,998 compared to $25,087). The average 
length of stay for cases reporting ICD-9-CM procedure codes 39.71 and 
39.78 in MS-DRGs 237 and 238 were also shorter than the average length 
of stay for all cases in the respective MS-DRG.
    Our clinical advisors did not support creating a new MS-DRG 
specifically for endovascular abdominal aortic aneurysm repair 
procedures only. Therefore, we reviewed other procedure codes currently 
assigned to MS-DRGs 237 and 238 and found that there were a number of 
procedures with varying resource requirements and clinical indications 
that could be analyzed further. We agreed with our clinical advisors 
that further analysis was warranted to determine how we could better 
recognize resource utilization, clinical complexity, and average costs 
by separating the more complex, more invasive, and more expensive 
procedures used to treat more severely ill individuals from the less 
complex, less invasive, and less expensive procedures currently grouped 
to these MS-DRGs.
    Therefore, we evaluated all of the procedures currently assigned to 
MS-DRGs 237 and 238. In our evaluation, we found that MS-DRGs 237 and 
238 contained two distinct groups of procedures. We found a high volume 
of less invasive procedures, such as pericardiotomies and pulsation 
balloon implants, that had substantially lower costs than the more 
invasive procedures, such as open and endovascular repairs of the aorta 
with replacement grafts. We found that the more invasive procedures 
were primarily associated with procedures on the aorta and heart assist 
procedures.
    For this next phase of our analysis, the following procedure codes 
were designated as the more complex, more invasive procedures:
     37.41 (Implantation of prosthetic cardiac support device 
around the heart);
     37.49 (Other repair of heart and pericardium);
     37.55 (Removal of internal biventricular heart replacement 
system);
     37.64 (Removal of external heart assist system(s) or 
device(s));
     38.04 (Incision of vessel, aorta);
     38.14 (Endarterectomy, aorta);
     38.34 (Resection of vessel with anastomosis, aorta);
     38.44 (Resection of vessel with replacement, aorta, 
abdominal);
     38.64 (Other excision of vessels, aorta, abdominal);
     38.84 (Other surgical occlusion of vessels, aorta, 
abdominal);
     39.24 (Aorta-renal bypass);
     39.71 (Endovascular implantation of other graft in 
abdominal aorta); and
     39.78 (Endovascular implantation of branching or 
fenestrated graft(s) in aorta).
    There are a number of ICD-10-PCS code translations that provide 
more detailed and specific information for each of the ICD-9-CM codes 
listed above that also currently group to MS-DRGs 237 and 238 in the 
ICD-10 MS-DRGs Version 32. The comparable ICD-10-PCS code translations 
for these ICD-

[[Page 49373]]

9-CM procedure codes are shown in the following table:

     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.41
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02UA0JZ..................  Supplement heart with synthetic substitute,
                            open approach.
02UA3JZ..................  Supplement heart with synthetic substitute,
                            percutaneous approach.
02UA4JZ..................  Supplement heart with synthetic substitute,
                            percutaneous endoscopic approach.
------------------------------------------------------------------------

    For the ICD-9-CM codes that result in greater than 50 ICD-10-PCS 
comparable code translations, we refer readers to Table 6P (ICD-10-PCS 
Code Translations for MS-DRG Changes) for this FY 2016 final rule 
(which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html). The table includes the MDC topic, the 
ICD-9-CM code, and the ICD-10-PCS code translations.

     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.49
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code
 37.49 are shown in Table 6P.1a for this final rule that is available
 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.55
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02PA0QZ..................  Removal of implantable heart assist system
                            from heart, open approach.
02PA3QZ..................  Removal of implantable heart assist system
                            from heart, percutaneous approach.
02PA4QZ..................  Removal of implantable heart assist system
                            from heart, percutaneous endoscopic
                            approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.64
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02PA0RZ..................  Removal of external heart assist system from
                            heart, open approach.
02PA3RZ..................  Removal of external heart assist system from
                            heart, percutaneous approach.
02PA4RZ..................  Removal of external heart assist system from
                            heart, percutaneous endoscopic approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.04
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02CW0ZZ..................  Extirpation of matter from thoracic aorta,
                            open approach.
02CW3ZZ..................  Extirpation of matter from thoracic aorta,
                            percutaneous approach.
02CW4ZZ..................  Extirpation of matter from thoracic aorta,
                            percutaneous endoscopic approach.
04C00ZZ..................  Extirpation of matter from abdominal aorta,
                            open approach.
04C03ZZ..................  Extirpation of matter from abdominal aorta,
                            percutaneous approach.
04C04ZZ..................  Extirpation of matter from abdominal aorta,
                            percutaneous endoscopic approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.14
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02CW0ZZ..................  Extirpation of matter from thoracic aorta,
                            open approach.
02CW3ZZ..................  Extirpation of matter from thoracic aorta,
                            percutaneous approach.
02CW4ZZ..................  Extirpation of matter from thoracic aorta,
                            percutaneous endoscopic approach.
04C00ZZ..................  Extirpation of matter from abdominal aorta,
                            open approach.
04C03ZZ..................  Extirpation of matter from abdominal aorta,
                            percutaneous approach.
04C04ZZ..................  Extirpation of matter from abdominal aorta,
                            percutaneous endoscopic approach.
------------------------------------------------------------------------


[[Page 49374]]


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.34
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02BW0ZZ..................  Excision of thoracic aorta, open approach.
02BW4ZZ..................  Excision of thoracic aorta, percutaneous
                            endoscopic approach.
04B00ZZ..................  Excision of abdominal aorta, open approach.
04B04ZZ..................  Excision of abdominal aorta, percutaneous
                            endoscopic approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.44
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
04R007Z..................  Replacement of abdominal aorta with
                            autologous tissue substitute, open approach.
04R00JZ..................  Replacement of abdominal aorta with synthetic
                            substitute, open approach.
04R00KZ..................  Replacement of abdominal aorta with
                            nonautologous tissue substitute, open
                            approach.
04R047Z..................  Replacement of abdominal aorta with
                            autologous tissue substitute, percutaneous
                            endoscopic approach.
04R04JZ..................  Replacement of abdominal aorta with synthetic
                            substitute, percutaneous endoscopic
                            approach.
04R04KZ..................  Replacement of abdominal aorta with
                            nonautologous tissue substitute,
                            percutaneous endoscopic approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.64
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
04500ZZ..................  Destruction of abdominal aorta, open
                            approach.
04503ZZ..................  Destruction of abdominal aorta, percutaneous
                            approach.
04504ZZ..................  Destruction of abdominal aorta, percutaneous
                            endoscopic approach.
04B00ZZ..................  Excision of abdominal aorta, open approach.
04B03ZZ..................  Excision of abdominal aorta, percutaneous
                            approach.
04B04ZZ..................  Excision of abdominal aorta, percutaneous
                            endoscopic approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.84
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
04L00CZ..................  Occlusion of abdominal aorta with
                            extraluminal device, open approach.
04L00DZ..................  Occlusion of abdominal aorta with
                            intraluminal device, open approach.
04L00ZZ..................  Occlusion of abdominal aorta, open approach.
04L03CZ..................  Occlusion of abdominal aorta with
                            extraluminal device, percutaneous approach.
04L03DZ..................  Occlusion of abdominal aorta with
                            intraluminal device, percutaneous approach.
04L03ZZ..................  Occlusion of abdominal aorta, percutaneous
                            approach.
04L04CZ..................  Occlusion of abdominal aorta with
                            extraluminal device, percutaneous endoscopic
                            approach.
04L04DZ..................  Occlusion of abdominal aorta with
                            intraluminal device, percutaneous endoscopic
                            approach.
04L04ZZ..................  Occlusion of abdominal aorta, percutaneous
                            endoscopic approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.24
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
0410093..................  Bypass abdominal aorta to right renal artery
                            with autologous venous tissue, open
                            approach.
0410094..................  Bypass abdominal aorta to left renal artery
                            with autologous venous tissue, open
                            approach.
0410095..................  Bypass abdominal aorta to bilateral renal
                            artery with autologous venous tissue, open
                            approach.
04100A3..................  Bypass abdominal aorta to right renal artery
                            with autologous arterial tissue, open
                            approach.
04100A4..................  Bypass abdominal aorta to left renal artery
                            with autologous arterial tissue, open
                            approach.
04100A5..................  Bypass abdominal aorta to bilateral renal
                            artery with autologous arterial tissue, open
                            approach.
04100J3..................  Bypass abdominal aorta to right renal artery
                            with synthetic substitute, open approach.
04100J4..................  Bypass abdominal aorta to left renal artery
                            with synthetic substitute, open approach.
04100J5..................  Bypass abdominal aorta to bilateral renal
                            artery with synthetic substitute, open
                            approach.
04100K3..................  Bypass abdominal aorta to right renal artery
                            with nonautologous tissue substitute, open
                            approach.
04100K4..................  Bypass abdominal aorta to left renal artery
                            with nonautologous tissue substitute, open
                            approach.
04100K5..................  Bypass abdominal aorta to bilateral renal
                            artery with nonautologous tissue substitute,
                            open approach.
04100Z3..................  Bypass abdominal aorta to right renal artery,
                            open approach.
04100Z4..................  Bypass abdominal aorta to left renal artery,
                            open approach.
04100Z5..................  Bypass abdominal aorta to bilateral renal
                            artery, open approach.
0410493..................  Bypass abdominal aorta to right renal artery
                            with autologous venous tissue, percutaneous
                            endoscopic approach.
0410494..................  Bypass abdominal aorta to left renal artery
                            with autologous venous tissue, percutaneous
                            endoscopic approach.
0410495..................  Bypass abdominal aorta to bilateral renal
                            artery with autologous venous tissue,
                            percutaneous endoscopic approach.
04104A3..................  Bypass abdominal aorta to right renal artery
                            with autologous arterial tissue,
                            percutaneous endoscopic approach.

[[Page 49375]]

 
04104A4..................  Bypass abdominal aorta to left renal artery
                            with autologous arterial tissue,
                            percutaneous endoscopic approach.
04104A5..................  Bypass abdominal aorta to bilateral renal
                            artery with autologous arterial tissue,
                            percutaneous endoscopic approach.
04104J3..................  Bypass abdominal aorta to right renal artery
                            with synthetic substitute, percutaneous
                            endoscopic approach.
04104J4..................  Bypass abdominal aorta to left renal artery
                            with synthetic substitute, percutaneous
                            endoscopic approach.
04104J5..................  Bypass abdominal aorta to bilateral renal
                            artery with synthetic substitute,
                            percutaneous endoscopic approach.
04104K3..................  Bypass abdominal aorta to right renal artery
                            with nonautologous tissue substitute,
                            percutaneous endoscopic approach
04104K4..................  Bypass abdominal aorta to left renal artery
                            with nonautologous tissue substitute,
                            percutaneous endoscopic approach.
04104K5..................  Bypass abdominal aorta to bilateral renal
                            artery with nonautologous tissue substitute,
                            percutaneous endoscopic approach.
04104Z3..................  Bypass abdominal aorta to right renal artery,
                            percutaneous endoscopic approach.
04104Z4..................  Bypass abdominal aorta to left renal artery,
                            percutaneous endoscopic approach.
04104Z5..................  Bypass abdominal aorta to bilateral renal
                            artery, percutaneous endoscopic approach
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.71
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
04U03JZ..................  Supplement abdominal aorta with synthetic
                            substitute, percutaneous approach.
04U04JZ..................  Supplement abdominal aorta with synthetic
                            substitute, percutaneous endoscopic
                            approach.
04V03DZ..................  Restriction of abdominal aorta with
                            intraluminal device, percutaneous approach.
04V04DZ..................  Restriction of abdominal aorta with
                            intraluminal device, percutaneous endoscopic
                            approach
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.78
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
04793DZ..................  Dilation of right renal artery with
                            intraluminal device, percutaneous approach.
04794DZ..................  Dilation of right renal artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
047A3DZ..................  Dilation of left renal artery with
                            intraluminal device, percutaneous approach.
047A4DZ..................  Dilation of left renal artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
04753DZ..................  Dilation of superior mesenteric artery with
                            intraluminal device, percutaneous approach.
04754DZ..................  Dilation of superior mesenteric artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
04U03JZ..................  Supplement abdominal aorta with synthetic
                            substitute, percutaneous approach.
04U04JZ..................  Supplement abdominal aorta with synthetic
                            substitute, percutaneous endoscopic
                            approach.
04V03DZ..................  Restriction of abdominal aorta with
                            intraluminal device, percutaneous approach.
04V04DZ..................  Restriction of abdominal aorta with
                            intraluminal device, percutaneous endoscopic
                            approach.
------------------------------------------------------------------------

    For the next phase of our analysis, the procedure codes shown in 
the following table were designated as the less complex, less invasive 
procedures.

 ICD-9-CM Procedure Codes That Were Designated as the Less Complex, Less
                           Invasive Procedures
------------------------------------------------------------------------
 ICD-9-CM Procedure code                  Code description
------------------------------------------------------------------------
35.00....................  Closed heart valvotomy, unspecified valve.
35.01....................  Closed heart valvotomy, aortic valve.
35.02....................  Closed heart valvotomy, mitral valve.
35.03....................  Closed heart valvotomy, pulmonary valve.
35.04....................  Closed heart valvotomy, tricuspid valve.
37.12....................  Pericardiotomy.
37.24....................  Biopsy of pericardium.
37.31....................  Pericardiectomy.
37.61....................  Implant of pulsation balloon.
37.67....................  Implantation of cardiomyostimulation system.
37.91....................  Open chest cardiac massage.
37.99....................  Other operations on heart and pericardium.
38.05....................  Incision of vessel, other thoracic vessels.
38.06....................  Incision of vessel, abdominal arteries.
38.07....................  Incision of vessel, abdominal veins.
38.15....................  Endarterectomy, other thoracic vessels.
38.16....................  Endarterectomy, abdominal arteries.
38.35....................  Resection of vessel with anastomosis, other
                            thoracic vessels.
38.36....................  Resection of vessel with anastomosis,
                            abdominal arteries.
38.37....................  Resection of vessel with anastomosis,
                            abdominal veins.
38.46....................  Resection of vessel with replacement,
                            abdominal arteries.

[[Page 49376]]

 
38.47....................  Resection of vessel with replacement,
                            abdominal veins.
38.55....................  Ligation and stripping of varicose veins,
                            other thoracic vessels.
38.65....................  Other excision of vessels, thoracic vessels.
38.66....................  Other excision of vessels, abdominal
                            arteries.
38.67....................  Other excision of vessels, abdominal veins.
38.85....................  Other surgical occlusion of vessels, thoracic
                            vessels.
38.86....................  Other surgical occlusion of vessels,
                            abdominal arteries.
38.87....................  Other surgical occlusion of vessels,
                            abdominal veins.
39.0.....................  Systemic to pulmonary artery shunt.
39.1.....................  Intra-abdominal venous shunt.
39.21....................  Caval-pulmonary artery anastomosis.
39.22....................  Aorta-subclavian-carotid bypass.
39.23....................  Other intrathoracic vascular shunt or bypass.
39.25....................  Aorta-iliac-femoral bypass.
39.26....................  Other intra-abdominal vascular shunt or
                            bypass.
39.52....................  Other repair of aneurysm.
39.54....................  Re-entry operation (aorta).
39.72....................  Endovascular (total) embolization or
                            occlusion of head and neck vessels.
39.75....................  Endovascular embolization or occlusion of
                            vessel(s) of head or neck using bare coils.
39.76....................  Endovascular embolization or occlusion of
                            vessel(s) of head or neck using bioactive
                            coils.
39.79....................  Other endovascular procedures on other
                            vessels.
------------------------------------------------------------------------

    There are a number of ICD-10-PCS code translations that provide 
more detailed and specific information for each of the ICD-9-CM codes 
listed in the table immediately above that also currently group to MS-
DRGs 237 and 238 in the ICD-10 MS-DRGs Version 32. The comparable ICD-
10-PCS code translations for these ICD-9-CM procedure codes are shown 
in the following tables:

     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 35.00
------------------------------------------------------------------------
ICD-10-PCS Procedure code                 Code description
------------------------------------------------------------------------
02NF3ZZ..................  Release aortic valve, percutaneous approach.
02NF4ZZ..................  Release aortic valve, percutaneous endoscopic
                            approach.
02NG3ZZ..................  Release mitral valve, percutaneous approach.
02NG4ZZ..................  Release mitral valve, percutaneous endoscopic
                            approach.
02NH3ZZ..................  Release pulmonary valve, percutaneous
                            approach.
02NH4ZZ..................  Release pulmonary valve, percutaneous
                            endoscopic approach.
02NJ3ZZ..................  Release tricuspid valve, percutaneous
                            approach.
02NJ4ZZ..................  Release tricuspid valve, percutaneous
                            endoscopic approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 35.01
------------------------------------------------------------------------
ICD-10-PCS Procedure code                 Code description
------------------------------------------------------------------------
02CF3ZZ..................  Extirpation of matter from aortic valve,
                            percutaneous approach.
02CF4ZZ..................  Extirpation of matter from aortic valve,
                            percutaneous endoscopic approach.
02NF3ZZ..................  Release aortic valve, percutaneous approach.
02NF4ZZ..................  Release aortic valve, percutaneous endoscopic
                            approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 35.02
------------------------------------------------------------------------
ICD-10-PCS Procedure code                 Code description
------------------------------------------------------------------------
02CG3ZZ..................  Extirpation of matter from mitral valve,
                            percutaneous approach.
02CG4ZZ..................  Extirpation of matter from mitral valve,
                            percutaneous endoscopic approach.
02NG3ZZ..................  Release mitral valve, percutaneous approach.
02NG4ZZ..................  Release mitral valve, percutaneous endoscopic
                            approach.
------------------------------------------------------------------------


[[Page 49377]]


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 35.03
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02CH3ZZ..................  Extirpation of matter from pulmonary valve,
                            percutaneous approach.
02CH4ZZ..................  Extirpation of matter from pulmonary valve,
                            percutaneous endoscopic approach.
02NH3ZZ..................  Release Pulmonary Valve, Percutaneous
                            Approach.
02NH4ZZ..................  Release Pulmonary Valve, Percutaneous
                            Endoscopic Approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 35.04
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02CJ3ZZ..................  Extirpation of matter from tricuspid valve,
                            percutaneous approach.
02CJ4ZZ..................  Extirpation of matter from tricuspid valve,
                            percutaneous endoscopic approach.
02NJ3ZZ..................  Release tricuspid valve, percutaneous
                            approach.
02NJ4ZZ..................  Release tricuspid valve, percutaneous
                            endoscopic approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.12
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02CN0ZZ..................  Extirpation of matter from pericardium, open
                            approach.
02CN3ZZ..................  Extirpation of matter from pericardium,
                            percutaneous approach.
02CN4ZZ..................  Extirpation of matter from pericardium,
                            percutaneous endoscopic approach.
02HN00Z..................  Insertion of pressure sensor monitoring
                            device into pericardium, open approach.
02HN02Z..................  Insertion of monitoring device into
                            pericardium, open approach.
02HN30Z..................  Insertion of pressure sensor monitoring
                            device into pericardium, percutaneous
                            approach.
02HN32Z..................  Insertion of monitoring device into
                            pericardium, percutaneous approach.
02HN40Z..................  Insertion of pressure sensor monitoring
                            device into pericardium, percutaneous
                            endoscopic approach.
02HN42Z..................  Insertion of monitoring device into
                            pericardium, percutaneous endoscopic
                            approach.
02NN0ZZ..................  Release pericardium, open approach.
02NN3ZZ..................  Release pericardium, percutaneous approach.
02NN4ZZ..................  Release pericardium, percutaneous endoscopic
                            approach.
0W9D00Z..................  Drainage of pericardial cavity with drainage
                            device, open approach.
0W9D0ZX..................  Drainage of pericardial cavity, open
                            approach, diagnostic.
0W9D0ZZ..................  Drainage of pericardial cavity, open
                            approach.
0WCD0ZZ..................  Extirpation of matter from pericardial
                            cavity, open approach.
0WCD3ZZ..................  Extirpation of matter from pericardial
                            cavity, percutaneous approach.
0WCD4ZZ..................  Extirpation of matter from pericardial
                            cavity, percutaneous endoscopic approach.
0WHD03Z..................  Insertion of infusion device into pericardial
                            cavity, open approach.
0WHD0YZ..................  Insertion of other device into pericardial
                            cavity, open approach.
0WHD33Z..................  Insertion of infusion device into pericardial
                            cavity, percutaneous approach.
0WHD3YZ..................  Insertion of other device into pericardial
                            cavity, percutaneous approach.
0WHD43Z..................  Insertion of infusion device into pericardial
                            cavity, percutaneous endoscopic approach.
0WHD4YZ..................  Insertion of other device into pericardial
                            cavity, percutaneous endoscopic approach.
0WPD00Z..................  Removal of drainage device from pericardial
                            cavity, open approach.
0WPD01Z..................  Removal of radioactive element from
                            pericardial cavity, open approach.
0WPD03Z..................  Removal of infusion device from pericardial
                            cavity, open approach.
0WPD0YZ..................  Removal of other device from pericardial
                            cavity, open approach.
0WPD30Z..................  Removal of drainage device from pericardial
                            cavity, percutaneous approach.
0WPD31Z..................  Removal of radioactive element from
                            pericardial cavity, percutaneous approach.
0WPD33Z..................  Removal of infusion device from pericardial
                            cavity, percutaneous approach.
0WPD3YZ..................  Removal of other device from pericardial
                            cavity, percutaneous approach.
0WPD40Z..................  Removal of drainage device from pericardial
                            cavity, percutaneous endoscopic approach.
0WPD41Z..................  Removal of radioactive element from
                            pericardial cavity, percutaneous endoscopic
                            approach.
0WPD43Z..................  Removal of infusion device from pericardial
                            cavity, percutaneous endoscopic approach.
0WPD4YZ..................  Removal of other device from pericardial
                            cavity, percutaneous endoscopic approach.
0WWD00Z..................  Revision of drainage device in pericardial
                            cavity, open approach.
0WWD01Z..................  Revision of radioactive element in
                            pericardial cavity, open approach.
0WWD03Z..................  Revision of infusion device in pericardial
                            cavity, open approach.
0WWD0YZ..................  Revision of other device in pericardial
                            cavity, open approach.
0WWD30Z..................  Revision of drainage device in pericardial
                            cavity, percutaneous approach.
0WWD31Z..................  Revision of radioactive element in
                            pericardial cavity, percutaneous approach.
0WWD33Z..................  Revision of infusion device in pericardial
                            cavity, percutaneous approach.
0WWD3YZ..................  Revision of other device in pericardial
                            cavity, percutaneous approach.
0WWD40Z..................  Revision of drainage device in pericardial
                            cavity, percutaneous endoscopic approach.
0WWD41Z..................  Revision of radioactive element in
                            pericardial cavity, percutaneous endoscopic
                            approach.
0WWD43Z..................  Revision of infusion device in pericardial
                            cavity, percutaneous endoscopic approach.
0WWD4YZ..................  Revision of other device in pericardial
                            cavity, percutaneous endoscopic approach.
------------------------------------------------------------------------


[[Page 49378]]


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.24
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02BN0ZX..................  Excision of pericardium, open approach,
                            diagnostic.
02BN3ZX..................  Excision of pericardium, percutaneous
                            approach, diagnostic.
02BN4ZX..................  Excision of pericardium, percutaneous
                            endoscopic approach, diagnostic.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.31
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
025N0ZZ..................  Destruction of pericardium, open approach.
025N3ZZ..................  Destruction of pericardium, percutaneous
                            approach.
025N4ZZ..................  Destruction of pericardium, percutaneous
                            endoscopic approach.
02BN0ZZ..................  Excision of pericardium, open approach.
02BN3ZZ..................  Excision of pericardium, percutaneous
                            approach.
02BN4ZZ..................  Excision of pericardium, percutaneous
                            endoscopic approach.
02TN0ZZ..................  Resection of pericardium, open approach.
02TN3ZZ..................  Resection of pericardium, percutaneous
                            approach.
02TN4ZZ..................  Resection of pericardium, percutaneous
                            endoscopic approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.61
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
5A02110..................  Assistance with cardiac output using balloon
                            pump, intermittent.
5A02210..................  Assistance with cardiac output using balloon
                            pump, continuous.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.67
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02QA0ZZ..................  Repair heart, open approach.
02QA3ZZ..................  Repair heart, percutaneous approach.
02QA4ZZ..................  Repair heart, percutaneous endoscopic
                            approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.91
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02QA0ZZ..................  Repair heart, open approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.99
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02880ZZ..................  Division of conduction mechanism, open
                            approach.
02883ZZ..................  Division of conduction mechanism,
                            percutaneous approach.
02884ZZ..................  Division of conduction mechanism,
                            percutaneous endoscopic approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.05
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code
 38.05 are shown in Table 6P.1b for this final rule, which is available
 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.06
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
04C10ZZ..................  Extirpation of matter from celiac artery,
                            open approach.
04C13ZZ..................  Extirpation of matter from celiac artery,
                            percutaneous approach.

[[Page 49379]]

 
04C14ZZ..................  Extirpation of matter from celiac artery,
                            percutaneous endoscopic approach.
04C20ZZ..................  Extirpation of matter from gastric artery,
                            open approach.
04C23ZZ..................  Extirpation of matter from gastric artery,
                            percutaneous approach.
04C24ZZ..................  Extirpation of matter from gastric artery,
                            percutaneous endoscopic approach.
04C30ZZ..................  Extirpation of matter from hepatic artery,
                            open approach.
04C33ZZ..................  Extirpation of matter from hepatic artery,
                            percutaneous approach.
04C34ZZ..................  Extirpation of matter from hepatic artery,
                            percutaneous endoscopic approach.
04C40ZZ..................  Extirpation of matter from splenic artery,
                            open approach.
04C43ZZ..................  Extirpation of matter from splenic artery,
                            percutaneous approach.
04C44ZZ..................  Extirpation of matter from splenic artery,
                            percutaneous endoscopic approach.
04C50ZZ..................  Extirpation of matter from superior
                            mesenteric artery, open approach.
04C53ZZ..................  Extirpation of matter from superior
                            mesenteric artery, percutaneous approach.
04C54ZZ..................  Extirpation of matter from superior
                            mesenteric artery, percutaneous endoscopic
                            approach.
04C60ZZ..................  Extirpation of matter from right colic
                            artery, open approach.
04C63ZZ..................  Extirpation of matter from right colic
                            artery, percutaneous approach.
04C64ZZ..................  Extirpation of matter from right colic
                            artery, percutaneous endoscopic approach.
04C70ZZ..................  Extirpation of matter from left colic artery,
                            open approach.
04C73ZZ..................  Extirpation of matter from left colic artery,
                            percutaneous approach.
04C74ZZ..................  Extirpation of matter from left colic artery,
                            percutaneous endoscopic approach.
04C80ZZ..................  Extirpation of matter from middle colic
                            artery, open approach.
04C83ZZ..................  Extirpation of matter from middle colic
                            artery, percutaneous approach.
04C84ZZ..................  Extirpation of matter from middle colic
                            artery, percutaneous endoscopic approach.
04C90ZZ..................  Extirpation of matter from right renal
                            artery, open approach.
04C93ZZ..................  Extirpation of matter from right renal
                            artery, percutaneous approach.
04C94ZZ..................  Extirpation of matter from right renal
                            artery, percutaneous endoscopic approach.
04CA0ZZ..................  Extirpation of matter from left renal artery,
                            open approach.
04CA3ZZ..................  Extirpation of matter from left renal artery,
                            percutaneous approach.
04CA4ZZ..................  Extirpation of matter from left renal artery,
                            percutaneous endoscopic approach.
04CB0ZZ..................  Extirpation of matter from inferior
                            mesenteric artery, open approach.
04CB3ZZ..................  Extirpation of matter from inferior
                            mesenteric artery, percutaneous approach.
04CB4ZZ..................  Extirpation of matter from inferior
                            mesenteric artery, percutaneous endoscopic
                            approach.
04CC0ZZ..................  Extirpation of matter from right common iliac
                            artery, open approach.
04CC3ZZ..................  Extirpation of matter from right common iliac
                            artery, percutaneous approach.
04CC4ZZ..................  Extirpation of matter from right common iliac
                            artery, percutaneous endoscopic approach.
04CD0ZZ..................  Extirpation of matter from left common iliac
                            artery, open approach.
04CD3ZZ..................  Extirpation of matter from left common iliac
                            artery, percutaneous approach.
04CD4ZZ..................  Extirpation of matter from left common iliac
                            artery, percutaneous endoscopic approach.
04CE0ZZ..................  Extirpation of matter from right internal
                            iliac artery, open approach.
04CE3ZZ..................  Extirpation of matter from right internal
                            iliac artery, percutaneous approach.
04CE4ZZ..................  Extirpation of matter from right internal
                            iliac artery, percutaneous endoscopic
                            approach.
04CF0ZZ..................  Extirpation of matter from left internal
                            iliac artery, open approach.
04CF3ZZ..................  Extirpation of matter from left internal
                            iliac artery, percutaneous approach.
04CF4ZZ..................  Extirpation of matter from left internal
                            iliac artery, percutaneous endoscopic
                            approach.
04CH0ZZ..................  Extirpation of matter from right external
                            iliac artery, open approach.
04CH3ZZ..................  Extirpation of matter from right external
                            iliac artery, percutaneous approach.
04CH4ZZ..................  Extirpation of matter from right external
                            iliac artery, percutaneous endoscopic
                            approach.
04CJ0ZZ..................  Extirpation of matter from left external
                            iliac artery, open approach.
04CJ3ZZ..................  Extirpation of matter from left external
                            iliac artery, percutaneous approach.
04CJ4ZZ..................  Extirpation of matter from left external
                            iliac artery, percutaneous endoscopic
                            approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.07
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
06C00ZZ..................  Extirpation of matter from inferior vena
                            cava, open approach.
06C03ZZ..................  Extirpation of matter from inferior vena
                            cava, percutaneous approach.
06C04ZZ..................  Extirpation of matter from inferior vena
                            cava, percutaneous endoscopic approach.
06C10ZZ..................  Extirpation of matter from splenic vein, open
                            approach.
06C13ZZ..................  Extirpation of matter from splenic vein,
                            percutaneous approach.
06C14ZZ..................  Extirpation of matter from splenic vein,
                            percutaneous endoscopic approach.
06C20ZZ..................  Extirpation of matter from gastric vein, open
                            approach.
06C23ZZ..................  Extirpation of matter from gastric vein,
                            percutaneous approach.
06C24ZZ..................  Extirpation of matter from gastric vein,
                            percutaneous endoscopic approach.
06C40ZZ..................  Extirpation of matter from hepatic vein, open
                            approach.
06C43ZZ..................  Extirpation of matter from hepatic vein,
                            percutaneous approach.
06C44ZZ..................  Extirpation of matter from hepatic vein,
                            percutaneous endoscopic approach.
06C50ZZ..................  Extirpation of matter from superior
                            mesenteric vein, open approach.
06C53ZZ..................  Extirpation of matter from superior
                            mesenteric vein, percutaneous approach.
06C54ZZ..................  Extirpation of matter from superior
                            mesenteric vein, percutaneous endoscopic
                            approach.

[[Page 49380]]

 
06C60ZZ..................  Extirpation of matter from inferior
                            mesenteric vein, open approach.
06C63ZZ..................  Extirpation of matter from inferior
                            mesenteric vein, percutaneous approach.
06C64ZZ..................  Extirpation of matter from inferior
                            mesenteric vein, percutaneous endoscopic
                            approach.
06C70ZZ..................  Extirpation of matter from colic vein, open
                            approach.
06C73ZZ..................  Extirpation of matter from colic vein,
                            percutaneous approach.
06C74ZZ..................  Extirpation of matter from colic vein,
                            percutaneous endoscopic approach.
06C80ZZ..................  Extirpation of matter from portal vein, open
                            approach.
06C83ZZ..................  Extirpation of matter from portal vein,
                            percutaneous approach.
06C84ZZ..................  Extirpation of matter from portal vein,
                            percutaneous endoscopic approach.
06C90ZZ..................  Extirpation of matter from right renal vein,
                            open approach.
06C93ZZ..................  Extirpation of matter from right renal vein,
                            percutaneous approach.
06C94ZZ..................  Extirpation of matter from right renal vein,
                            percutaneous endoscopic approach.
06CB0ZZ..................  Extirpation of matter from left renal vein,
                            open approach.
06CB3ZZ..................  Extirpation of matter from left renal vein,
                            percutaneous approach.
06CB4ZZ..................  Extirpation of matter from left renal vein,
                            percutaneous endoscopic approach.
06CC0ZZ..................  Extirpation of matter from right common iliac
                            vein, open approach.
06CC3ZZ..................  Extirpation of matter from right common iliac
                            vein, percutaneous approach.
06CC4ZZ..................  Extirpation of matter from right common iliac
                            vein, percutaneous endoscopic approach.
06CD0ZZ..................  Extirpation of matter from left common iliac
                            vein, open approach.
06CD3ZZ..................  Extirpation of matter from left common iliac
                            vein, percutaneous approach.
06CD4ZZ..................  Extirpation of matter from left common iliac
                            vein, percutaneous endoscopic approach.
06CF0ZZ..................  Extirpation of matter from right external
                            iliac vein, open approach.
06CF3ZZ..................  Extirpation of matter from right external
                            iliac vein, percutaneous approach.
06CF4ZZ..................  Extirpation of matter from right external
                            iliac vein, percutaneous endoscopic
                            approach.
06CG0ZZ..................  Extirpation of matter from left external
                            iliac vein, open approach.
06CG3ZZ..................  Extirpation of matter from left external
                            iliac vein, percutaneous approach.
06CG4ZZ..................  Extirpation of matter from left external
                            iliac vein, percutaneous endoscopic
                            approach.
06CH0ZZ..................  Extirpation of matter from right hypogastric
                            vein, open approach.
06CH3ZZ..................  Extirpation of matter from right hypogastric
                            vein, percutaneous approach.
06CH4ZZ..................  Extirpation of matter from right hypogastric
                            vein, percutaneous endoscopic approach.
06CJ0ZZ..................  Extirpation of matter from left hypogastric
                            vein, open approach.
06CJ3ZZ..................  Extirpation of matter from left hypogastric
                            vein, percutaneous approach.
06CJ4ZZ..................  Extirpation of matter from left hypogastric
                            vein, percutaneous endoscopic approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.15
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02CP0ZZ..................  Extirpation of matter from pulmonary trunk,
                            open approach.
02CP3ZZ..................  Extirpation of matter from pulmonary trunk,
                            percutaneous approach.
02CP4ZZ..................  Extirpation of matter from pulmonary trunk,
                            percutaneous endoscopic approach.
02CQ0ZZ..................  Extirpation of matter from right pulmonary
                            artery, open approach.
02CQ3ZZ..................  Extirpation of matter from right pulmonary
                            artery, percutaneous approach.
02CQ4ZZ..................  Extirpation of matter from right pulmonary
                            artery, percutaneous endoscopic approach.
02CR0ZZ..................  Extirpation of matter from left pulmonary
                            artery, open approach.
02CR3ZZ..................  Extirpation of matter from left pulmonary
                            artery, percutaneous approach.
02CR4ZZ..................  Extirpation of matter from left pulmonary
                            artery, percutaneous endoscopic approach.
02CS0ZZ..................  Extirpation of matter from right pulmonary
                            vein, open approach.
02CS3ZZ..................  Extirpation of matter from right pulmonary
                            vein, percutaneous approach.
02CS4ZZ..................  Extirpation of matter from right pulmonary
                            vein, percutaneous endoscopic approach.
02CT0ZZ..................  Extirpation of matter from left pulmonary
                            vein, open approach.
02CT3ZZ..................  Extirpation of matter from left pulmonary
                            vein, percutaneous approach.
02CT4ZZ..................  Extirpation of matter from left pulmonary
                            vein, percutaneous endoscopic approach.
02CV0ZZ..................  Extirpation of matter from superior vena
                            cava, open approach.
02CV3ZZ..................  Extirpation of matter from superior vena
                            cava, percutaneous approach.
02CV4ZZ..................  Extirpation of matter from superior vena
                            cava, percutaneous endoscopic approach.
03C00ZZ..................  Extirpation of matter from right internal
                            mammary artery, open approach.
03C03ZZ..................  Extirpation of matter from right internal
                            mammary artery, percutaneous approach.
03C04ZZ..................  Extirpation of matter from right internal
                            mammary artery, percutaneous endoscopic
                            approach.
03C10ZZ..................  Extirpation of matter from left internal
                            mammary artery, open approach.
03C13ZZ..................  Extirpation of matter from left internal
                            mammary artery, percutaneous approach.
03C14ZZ..................  Extirpation of matter from left internal
                            mammary artery, percutaneous endoscopic
                            approach.
03C20ZZ..................  Extirpation of matter from innominate artery,
                            open approach.
03C23ZZ..................  Extirpation of matter from innominate artery,
                            percutaneous approach.
03C24ZZ..................  Extirpation of matter from innominate artery,
                            percutaneous endoscopic approach.
03C30ZZ..................  Extirpation of matter from right subclavian
                            artery, open approach.
03C33ZZ..................  Extirpation of matter from right subclavian
                            artery, percutaneous approach.
03C34ZZ..................  Extirpation of matter from right subclavian
                            artery, percutaneous endoscopic approach.
03C40ZZ..................  Extirpation of matter from left subclavian
                            artery, open approach.

[[Page 49381]]

 
03C43ZZ..................  Extirpation of matter from left subclavian
                            artery, percutaneous approach.
03C44ZZ..................  Extirpation of matter from left subclavian
                            artery, percutaneous endoscopic approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.16
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code
 38.16 are shown in Table 6P.1c for this final rule, which is available
 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.35
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02BP0ZZ..................  Excision of pulmonary trunk, open approach.
02BP4ZZ..................  Excision of pulmonary trunk, percutaneous
                            endoscopic approach.
02BQ0ZZ..................  Excision of right pulmonary artery, open
                            approach.
02BQ4ZZ..................  Excision of right pulmonary artery,
                            percutaneous endoscopic approach.
02BR0ZZ..................  Excision of left pulmonary artery, open
                            approach.
02BR4ZZ..................  Excision of left pulmonary artery,
                            percutaneous endoscopic approach.
02BS0ZZ..................  Excision of right pulmonary vein, open
                            approach.
02BS4ZZ..................  Excision of right pulmonary vein,
                            percutaneous endoscopic approach.
02BT0ZZ..................  Excision of left pulmonary vein, open
                            approach.
02BT4ZZ..................  Excision of left pulmonary vein, percutaneous
                            endoscopic approach.
02BV0ZZ..................  Excision of superior vena cava, open
                            approach.
02BV4ZZ..................  Excision of superior vena cava, percutaneous
                            endoscopic approach.
03B00ZZ..................  Excision of right internal mammary artery,
                            open approach.
03B04ZZ..................  Excision of right internal mammary artery,
                            percutaneous endoscopic approach.
03B10ZZ..................  Excision of left internal mammary artery,
                            open approach.
03B14ZZ..................  Excision of left internal mammary artery,
                            percutaneous endoscopic approach.
03B20ZZ..................  Excision of innominate artery, open approach.
03B24ZZ..................  Excision of innominate artery, percutaneous
                            endoscopic approach.
03B30ZZ..................  Excision of right subclavian artery, open
                            approach.
03B34ZZ..................  Excision of right subclavian artery,
                            percutaneous endoscopic approach.
03B40ZZ..................  Excision of left subclavian artery, open
                            approach.
03B44ZZ..................  Excision of left subclavian artery,
                            percutaneous endoscopic approach.
05B00ZZ..................  Excision of azygos vein, open approach.
05B04ZZ..................  Excision of azygos vein, percutaneous
                            endoscopic approach.
05B10ZZ..................  Excision of hemiazygos vein, open approach.
05B14ZZ..................  Excision of hemiazygos vein, percutaneous
                            endoscopic approach.
05B30ZZ..................  Excision of right innominate vein, open
                            approach.
05B34ZZ..................  Excision of right innominate vein,
                            percutaneous endoscopic approach.
05B40ZZ..................  Excision of left innominate vein, open
                            approach.
05B44ZZ..................  Excision of left innominate vein,
                            percutaneous endoscopic approach.
05B50ZZ..................  Excision of right subclavian vein, open
                            approach.
05B54ZZ..................  Excision of right subclavian vein,
                            percutaneous endoscopic approach.
05B60ZZ..................  Excision of left subclavian vein, open
                            approach.
05B64ZZ..................  Excision of left subclavian vein,
                            percutaneous endoscopic approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.36
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
04B10ZZ..................  Excision of celiac artery, open approach.
04B14ZZ..................  Excision of celiac artery, percutaneous
                            endoscopic approach.
04B20ZZ..................  Excision of gastric artery, open approach.
04B24ZZ..................  Excision of gastric artery, percutaneous
                            endoscopic approach.
04B30ZZ..................  Excision of hepatic artery, open approach.
04B34ZZ..................  Excision of hepatic artery, percutaneous
                            endoscopic approach.
04B40ZZ..................  Excision of splenic artery, open approach.
04B44ZZ..................  Excision of splenic artery, percutaneous
                            endoscopic approach.
04B50ZZ..................  Excision of superior mesenteric artery, open
                            approach.
04B54ZZ..................  Excision of superior mesenteric artery,
                            percutaneous endoscopic approach.
04B60ZZ..................  Excision of right colic artery, open
                            approach.
04B64ZZ..................  Excision of right colic artery, percutaneous
                            endoscopic approach.
04B70ZZ..................  Excision of left colic artery, open approach.
04B74ZZ..................  Excision of left colic artery, percutaneous
                            endoscopic approach.

[[Page 49382]]

 
04B80ZZ..................  Excision of middle colic artery, open
                            approach.
04B84ZZ..................  Excision of middle colic artery, percutaneous
                            endoscopic approach.
04B90ZZ..................  Excision of right renal artery, open
                            approach.
04B94ZZ..................  Excision of right renal artery, percutaneous
                            endoscopic approach.
04BA0ZZ..................  Excision of left renal artery, open approach.
04BA4ZZ..................  Excision of left renal artery, percutaneous
                            endoscopic approach.
04BB0ZZ..................  Excision of inferior mesenteric artery, open
                            approach.
04BB4ZZ..................  Excision of inferior mesenteric artery,
                            percutaneous endoscopic approach.
04BC0ZZ..................  Excision of right common iliac artery, open
                            approach.
04BC4ZZ..................  Excision of right common iliac artery,
                            percutaneous endoscopic approach.
04BD0ZZ..................  Excision of left common iliac artery, open
                            approach.
04BD4ZZ..................  Excision of left common iliac artery,
                            percutaneous endoscopic approach.
04BE0ZZ..................  Excision of right internal iliac artery, open
                            approach.
04BE4ZZ..................  Excision of right internal iliac artery,
                            percutaneous endoscopic approach.
04BF0ZZ..................  Excision of left internal iliac artery, open
                            approach.
04BF4ZZ..................  Excision of left internal iliac artery,
                            percutaneous endoscopic approach.
04BH0ZZ..................  Excision of right external iliac artery, open
                            approach.
04BH4ZZ..................  Excision of right external iliac artery,
                            percutaneous endoscopic approach.
04BJ0ZZ..................  Excision of left external iliac artery, open
                            approach.
04BJ4ZZ..................  Excision of left external iliac artery,
                            percutaneous endoscopic approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.37
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
06B00ZZ..................  Excision of inferior vena cava, open
                            approach.
06B04ZZ..................  Excision of inferior vena cava, percutaneous
                            endoscopic approach.
06B10ZZ..................  Excision of splenic vein, open approach.
06B14ZZ..................  Excision of splenic vein, percutaneous
                            endoscopic approach.
06B20ZZ..................  Excision of gastric vein, open approach.
06B24ZZ..................  Excision of gastric vein, percutaneous
                            endoscopic approach.
06B40ZZ..................  Excision of hepatic vein, open approach.
06B44ZZ..................  Excision of hepatic vein, percutaneous
                            endoscopic approach.
06B50ZZ..................  Excision of superior mesenteric vein, open
                            approach.
06B54ZZ..................  Excision of superior mesenteric vein,
                            percutaneous endoscopic approach.
06B60ZZ..................  Excision of inferior mesenteric vein, open
                            approach.
06B64ZZ..................  Excision of inferior mesenteric vein,
                            percutaneous endoscopic approach.
06B70ZZ..................  Excision of colic vein, open approach.
06B74ZZ..................  Excision of colic vein, percutaneous
                            endoscopic approach.
06B80ZZ..................  Excision of portal vein, open approach.
06B84ZZ..................  Excision of portal vein, percutaneous
                            endoscopic approach.
06B90ZZ..................  Excision of right renal vein, open approach.
06B94ZZ..................  Excision of right renal vein, percutaneous
                            endoscopic approach.
06BB0ZZ..................  Excision of left renal vein, open approach.
06BB4ZZ..................  Excision of left renal vein, percutaneous
                            endoscopic approach.
06BC0ZZ..................  Excision of right common iliac vein, open
                            approach.
06BC4ZZ..................  Excision of right common iliac vein,
                            percutaneous endoscopic approach.
06BD0ZZ..................  Excision of left common iliac vein, open
                            approach.
06BD4ZZ..................  Excision of left common iliac vein,
                            percutaneous endoscopic approach.
06BF0ZZ..................  Excision of right external iliac vein, open
                            approach.
06BF4ZZ..................  Excision of right external iliac vein,
                            percutaneous endoscopic approach.
06BG0ZZ..................  Excision of left external iliac vein, open
                            approach.
06BG4ZZ..................  Excision of left external iliac vein,
                            percutaneous endoscopic approach.
06BH0ZZ..................  Excision of right hypogastric vein, open
                            approach.
06BH4ZZ..................  Excision of right hypogastric vein,
                            percutaneous endoscopic approach.
06BJ0ZZ..................  Excision of left hypogastric vein, open
                            approach.
06BJ4ZZ..................  Excision of left hypogastric vein,
                            percutaneous endoscopic approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.46
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code
 38.46 are shown in Table 6P.1d for this final rule, which is available
 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html..
------------------------------------------------------------------------


[[Page 49383]]


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.47
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code
 38.47 are shown in Table 6P.1e for this final rule, which is available
 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
------------------------------------------------------------------------

    There is not an equivalent ICD-10-PCS code translation for ICD-9-CM 
procedure code 38.55.

     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.65
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code
 38.65 are shown in Table 6P.1f for this final rule, which is available
 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html..
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.66
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code
 38.66 are shown in Table 6P.1g for this final rule, which is available
 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html..
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.67
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code
 38.67 are shown in Table 6P.1h for this final rule, which is available
 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html..
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.85
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code
 38.85 are shown in Table 6P.1i for this final rule, which is available
 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html..
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.86
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code
 38.86 are shown in Table 6P.1j for this final rule, which is available
 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html..
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.87
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code
 38.87 are shown in Table 6P.1k for this final rule, which is available
 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html..
------------------------------------------------------------------------


[[Page 49384]]


      ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.0
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code
 39.0 are shown in Table 6P.1l for this final rule, which is available
 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html..
------------------------------------------------------------------------


      ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.1
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code
 39.1 are shown in Table 6P.1m for this final rule, which is available
 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html..
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.21
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
021V09P..................  Bypass superior vena cava to pulmonary trunk
                            with autologous venous tissue, open
                            approach.
021V09Q..................  Bypass superior vena cava to right pulmonary
                            artery with autologous venous tissue, open
                            approach.
021V09R..................  Bypass superior vena cava to left pulmonary
                            artery with autologous venous tissue, open
                            approach.
021V0AP..................  Bypass superior vena cava to pulmonary trunk
                            with autologous arterial tissue, open
                            approach.
021V0AQ..................  Bypass superior vena cava to right pulmonary
                            artery with autologous arterial tissue, open
                            approach.
021V0AR..................  Bypass superior vena cava to left pulmonary
                            artery with autologous arterial tissue, open
                            approach.
021V0JP..................  Bypass superior vena cava to pulmonary trunk
                            with synthetic substitute, open approach.
021V0JQ..................  Bypass superior vena cava to right pulmonary
                            artery with synthetic substitute, open
                            approach.
021V0JR..................  Bypass superior vena cava to left pulmonary
                            artery with synthetic substitute, open
                            approach.
021V0KP..................  Bypass superior vena cava to pulmonary trunk
                            with nonautologous tissue substitute, open
                            approach.
021V0KQ..................  Bypass superior vena cava to right pulmonary
                            artery with nonautologous tissue substitute,
                            open approach.
021V0KR..................  Bypass superior vena cava to left pulmonary
                            artery with nonautologous tissue substitute,
                            open approach.
021V0ZP..................  Bypass superior vena cava to pulmonary trunk,
                            open approach.
021V0ZQ..................  Bypass superior vena cava to right pulmonary
                            artery, open approach.
021V0ZR..................  Bypass superior vena cava to left pulmonary
                            artery, open approach.
021V49P..................  Bypass superior vena cava to pulmonary trunk
                            with autologous venous tissue, percutaneous
                            endoscopic approach.
021V49Q..................  Bypass superior vena cava to right pulmonary
                            artery with autologous venous tissue,
                            percutaneous endoscopic approach.
021V49R..................  Bypass superior vena cava to left pulmonary
                            artery with autologous venous tissue,
                            percutaneous endoscopic approach.
021V4AP..................  Bypass superior vena cava to pulmonary trunk
                            with autologous arterial tissue,
                            percutaneous endoscopic approach.
021V4AQ..................  Bypass superior vena cava to right pulmonary
                            artery with autologous arterial tissue,
                            percutaneous endoscopic approach.
021V4AR..................  Bypass superior vena cava to left pulmonary
                            artery with autologous arterial tissue,
                            percutaneous endoscopic approach.
021V4JP..................  Bypass superior vena cava to pulmonary trunk
                            with synthetic substitute, percutaneous
                            endoscopic approach.
021V4JQ..................  Bypass superior vena cava to right pulmonary
                            artery with synthetic substitute,
                            percutaneous endoscopic approach.
021V4JR..................  Bypass superior vena cava to left pulmonary
                            artery with synthetic substitute,
                            percutaneous endoscopic approach.
021V4KP..................  Bypass superior vena cava to pulmonary trunk
                            with nonautologous tissue substitute,
                            percutaneous endoscopic approach.
021V4KQ..................  Bypass superior vena cava to right pulmonary
                            artery with nonautologous tissue substitute,
                            percutaneous endoscopic approach.
021V4KR..................  Bypass superior vena cava to left pulmonary
                            artery with nonautologous tissue substitute,
                            percutaneous endoscopic approach.
021V4ZP..................  Bypass superior vena cava to pulmonary trunk,
                            percutaneous endoscopic approach.
021V4ZQ..................  Bypass superior vena cava to right pulmonary
                            artery, percutaneous endoscopic approach.
021V4ZR..................  Bypass superior vena cava to left pulmonary
                            artery, percutaneous endoscopic approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.22
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
021W09B..................  Bypass thoracic aorta to subclavian with
                            autologous venous tissue, open approach).
021W09D..................  Bypass thoracic aorta to carotid with
                            autologous venous tissue, open approach).
021W0AB..................  Bypass thoracic aorta to subclavian with
                            autologous arterial tissue, open approach.
021W0AD..................  Bypass thoracic aorta to carotid with
                            autologous arterial tissue, open approach.
021W0JB..................  Bypass thoracic aorta to subclavian with
                            synthetic substitute, open approach.
021W0JD..................  Bypass thoracic aorta to carotid with
                            synthetic substitute, open approach.
021W0KB..................  Bypass thoracic aorta to subclavian with
                            nonautologous tissue substitute, open
                            approach.
021W0KD..................  Bypass thoracic aorta to carotid with
                            nonautologous tissue substitute, open
                            approach.
021W0ZB..................  Bypass thoracic aorta to subclavian, open
                            approach.
021W0ZD..................  Bypass thoracic aorta to carotid, open
                            approach.
021W49B..................  Bypass thoracic aorta to subclavian with
                            autologous venous tissue, percutaneous
                            endoscopic approach.
021W49D..................  Bypass thoracic aorta to carotid with
                            autologous venous tissue, percutaneous
                            endoscopic approach.
021W4AB..................  Bypass thoracic aorta to subclavian with
                            autologous arterial tissue, percutaneous
                            endoscopic approach.
021W4AD..................  Bypass thoracic aorta to carotid with
                            autologous arterial tissue, percutaneous
                            endoscopic approach.

[[Page 49385]]

 
021W4JB..................  Bypass thoracic aorta to subclavian with
                            synthetic substitute, percutaneous
                            endoscopic approach.
021W4JD..................  Bypass thoracic aorta to carotid with
                            synthetic substitute, percutaneous
                            endoscopic approach.
021W4KB..................  Bypass thoracic aorta to subclavian with
                            nonautologous tissue substitute,
                            percutaneous endoscopic approach.
021W4KD..................  Bypass thoracic aorta to carotid with
                            nonautologous tissue substitute,
                            percutaneous endoscopic approach.
021W4ZB..................  Bypass thoracic aorta to subclavian,
                            percutaneous endoscopic approach.
021W4ZD..................  Bypass thoracic aorta to carotid,
                            percutaneous endoscopic approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.23
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code
 39.23 are shown in Table 6P.1n for this final rule, which is available
 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html..
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.25
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code
 39.25 are shown in Table 6P.1o for this final rule, which is available
 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html..
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.26
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code
 39.26 are shown in Table 6P.1p for this final rule, which is available
 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html..
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.52
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code
 39.52 are shown in Table 6P.1q for this final rule, which is available
 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html..
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.54
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
02QW0ZZ..................  Repair thoracic aorta, open approach.
02QW3ZZ..................  Repair thoracic aorta, percutaneous approach.
02QW4ZZ..................  Repair thoracic aorta, percutaneous
                            endoscopic approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.72
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
03LR0DZ..................  Occlusion of face artery with intraluminal
                            device, open approach.
03LR3DZ..................  Occlusion of face artery with intraluminal
                            device, percutaneous approach.
03LR4DZ..................  Occlusion of face artery with intraluminal
                            device, percutaneous endoscopic approach.
03LS0DZ..................  Occlusion of right temporal artery with
                            intraluminal device, open approach.
03LS3DZ..................  Occlusion of right temporal artery with
                            intraluminal device, percutaneous approach.
03LS4DZ..................  Occlusion of right temporal artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03LT0DZ..................  Occlusion of left temporal artery with
                            intraluminal device, open approach.
03LT3DZ..................  Occlusion of left temporal artery with
                            intraluminal device, percutaneous approach.

[[Page 49386]]

 
03LT4DZ..................  Occlusion of left temporal artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.75
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code
 39.75 are shown in Table 6P.1r for this final rule, which is available
 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html..
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.76
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code
 39.76 are shown in Table 6P.1s for this final rule, which is available
 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html..
------------------------------------------------------------------------


     ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.79
------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code
 39.79 are shown in Table 6P.1t for this final rule, which is available
 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html..
------------------------------------------------------------------------

    As previously stated, we separated the more complex, more invasive 
procedures from the less complex, less invasive procedures to continue 
our evaluation of the procedures assigned to MS-DRGs 237 and 238. Our 
data analysis showed that the distribution of cases, the average length 
of stay, and average costs of the more complex, more invasive aortic 
and heart assist procedures and the less complex, less invasive other 
cardiovascular procedures would be more appropriately reflected if we 
classified these distinguishing types of procedures under newly created 
MS-DRGs, as reflected in the table below.

                              Major Cardiovascular Procedures with and without MCC
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRGs 237 and 238--Combined...................................          50,567             5.8         $29,174
MS-DRGs 237 and 238--Cases with more complex, more invasive               22,278             4.0          31,729
 procedure codes (37.41; 37.49; 37.55; 37.64; 38.04; 38.14;
 38.34; 38.44; 38.64; 38.84; 39.24; 39.71, and 39.78)...........
MS-DRGs 237 and 238--Cases with less complex, less invasive               28,289             7.1          27,162
 procedure codes (35.00; 35.01; 35.02; 35.03; 35.04; 37.12;
 37.24; 37.31; 37.61; 37.67; 37.91; 37.99; 38.05; 38.06; 38.07;
 38.15; 38.16; 38.35; 38.36; 38.37; 38.46; 38.47; 38.55; 38.65;
 38.66; 38.67; 38.85; 38.86; 38.87; 39.0; 39.1; 39.21; 39.22;
 39.23; 39.25; 39.26; 39.52; 39.54; 39.72; 39.75; 39.76; and
 39.79).........................................................
----------------------------------------------------------------------------------------------------------------

    Our clinical advisors reviewed the results of the analysis and 
agreed that distinguishing the more complex, more invasive procedures 
from the less complex, less invasive procedures would result in 
improved clinical coherence for the various cardiovascular procedures 
currently assigned to MS-DRGs 237 and 238, as listed previously. 
Therefore, for FY 2016, we proposed to delete MS-DRGs 237 and 238. When 
we applied our established criteria to determine if the creation of a 
new CC or MCC subgroup within a base MS-DRG is warranted, we determined 
that a 2-way severity level split (with MCC and without MCC) was 
justified. Therefore, we proposed to create two new MS-DRGs that would 
contain the more complex, more invasive aortic and heart assist 
procedures currently assigned to MS-DRGs 237 and 238, as listed 
previously. We proposed to create MS-DRG 268, entitled ``Aortic and 
Heart Assist Procedures Except Pulsation Balloon with MCC,'' and MS-DRG 
269, entitled ``Aortic and Heart Assist Procedures Except Pulsation 
Balloon without MCC.'' The table below shows the distribution of cases 
and the average length of stay and average costs of the more complex, 
more invasive procedures for aortic and heart assistance for the 
proposed new MS-DRGs 268 and 269.

[[Page 49387]]



                           Proposed New MS-DRGs for Aortic and Heart Assist Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
Proposed New MS-DRG 268 with MCC................................           4,182           10.03         $45,996
Proposed New MS-DRG 269 without MCC.............................          18,096            2.68          28,431
----------------------------------------------------------------------------------------------------------------

    We invited public comments on this proposal and the ICD-10-PCS code 
translations for these procedures shown earlier in this section, which 
we also proposed to assign to proposed new MS-DRGs 268 and 269.
    In addition, when we further applied our established criteria to 
determine if the creation of a new CC or MCC subgroup for the remaining 
procedures was warranted, we determined that a 3-way severity level 
split (with MCC, with CC, and without CC/MCC) was justified. Therefore, 
we proposed to create three new MS-DRGs that would contain the 
remaining cardiovascular procedures that were designated as the less 
complex, less invasive procedures, as listed previously. For FY 2016, 
we proposed to create MS-DRG 270, entitled ``Other Major Cardiovascular 
Procedures with MCC''; MS-DRG 271, entitled ``Other Major 
Cardiovascular Procedures with CC''; and MS-DRG 272, entitled ``Other 
Major Cardiovascular Procedures without CC/MCC,'' and to assign the 
less complex, less invasive cardiovascular procedures shown earlier in 
this section to these proposed new MS-DRGs. We believed that, as shown 
in the table below, the distribution of cases and average length of 
stay and average costs of these procedures would be more appropriately 
reflected when these types of procedures are classified under these 
proposed new MS-DRGs.

                         Proposed New MS-DRGs for Other Major Cardiovascular Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
Proposed New MS-DRG 270 with MCC................................          14,158             9.3         $33,507
Proposed New MS-DRG 271 with CC.................................           9,648            5.99          22,800
Proposed New MS-DRG 272 without CC/MCC..........................           4,483            3.08          16,438
----------------------------------------------------------------------------------------------------------------

    We invited public comments on this proposal and the ICD-10-PCS code 
translations for the less complex, less invasive cardiovascular 
procedures shown earlier in this section, which we also proposed to 
assign to proposed new MS-DRGs 270, 271, and 272.
    In summary, for FY 2016, we proposed to delete MS-DRGs 237 and 238, 
and to create the following five new MS-DRGs:
     Proposed new MS-DRG 268 (Aortic and Heart Assist 
Procedures Except Pulsation Balloon with MCC);
     Proposed new MS-DRG 269 (Aortic and Heart Assist 
Procedures Except Pulsation Balloon without MCC);
     Proposed new MS-DRG 270 (Other Major Cardiovascular 
Procedures with MCC);
     Proposed new MS-DRG 271 (Other Major Cardiovascular 
Procedures with CC); and
     Proposed new MS-DRG 272 (Other Major Cardiovascular 
Procedures without CC/MCC).
    We also proposed to assign the more complex, more invasive 
cardiovascular procedures identified in our analysis and the ICD-10-PCS 
code translations to proposed new MS-DRGs 268 and 269. In addition, we 
proposed to assign the less complex, less invasive cardiovascular 
procedures identified in our analysis and the ICD-10-PCS code 
translations to proposed new MS-DRGs 270, 271, and 272. We encouraged 
public comments on our proposal to create these proposed new MS-DRGs, 
as well as the ICD-10-PCS code translations that we proposed to assign 
to the corresponding proposed new MS-DRGs.
    Comment: Several commenters supported the proposal to delete MS-
DRGs 237 and 238 and to create five new proposed MS-DRGs 268, 269, 270, 
271, and 272 to distinguish the more complex, more invasive procedures 
from the less complex, less invasive procedures resulting in improved 
clinical coherence for the various cardiovascular procedures currently 
assigned to MS-DRGs 237 and 238. Commenters stated that the proposal 
was reasonable, given the data and information provided.
    One commenter who supported the creation of proposed new MS-DRGs 
268 and 269 expressed additional support with regard to how these 
proposed new MS-DRGs would incorporate selected high resource surgical 
aortic and visceral vessel procedures, as well as selected high 
resource extra-cardiac procedures. The commenter agreed that, in terms 
of resource utilization and clinical coherency, the procedures included 
would be classified appropriately to the proposed new MS-DRGs. However, 
this commenter requested clarification on some of the ICD-10-PCS code 
translations that were listed for ICD-9-CM procedure code 39.78 
(Endovascular implantation of branching or fenestrated graft(s) in 
aorta). The commenter stated that, as displayed in the FY 2016 IPPS/
LTCH PPS proposed rule (80 FR 24363), the dilation of right and left 
renal arteries and the superior mesenteric artery (procedures described 
by ICD-10-PCS codes 04793DZ through 04754DZ) also appear to be proposed 
for grouping to proposed MS-DRGs 268 and 269. The commenter believed 
that CMS did not intend to classify those dilation codes as ``stand 
alone'' procedures that would be assigned to proposed new MS-DRGs 268 
and 269. The commenter stated that the ICD-10-PCS dilation codes should 
not be necessary as translations for ICD-9-CM procedure code 39.78.
    Another commenter commended CMS on the timing of the proposal to 
establish proposed new MS-DRGs 268 and 269. The commenter stated that 
this proposal will allow patients requiring fenestrated grafts 
continued access to care in FY 2016, as the new-technology add-on 
payment for the Zenith Fenestrated Graft device is expiring September 
30, 2015. The commenter also stated that, currently, there is not an 
appropriate mechanism to ensure access to these procedures, especially 
in rural hospitals, and that this proposal would change that.
    Other commenters stated that the proposed new MS-DRGs would better 
recognize clinical homogeneity and

[[Page 49388]]

resource requirements for the range of major cardiovascular procedures.
    Response: We appreciate the commenters' support of our proposal to 
delete MS-DRGs 237 and 238 and to create proposed new MS-DRGs 268 
through 272.
    In response to the comment requesting clarification on some of the 
ICD-10-PCS code translations that were listed for ICD-9-CM procedure 
code 39.78, the commenter is correct. It was not our intent to classify 
those dilation codes (ICD-10-PCS codes 04793DZ through 04754DZ) as 
``stand alone'' procedures that would be assigned to proposed new MS-
DRGs 268 and 269. Rather, we proposed those codes for consideration as 
supplemental codes to more fully describe the procedure performed. We 
agree with the commenter that these dilation codes are not necessary 
translations for ICD-9-CM procedure code 39.78 and as ``stand alone'' 
procedures they would be assigned to their own separate and clinically 
appropriate ICD-10 MS-DRG.
    As we reviewed the translations for ICD-9-CM procedure code 39.78 
in response to the commenter's request, we reviewed all the comparable 
ICD-10-PCS code translations that we proposed to assign to proposed new 
MS-DRGs 268 through 272. Specifically, we reviewed the list of the more 
complex, more invasive procedures that we proposed to assign to 
proposed MS-DRGs 268 and 269 and the list of the less complex, less 
invasive procedures that we proposed to assign to proposed MS-DRGs 270 
through 272. We determined that the ICD-10-PCS translations for ICD-9-
CM procedure code 37.49 (Other repair of heart and pericardium) as 
displayed in Table 6P.1a of the proposed rule were not complete. There 
was an inadvertent omission of an additional 78 ICD-10-PCS comparable 
code translations. Therefore, we are providing an updated Table 6P for 
this final rule, which is available via the Internet on the CMS Web 
site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. We note that this list of ICD-10-PCS code 
translations for ICD-9-CM procedure code 37.49 is consistent with the 
list of possible code translations found in the General Equivalency 
Maps (GEMs) files provided for public use available via the Internet on 
the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/index.html.
    In conducting this review, our clinical advisors also determined 
that ICD-9-CM procedure code 37.49 and the corresponding ICD-10-PCS 
comparable code translations would be more appropriately classified 
under proposed new MS-DRGs 270 through 272 versus proposed new MS-DRGs 
268 and 269. This decision is consistent with our proposal to assign 
less invasive procedures, such as pericardiotomies and pulsation 
balloon implants, to proposed new MS-DRGs 270 through 272. This 
procedure code captures procedures that are similar to the other 
procedures included in the proposal for MS-DRGs 270 through 272 
involving the pericardium such as ICD-9-CM procedure codes 37.12 
(Pericardiotomy), 37.24 (Biopsy of pericardium) and 37.61 
(Pericardiectomy) and does not relate to the more complex, more 
invasive aortic and heart assist procedures that we proposed to assign 
to proposed MS-DRGs 268 and 269. According to our clinical advisors, 
the ICD-10-PCS code translations for ICD-9-CM procedure code 37.49 also 
do not constitute the level of complexity or resources similar to the 
other procedures that we proposed to assign to proposed new MS-DRGs 268 
and 269. In addition, our clinical advisors determined that ICD-9-CM 
procedure code 39.54 (Re-entry operation (aorta)) and the corresponding 
ICD-10-PCS comparable code translations would be more appropriately 
classified under proposed new MS-DRGs 268 through 269 versus proposed 
new MS-DRGs 270 through 272. This decision is consistent with our 
proposal to assign more invasive procedures, such as open and 
endovascular repairs of the aorta with replacement grafts, to proposed 
new MS-DRGs 268 and 269. According to our clinical advisors, the 
procedure described by ICD-9-CM procedure code 39.54 and the comparable 
ICD-10-PCS code translations are precisely indicated for the aorta, 
and, as such, the procedure code belongs under proposed new MS-DRGs 268 
and 269 along with the other aorta and heart assist procedures.
    Comment: One commenter requested clarification on certain ICD-10-
PCS code translations for proposed new MS-DRGs 268 through 272 and how 
they relate to the General Equivalency Maps (GEMs) and ICD-10-PCS to 
ICD-9-CM Reimbursement Mappings files. The commenter noted that there 
were instances where more than one ICD-9-CM procedure code could be 
translated to an ICD-10-PCS code that was included in the proposed new 
MS-DRGs, as well as listed in the Reimbursement Mappings file. The 
commenter submitted an example where ICD-10-PCS code 04V00DZ 
(Restriction of abdominal aorta with intraluminal device, open 
approach) was listed as a comparable ICD-10-PCS translation for ICD-9-
CM procedure code 39.52 (Other repair of aneurysm) in the proposal for 
proposed new MS-DRGs 270 through 272. However, the commenter stated 
that, in the FY 2015 Reimbursement Mappings file, this same ICD-10-PCS 
code (04V00DZ) was shown to map to ICD-9-CM procedure code 39.71 
(Endovascular implantation of other graft in abdominal aorta), which 
was included in the proposal for proposed new MS-DRGs 268 and 269. The 
commenter asked if the FY 2016 Reimbursement Mappings file would be 
updated to reflect that ICD-10-PCS code 04V00DZ maps back to ICD-9-CM 
procedure code 39.52.
    Response: We acknowledge and appreciate the commenter's request for 
clarification. We point out that the General Equivalence Mappings 
(GEMs) and Reimbursement Mappings files were developed as resources for 
the public and are updated separate from the IPPS rulemaking. The GEMs 
were developed to provide users with a code to code translation 
reference tool for both ICD-9-CM and ICD-10 codes sets and to offer 
acceptable translation alternatives where possible. The Reimbursement 
Mappings were created to provide a temporary mechanism for mapping 
records containing ICD-10 codes to ``MS-DRG reimbursement minimum 
impact'' ICD-9-CM codes and allow claims processing by legacy systems 
while systems were being converted to process ICD-10 claims directly. 
The GEMs have been updated on an annual basis as part of the ICD-10 
Coordination and Maintenance Committee meetings process and will 
continue to be updated for approximately 3 years after ICD-10 is 
implemented. We refer readers to the ICD-10 Coordination and 
Maintenance Committee Meeting Materials for further information related 
to discussion of GEMs updates, which can be found on the CMS Web site 
at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html. The Reimbursement Mappings have 
been updated on an annual basis in preparation for the transition to 
ICD-10 implementation. As stated on the CMS ICD-10 Coordination and 
Maintenance Committee Meeting Web page available on the CMS Web site 
at: http://www.cms.gov/Medicare/Coding/ICD10/2016-ICD-10-PCS-and-GEMs.html, the FY 2016 Reimbursement Mappings files will be posted in 
August 2015.
    Comment: One commenter who supported proposed new MS-DRGs 268 and 
269 requested that CMS revise the

[[Page 49389]]

titles to address concerns expressed by stakeholders. According to the 
commenter, the proposed titles have caused confusion among providers 
and consultants. The commenter suggested that CMS consider the 
following three modifications:
     Indicate that MS-DRGs 268 and 269 are aortic procedures, 
not aortic heart assist devices;
     Indicate that MS-DRGs 268 and 269 are assigned to heart 
assist removal or repair, and not the multitude of other heart assist 
insertion procedures not addressed in the proposed rule; and
     Remove the reference to pulsation balloon insertion, or 
add the reference to proposed new MS-DRGs 270 through 272 (Other Major 
Cardiovascular Procedures with MCC, with CC and without CC/MCC, 
respectively).
    The commenter noted that the titles for proposed new MS-DRGs 268 
and 269 contain the phrase ``Heart Assist Procedures''. However, the 
commenter stated that not all heart assist procedures are proposed to 
be assigned to these MS-DRGs; essentially, it is only the removal of 
heart assist procedures codes that are included. The commenter further 
noted that other heart assist procedures such as insertion of heart 
assist devices are identified in several other MS-DRGs, such as MS-DRGs 
001 and 002 (Heart Transplant or Implant of Heart Assist System w MCC 
and without MCC, respectively) and that external heart assist devices 
are identified in MS-DRG 215 (Other Heart Assist System Implant), while 
heart assist devices inserted percutaneously with cardiac 
catheterization are identified in MS-DRGs 216 through 218 (Cardiac 
Valve & Other Major Cardiothoracic Procedures with Cardiac 
Catheterization with MCC, with CC and without CC/MCC, respectively).
    The commenter also stated that the reference to ``Except Pulsation 
Balloon'' in the titles for proposed new MS-DRGs 268 and 269 indicates 
that all aortic and heart assist procedures would be included except 
pulsation balloon. The commenter asserted that the titles could cause 
confusion for stakeholders because there are other procedures that are 
nonpulsation balloon, heart assist procedures that correspond to the 
titles for proposed new MS-DRGs 268 and 269 and are assigned to other 
MS-DRGs. The commenter requested that CMS delete the terminology of 
pulsation balloon completely or remove it from proposed new MS-DRGs 268 
and 269 and add it to proposed new MS-DRGs 270 through 272. The 
commenter maintained that incorporating the reference to pulsation 
balloon into proposed new MS-DRGs 270 through 272 would afford a 
clearer understanding of the procedures that are assigned for 
providers.
    The commenter provided suggestions for the revision to the titles 
that CMS should take into consideration for proposed new MS-DRGs 268 
through 272 as follows:
     Suggested retitle of proposed new MS-DRG 268: ``Aortic 
Procedures and Heart Assist Removal or Repair with MCC'';
     Suggested retitle of proposed new MS-DRG 269: ``Aortic 
Procedures and Heart Assist Removal or Repair without MCC'';
     Suggested retitle of proposed new MS-DRG 270: ``Pulsation 
Balloon and Other Major Cardiovascular Procedures with MCC'';
     Suggested retitle of proposed new MS-DRG 271: ``Pulsation 
Balloon and Other Major Cardiovascular Procedures with CC''; and
     Suggested retitle of proposed new MS-DRG 272: ``Pulsation 
Balloon and Other Major Cardiovascular Procedures without CC/MCC''.
    Response: We acknowledge the commenter's request to consider 
revisions to the titles for proposed new MS-DRGs 268 through 272. 
However, we note that we did not receive any other comments from 
stakeholders expressing confusion with regard to the titles for these 
proposed new MS-DRGs or the assignment of heart assist procedures.
    The commenter is correct that not all heart assist procedures are 
being proposed for assignment to proposed new MS-DRGs 268 and 269. As 
the commenter pointed out, there are other heart assist procedures that 
group to various MS-DRGs. The proposal was based on ICD-9-CM procedure 
codes that are currently assigned to MS-DRGs 237 and 238 and the 
corresponding ICD-10-PCS code translations for proposed new MS-DRGs 268 
through 272. We believe that stakeholders understand that the MS-DRG 
system is a classification scheme consisting of clinically similar 
groups of patients with similar resource intensity, and that while the 
titles of the MS-DRGs reflect the category of procedures which may or 
may not be assigned to a particular MS-DRG, they do not specifically 
identify the details of each applicable procedure code. We also believe 
that stakeholders do not rely solely on the MS-DRG titles to determine 
what procedures are assigned to a particular MS-DRG. Rather, they would 
consult the MS-DRG Definitions Manual. The MS-DRG Definitions Manual 
contains the complete documentation of the MS-DRG GROUPER logic and is 
available from 3M/HIS, which, under contract with CMS, is responsible 
for updating and maintaining the GROUPER program. As discussed in the 
FY 2015 IPPS/LTCH PPS final rule (79 FR 49905 through 49906), the MS-
DRG Definitions Manual, Version 32, which includes the FY 2015 MS-DRG 
changes is available on a CD for $225. This manual may be obtained by 
writing 3M/HIS at the following address: 100 Barnes Road, Wallingford, 
CT 06492; or by calling (203) 949-0303; or by obtaining an order form 
at the Web site at: http://www/3MHIS.com. In addition, as discussed in 
section II.G.1.a. of this final rule, in November 2014, CMS made 
available a Definitions Manual of the ICD-10 MS-DRGs Version 32 on the 
ICD-10 MS-DRG Conversion Project Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. 
Accordingly, we do not believe that the reference to ``Heart Assist 
Procedures'' in the title for proposed new MS-DRGs 268 and 269 would 
create confusion.
    For this same reason, we also do not believe that including the 
reference to ``except pulsation balloon'' in the titles for proposed 
new MS-DRGs 268 and 269, to accurately reflect that the pulsation 
balloon procedure is not assigned to those MS-DRGs, necessarily 
indicates that all other aortic and heart assist procedures are 
included. We would expect stakeholders to consult the MS-DRG 
Definitions Manual as described above to identify and determine whether 
a particular procedure is assigned to MS-DRG 268 or 269 or to another 
MS-DRG, rather than relying on the MS-DRGs title alone.
    After consideration of the public comments received, we are 
adopting as final our proposal to delete ICD-9-CM MS-DRGs 237 and 238 
and add the following five new MS-DRGs to ICD-10 MS-DRGs Version 33:
     MS-DRG 268 (Aortic and Heart Assist Procedures Except 
Pulsation Balloon with MCC);
     MS-DRG 269 (Aortic and Heart Assist Procedures Except 
Pulsation Balloon without MCC);
     MS-DRG 270 (Other Major Cardiovascular Procedures with 
MCC);
     MS-DRG 271 (Other Major Cardiovascular Procedures with 
CC); and
     MS-DRG 272 (Other Major Cardiovascular Procedures without 
CC/MCC)
    We agree that these modifications will more appropriately reflect 
payment while recognizing differences in complexity, resources and 
severity of illness for the various cardiovascular

[[Page 49390]]

procedures. These finalized ICD-10 MS-DRGs will include the updated 
assignments discussed above related to the ICD-10-PCS code translations 
for ICD-9-CM codes 37.49 (Other repair of heart and pericardium) and 
39.54 (Re-entry operation (aorta)). We also refer readers to the 
updated Table 6P for this final rule which is available via the 
Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Lastly, we will 
consider if further modifications to the titles of these MS-DRGs are 
warranted in future rulemaking.
4. MDC 8 (Diseases and Disorders of the Musculoskeletal System and 
Connective Tissue)
a. Revision of Hip or Knee Replacements: Proposed Revision of ICD-10-
PCS Version 32 Logic
    We received two comments that the logic for ICD-10 MS-DRGs Version 
32 does not work the same as it does for the ICD-9-CM based MS-DRGs 
Version 32 for procedures involving joint revisions. One of the 
commenters requested that CMS change the MS-DRG structure for 
procedures involving joint revisions within the ICD-10 MS-DRGs 466, 
467, and 468 (Revision of Hip or Knee Replacement with MCC, with CC, 
and without CC/MCC, respectively) so that cases that have a spacer 
removed prior to the insertion of a new joint prosthesis are assigned 
to MS-DRG 466, 467, and 468, as is the case with the ICD-9-CM MS-DRGs. 
The other commenter asked that joint revision cases that involve knee 
revisions with cemented and uncemented qualifiers be assigned to these 
MS-DRGs. This commenter provided an example of a patient admitted for a 
knee revision and reported under ICD-10-PCS codes 0SPD0JZ (Removal of 
synthetic substitute from left knee joint, open approach) and 0SRU0JA 
(Replacement of left knee joint, femoral surface with synthetic 
substitute, uncemented, open approach), which should be assigned to MS-
DRGs 466, 467, and 468. The requestor stated that joint revision cases 
reported with ICD-9-CM codes are assigned to MS-DRGs 466, 467, and 468, 
but similar cases reported with the corresponding ICD-10-PCS codes are 
not assigned to MS-DRGs 466, 467, and 468 in ICD-10-PCS MS-DRGs Version 
32.
    We agree that joint revision cases involving the removal of a 
spacer and subsequent insertion of a new joint prosthesis should be 
assigned to ICD-10 MS-DRGs 466, 467, and 468 as is the case currently 
with the ICD-9-CM based MS-DRGs Version 32. We also agree that knee 
revision cases that involve cemented and uncemented qualifiers should 
be assigned to ICD-10 MS-DRGs 466, 467, and 468. Knee revision cases 
currently reported with ICD-9-CM codes are assigned to MS-DRGs 466, 
467, and 468 in the ICD-9-CM based MS-DRGs. We examined joint revision 
combination codes that are not currently assigned to MS-DRGs 466, 467, 
and 468 in ICD-10 MS-DRGs Version 32 and identified additional 
combinations that also should be included so that the joint revision 
ICD-10 MS-DRGs would have the same logic as the ICD-9-CM MS-DRGs. In 
the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24379 through 24395), we 
proposed to add code combinations listed in a table in the proposed 
rule that would capture the joint revisions to the Version 33 MS-DRG 
structure for ICD-10 MS-DRGs 466, 467, and 468 that we proposed to 
implement effective October 1, 2015. We invited public comments on our 
proposal to add the joint revision code combinations to MS-DRGs 466, 
467, and 468 that were listed in the table in the proposed rule (80 FR 
24379 through 24395).
    Comment: A number of commenters supported the proposal to add the 
joint revision code combinations to MS-DRGs 466, 467, and 468. The 
commenters stated that the proposal was reasonable, given the data and 
information provided. One commenter commended CMS for its careful 
review of these code pairs for hip and knee revision cases and 
supported the proposed updates. Another commenter supported the 
proposed MS-DRG assignment changes which the commenter believed would 
help to ensure that the ICD-10 MS-DRGs capture the appropriate ICD-10 
procedure codes. One commenter stated that the proposed MS-DRG 
assignment changes improve alignment of these cases under the ICD-10 
framework.
    Response: We appreciate the commenters' support for our proposal.
    After consideration of the public comments we received, we are 
finalizing our proposal to add code combinations which capture the 
joint revision procedures set forth in the table below to the Version 
33 MS-DRG structure for ICD-10 MS-DRGs 466, 467, and 468 that will be 
implemented effective October 1, 2015. We note that joint revision 
procedures are also included in the ICD-9-CM version of MS-DRGs 628, 
629, and 630 (Other Endocrine, Nutritional, and Metabolic Operating 
Room Procedures with MCC, with CC, and without CC/MCC, respectively). 
Therefore, to ensure that the joint revision ICD-10 MS-DRGs would have 
the same logic as the ICD-9-CM MS-DRGs, any updates to the joint 
revision combinations would apply to MS-DRGs 466, 467, and 468 as well 
as MS-DRGs 628, 629, and 630 because both sets of MS-DRGs contain the 
same joint revision codes. These comparable joint revisions 
combinations updates also will be made to MS-DRGs 628, 629, and 630 in 
the Version 33 MS-DRG structure for ICD-10 to maintain consistency with 
the logic for the ICD-9-CM MS-DRGs, effective October 1, 2015. 
Therefore, the joint revision combination codes that we are finalizing 
in this final rule are the same for MS-DRGs 466, 467, 468, 628, 629, 
and 630 and are reflected in the updated table below.

  MS-DRGs 466-468 and 628-630 ICD-10-PCS Code Pairs Added to the Version 33 ICD-10 MS-DRGs 466, 467, 468, 628,
                             629, and 630: New Hip Revision ICD-10-PCS Combinations
----------------------------------------------------------------------------------------------------------------
     ICD-10-PCS code           Code description                   ICD-10-PCS code           Code description
----------------------------------------------------------------------------------------------------------------
0SP908Z..................  Removal of spacer from      and   0SR9019..................  Replacement of right hip
                            right hip joint, open                                        joint with metal
                            approach.                                                    synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SP908Z..................  Removal of spacer from      and   0SR901A..................  Replacement of right hip
                            right hip joint, open                                        joint with metal
                            approach.                                                    synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SP908Z..................  Removal of spacer from      and   0SR901Z..................  Replacement of right hip
                            right hip joint, open                                        joint with metal
                            approach.                                                    synthetic substitute,
                                                                                         open approach.
0SP908Z..................  Removal of spacer from      and   0SR9029..................  Replacement of right hip
                            right hip joint, open                                        joint with metal on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.

[[Page 49391]]

 
0SP908Z..................  Removal of spacer from      and   0SR902A..................  Replacement of right hip
                            right hip joint, open                                        joint with metal on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP908Z..................  Removal of spacer from      and   0SR902Z..................  Replacement of right hip
                            right hip joint, open                                        joint with metal on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP908Z..................  Removal of spacer from      and   0SR9039..................  Replacement of right hip
                            right hip joint, open                                        joint with ceramic
                            approach.                                                    synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SP908Z..................  Removal of spacer from      and   0SR903A..................  Replacement of right hip
                            right hip joint, open                                        joint with ceramic
                            approach.                                                    synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SP908Z..................  Removal of spacer from      and   0SR903Z..................  Replacement of right hip
                            right hip joint, open                                        joint with ceramic
                            approach.                                                    synthetic substitute,
                                                                                         open approach.
0SP908Z..................  Removal of spacer from      and   0SR9049..................  Replacement of right hip
                            right hip joint, open                                        joint with ceramic on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP908Z..................  Removal of spacer from      and   0SR904A..................  Replacement of right hip
                            right hip joint, open                                        joint with ceramic on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP908Z..................  Removal of spacer from      and   0SR904Z..................  Replacement of right hip
                            right hip joint, open                                        joint with ceramic on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP908Z..................  Removal of spacer from      and   0SR90J9..................  Replacement of right hip
                            right hip joint, open                                        joint with synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SP908Z..................  Removal of spacer from      and   0SR90JA..................  Replacement of right hip
                            right hip joint, open                                        joint with synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SP908Z..................  Removal of spacer from      and   0SR90JZ..................  Replacement of right hip
                            right hip joint, open                                        joint with synthetic
                            approach.                                                    substitute, open
                                                                                         approach.
0SP908Z..................  Removal of spacer from      and   0SRA009..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with
                                                                                         polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP908Z..................  Removal of spacer from      and   0SRA00A..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with
                                                                                         polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP908Z..................  Removal of spacer from      and   0SRA00Z..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with
                                                                                         polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP908Z..................  Removal of spacer from      and   0SRA019..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with metal
                                                                                         synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SP908Z..................  Removal of spacer from      and   0SRA01A..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with metal
                                                                                         synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SP908Z..................  Removal of spacer from      and   0SRA01Z..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with metal
                                                                                         synthetic substitute,
                                                                                         open approach.
0SP908Z..................  Removal of spacer from      and   0SRA039..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with ceramic
                                                                                         synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SP908Z..................  Removal of spacer from      and   0SRA03A..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with ceramic
                                                                                         synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SP908Z..................  Removal of spacer from      and   0SRA03Z..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with ceramic
                                                                                         synthetic substitute,
                                                                                         open approach.
0SP908Z..................  Removal of spacer from      and   0SRA0J9..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with synthetic
                                                                                         substitute, cemented,
                                                                                         pen approach.
0SP908Z..................  Removal of spacer from      and   0SRA0JA..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP908Z..................  Removal of spacer from      and   0SRA0JZ..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP908Z..................  Removal of spacer from      and   0SRR019..................  Replacement of right hip
                            right hip joint, open                                        joint, femoral surface
                            approach.                                                    with metal synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP908Z..................  Removal of spacer from      and   0SRR01A..................  Replacement of right hip
                            right hip joint, open                                        joint, femoral surface
                            approach.                                                    with metal synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP908Z..................  Removal of spacer from      and   0SRR01Z..................  Replacement of right hip
                            right hip joint, open                                        joint, femoral surface
                            approach.                                                    with metal synthetic
                                                                                         substitute, open
                                                                                         approach.

[[Page 49392]]

 
0SP908Z..................  Removal of spacer from      and   0SRR039..................  Replacement of right hip
                            right hip joint, open                                        joint, femoral surface
                            approach.                                                    with ceramic synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP908Z..................  Removal of spacer from      and   0SRR03A..................  Replacement of right hip
                            right hip joint, open                                        joint, femoral surface
                            approach.                                                    with ceramic synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP908Z..................  Removal of spacer from      and   0SRR03Z..................  Replacement of right hip
                            right hip joint, open                                        joint, femoral surface
                            approach.                                                    with ceramic synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP908Z..................  Removal of spacer from      and   0SRR0J9..................  Replacement of right hip
                            right hip joint, open                                        joint, femoral surface
                            approach.                                                    with synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP908Z..................  Removal of spacer from      and   0SRR0JA..................  Replacement of right hip
                            right hip joint, open                                        joint, femoral surface
                            approach.                                                    with synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP908Z..................  Removal of spacer from      and   0SRR0JZ..................  Replacement of right hip
                            right hip joint, open                                        joint, femoral surface
                            approach.                                                    with synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP908Z..................  Removal of spacer from      and   0SU909Z..................  Supplement right hip
                            right hip joint, open                                        joint with liner, open
                            approach.                                                    approach.
0SP908Z..................  Removal of spacer from      and   0SUA09Z..................  Supplement right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with liner,
                                                                                         open approach.
0SP908Z..................  Removal of spacer from      and   0SUR09Z..................  Supplement right hip
                            right hip joint, open                                        joint, femoral surface
                            approach.                                                    with liner, open
                                                                                         approach.
0SP909Z..................  Removal of liner from       and   0SR9019..................  Replacement of right hip
                            right hip joint, open                                        joint with metal
                            approach.                                                    synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SP909Z..................  Removal of liner from       and   0SR901A..................  Replacement of right hip
                            right hip joint, open                                        joint with metal
                            approach.                                                    synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SP909Z..................  Removal of liner from       and   0SR901Z..................  Replacement of right hip
                            right hip joint, open                                        joint with metal
                            approach.                                                    synthetic substitute,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SR9029..................  Replacement of right hip
                            right hip joint, open                                        joint with metal on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SR902A..................  Replacement of right hip
                            right hip joint, open                                        joint with metal on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SR902Z..................  Replacement of right hip
                            right hip joint, open                                        joint with metal on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP909Z..................  Removal of liner from       and   0SR9039..................  Replacement of right hip
                            right hip joint, open                                        joint with ceramic
                            approach.                                                    synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SP909Z..................  Removal of liner from       and   0SR903A..................  Replacement of right hip
                            right hip joint, open                                        joint with ceramic
                            approach.                                                    synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SP909Z..................  Removal of liner from       and   0SR903Z..................  Replacement of right hip
                            right hip joint, open                                        joint with ceramic
                            approach.                                                    synthetic substitute,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SR9049..................  Replacement of right hip
                            right hip joint, open                                        joint with ceramic on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SR904A..................  Replacement of right hip
                            right hip joint, open                                        joint with ceramic on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SR904Z..................  Replacement of right hip
                            right hip joint, open                                        joint with ceramic on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP909Z..................  Removal of liner from       and   0SR90J9..................  Replacement of right hip
                            right hip joint, open                                        joint with synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SR90JA..................  Replacement of right hip
                            right hip joint, open                                        joint with synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SR90JZ..................  Replacement of right hip
                            right hip joint, open                                        joint with synthetic
                            approach.                                                    substitute, open
                                                                                         approach.
0SP909Z..................  Removal of liner from       and   0SRA009..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with
                                                                                         polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SRA00A..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with
                                                                                         polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SRA00Z..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with
                                                                                         polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP909Z..................  Removal of liner from       and   0SRA019..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with metal
                                                                                         synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SP909Z..................  Removal of liner from       and   0SRA01A..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with metal
                                                                                         synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.

[[Page 49393]]

 
0SP909Z..................  Removal of liner from       and   0SRA01Z..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with metal
                                                                                         synthetic substitute,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SRA039..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with ceramic
                                                                                         synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SP909Z..................  Removal of liner from       and   0SRA03A..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with ceramic
                                                                                         synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SP909Z..................  Removal of liner from       and   0SRA03Z..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with ceramic
                                                                                         synthetic substitute,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SRA0J9..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SRA0JA..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SRA0JZ..................  Replacement of right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP909Z..................  Removal of liner from       and   0SRR019..................  Replacement of right hip
                            right hip joint, open                                        joint, femoral surface
                            approach.                                                    with metal synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SRR01A..................  Replacement of right hip
                            right hip joint, open                                        joint, femoral surface
                            approach.                                                    with metal synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SRR01Z..................  Replacement of right hip
                            right hip joint, open                                        joint, femoral surface
                            approach.                                                    with metal synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP909Z..................  Removal of liner from       and   0SRR039..................  Replacement of right hip
                            right hip joint, open                                        joint, femoral surface
                            approach.                                                    with ceramic synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SRR03A..................  Replacement of right hip
                            right hip joint, open                                        joint, femoral surface
                            approach.                                                    with ceramic synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SRR03Z..................  Replacement of right hip
                            right hip joint, open                                        joint, femoral surface
                            approach.                                                    with ceramic synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP909Z..................  Removal of liner from       and   0SRR0J9..................  Replacement of right hip
                            right hip joint, open                                        joint, femoral surface
                            approach.                                                    with synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SRR0JA..................  Replacement of right hip
                            right hip joint, open                                        joint, femoral surface
                            approach.                                                    with synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SRR0JZ..................  Replacement of right hip
                            right hip joint, open                                        joint, femoral surface
                            approach.                                                    with synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP909Z..................  Removal of liner from       and   0SU909Z..................  Supplement right hip
                            right hip joint, open                                        joint with liner, open
                            approach.                                                    approach.
0SP909Z..................  Removal of liner from       and   0SUA09Z..................  Supplement right hip
                            right hip joint, open                                        joint, acetabular
                            approach.                                                    surface with liner,
                                                                                         open approach.
0SP909Z..................  Removal of liner from       and   0SUR09Z..................  Supplement right hip
                            right hip joint, open                                        joint, femoral surface
                            approach.                                                    with liner, open
                                                                                         approach.
0SP90BZ..................  Removal of resurfacing      and   0SR9019..................  Replacement of right hip
                            device from right hip                                        joint with metal
                            joint, open approach.                                        synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SP90BZ..................  Removal of resurfacing      and   0SR901A..................  Replacement of right hip
                            device from right hip                                        joint with metal
                            joint, open approach.                                        synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SP90BZ..................  Removal of resurfacing      and   0SR901Z..................  Replacement of right hip
                            device from right hip                                        joint with metal
                            joint, open approach.                                        synthetic substitute,
                                                                                         open approach.
0SP90BZ..................  Removal of resurfacing      and   0SR9029..................  Replacement of right hip
                            device from right hip                                        joint with metal on
                            joint, open approach.                                        polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP90BZ..................  Removal of resurfacing      and   0SR902A..................  Replacement of right hip
                            device from right hip                                        joint with metal on
                            joint, open approach.                                        polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP90BZ..................  Removal of resurfacing      and   0SR902Z..................  Replacement of right hip
                            device from right hip                                        joint with metal on
                            joint, open approach.                                        polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP90BZ..................  Removal of resurfacing      and   0SR9039..................  Replacement of right hip
                            device from right hip                                        joint with ceramic
                            joint, open approach.                                        synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SP90BZ..................  Removal of resurfacing      and   0SR903A..................  Replacement of right hip
                            device from right hip                                        joint with ceramic
                            joint, open approach.                                        synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SP90BZ..................  Removal of resurfacing      and   0SR903Z..................  Replacement of right hip
                            device from right hip                                        joint with ceramic
                            joint, open approach.                                        synthetic substitute,
                                                                                         open approach.

[[Page 49394]]

 
0SP90BZ..................  Removal of resurfacing      and   0SR9049..................  Replacement of right hip
                            device from right hip                                        joint with ceramic on
                            joint, open approach.                                        polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP90BZ..................  Removal of resurfacing      and   0SR904A..................  Replacement of right hip
                            device from right hip                                        joint with ceramic on
                            joint, open approach.                                        polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP90BZ..................  Removal of resurfacing      and   0SR904Z..................  Replacement of right hip
                            device from right hip                                        joint with ceramic on
                            joint, open approach.                                        polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP90BZ..................  Removal of resurfacing      and   0SR90J9..................  Replacement of right hip
                            device from right hip                                        joint with synthetic
                            joint, open approach.                                        substitute, cemented,
                                                                                         open approach.
0SP90BZ..................  Removal of resurfacing      and   0SR90JA..................  Replacement of right hip
                            device from right hip                                        joint with synthetic
                            joint, open approach.                                        substitute, uncemented,
                                                                                         open approach.
0SP90BZ..................  Removal of resurfacing      and   0SR90JZ..................  Replacement of right hip
                            device from right hip                                        joint with synthetic
                            joint, open approach.                                        substitute, open
                                                                                         approach.
0SP90BZ..................  Removal of resurfacing      and   0SRA009..................  Replacement of right hip
                            device from right hip                                        joint, acetabular
                            joint, open approach.                                        surface with
                                                                                         polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP90BZ..................  Removal of resurfacing      and   0SRA00A..................  Replacement of right hip
                            device from right hip                                        joint, acetabular
                            joint, open approach.                                        surface with
                                                                                         polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP90BZ..................  Removal of resurfacing      and   0SRA00Z..................  Replacement of right hip
                            device from right hip                                        joint, acetabular
                            joint, open approach.                                        surface with
                                                                                         polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP90BZ..................  Removal of resurfacing      and   0SRA019..................  Replacement of right hip
                            device from right hip                                        joint, acetabular
                            joint, open approach.                                        surface with metal
                                                                                         synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SP90BZ..................  Removal of resurfacing      and   0SRA01A..................  Replacement of right hip
                            device from right hip                                        joint, acetabular
                            joint, open approach.                                        surface with metal
                                                                                         synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SP90BZ..................  Removal of resurfacing      and   0SRA01Z..................  Replacement of right hip
                            device from right hip                                        joint, acetabular
                            joint, open approach.                                        surface with metal
                                                                                         synthetic substitute,
                                                                                         open approach.
0SP90BZ..................  Removal of resurfacing      and   0SRA039..................  Replacement of right hip
                            device from right hip                                        joint, acetabular
                            joint, open approach.                                        surface with ceramic
                                                                                         synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SP90BZ..................  Removal of resurfacing      and   0SRA03A..................  Replacement of right hip
                            device from right hip                                        joint, acetabular
                            joint, open approach.                                        surface with ceramic
                                                                                         synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SP90BZ..................  Removal of resurfacing      and   0SRA03Z..................  Replacement of right hip
                            device from right hip                                        joint, acetabular
                            joint, open approach.                                        surface with ceramic
                                                                                         synthetic substitute,
                                                                                         open approach.
0SP90BZ..................  Removal of resurfacing      and   0SRA0J9..................  Replacement of right hip
                            device from right hip                                        joint, acetabular
                            joint, open approach.                                        surface with synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP90BZ..................  Removal of resurfacing      and   0SRA0JA..................  Replacement of right hip
                            device from right hip                                        joint, acetabular
                            joint, open approach.                                        surface with synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP90BZ..................  Removal of resurfacing      and   0SRA0JZ..................  Replacement of right hip
                            device from right hip                                        joint, acetabular
                            joint, open approach.                                        surface with synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP90BZ..................  Removal of resurfacing      and   0SRR019..................  Replacement of right hip
                            device from right hip                                        joint, femoral surface
                            joint, open approach.                                        with metal synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP90BZ..................  Removal of resurfacing      and   0SRR01A..................  Replacement of right hip
                            device from right hip                                        joint, femoral surface
                            joint, open approach.                                        with metal synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP90BZ..................  Removal of resurfacing      and   0SRR01Z..................  Replacement of right hip
                            device from right hip                                        joint, femoral surface
                            joint, open approach.                                        with metal synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP90BZ..................  Removal of resurfacing      and   0SRR039..................  Replacement of right hip
                            device from right hip                                        joint, femoral surface
                            joint, open approach.                                        with ceramic synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP90BZ..................  Removal of resurfacing      and   0SRR03A..................  Replacement of right hip
                            device from right hip                                        joint, femoral surface
                            joint, open approach.                                        with ceramic synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP90BZ..................  Removal of resurfacing      and   0SRR03Z..................  Replacement of right hip
                            device from right hip                                        joint, femoral surface
                            joint, open approach.                                        with ceramic synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP90BZ..................  Removal of resurfacing      and   0SRR0J9..................  Replacement of right hip
                            device from right hip                                        joint, femoral surface
                            joint, open approach.                                        with synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP90BZ..................  Removal of resurfacing      and   0SRR0JA..................  Replacement of right hip
                            device from right hip                                        joint, femoral surface
                            joint, open approach.                                        with synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.

[[Page 49395]]

 
0SP90BZ..................  Removal of resurfacing      and   0SRR0JZ..................  Replacement of right hip
                            device from right hip                                        joint, femoral surface
                            joint, open approach.                                        with synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP90BZ..................  Removal of resurfacing      and   0SU909Z..................  Supplement right hip
                            device from right hip                                        joint with liner, open
                            joint, open approach.                                        approach.
0SP90BZ..................  Removal of resurfacing      and   0SUA09Z..................  Supplement right hip
                            device from right hip                                        joint, acetabular
                            joint, open approach.                                        surface with liner,
                                                                                         open approach.
0SP90BZ..................  Removal of resurfacing      and   0SUR09Z..................  Supplement right hip
                            device from right hip                                        joint, femoral surface
                            joint, open approach.                                        with liner, open
                                                                                         approach.
0SP90JZ..................  Removal of synthetic        and   0SR9049..................  Replacement of right hip
                            substitute from right                                        joint with ceramic on
                            hip joint, open                                              polyethylene synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SP90JZ..................  Removal of synthetic        and   0SR904A..................  Replacement of right hip
                            substitute from right                                        joint with ceramic on
                            hip joint, open                                              polyethylene synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SP90JZ..................  Removal of synthetic        and   0SR904Z..................  Replacement of right hip
                            substitute from right                                        joint with ceramic on
                            hip joint, open                                              polyethylene synthetic
                            approach.                                                    substitute, open
                                                                                         approach.
0SP948Z..................  Removal of spacer from      and   0SR9019..................  Replacement of right hip
                            right hip joint,                                             joint with metal
                            percutaneous endoscopic                                      synthetic substitute,
                            approach.                                                    cemented, open
                                                                                         approach.
0SP948Z..................  Removal of spacer from      and   0SR901A..................  Replacement of right hip
                            right hip joint,                                             joint with metal
                            percutaneous endoscopic                                      synthetic substitute,
                            approach.                                                    uncemented, open
                                                                                         approach.
0SP948Z..................  Removal of spacer from      and   0SR901Z..................  Replacement of right hip
                            right hip joint,                                             joint with metal
                            percutaneous endoscopic                                      synthetic substitute,
                            approach.                                                    open approach.
0SP948Z..................  Removal of spacer from      and   0SR9029..................  Replacement of right hip
                            right hip joint,                                             joint with metal on
                            percutaneous endoscopic                                      polyethylene synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SP948Z..................  Removal of spacer from      and   0SR902A..................  Replacement of right hip
                            right hip joint,                                             joint with metal on
                            percutaneous endoscopic                                      polyethylene synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SP948Z..................  Removal of spacer from      and   0SR902Z..................  Replacement of right hip
                            right hip joint,                                             joint with metal on
                            percutaneous endoscopic                                      polyethylene synthetic
                            approach.                                                    substitute, open
                                                                                         approach.
0SP948Z..................  Removal of spacer from      and   0SR9039..................  Replacement of right hip
                            right hip joint,                                             joint with ceramic
                            percutaneous endoscopic                                      synthetic substitute,
                            approach.                                                    cemented, open
                                                                                         approach.
0SP948Z..................  Removal of spacer from      and   0SR903A..................  Replacement of right hip
                            right hip joint,                                             joint with ceramic
                            percutaneous endoscopic                                      synthetic substitute,
                            approach.                                                    uncemented, open
                                                                                         approach.
0SP948Z..................  Removal of spacer from      and   0SR903Z..................  Replacement of right hip
                            right hip joint,                                             joint with ceramic
                            percutaneous endoscopic                                      synthetic substitute,
                            approach.                                                    open approach.
0SP948Z..................  Removal of spacer from      and   0SR9049..................  Replacement of right hip
                            right hip joint,                                             joint with ceramic on
                            percutaneous endoscopic                                      polyethylene synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SP948Z..................  Removal of spacer from      and   0SR904A..................  Replacement of right hip
                            right hip joint,                                             joint with ceramic on
                            percutaneous endoscopic                                      polyethylene synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SP948Z..................  Removal of spacer from      and   0SR904Z..................  Replacement of right hip
                            right hip joint,                                             joint with ceramic on
                            percutaneous endoscopic                                      polyethylene synthetic
                            approach.                                                    substitute, open
                                                                                         approach.
0SP948Z..................  Removal of spacer from      and   0SR90J9..................  Replacement of right hip
                            right hip joint,                                             joint with synthetic
                            percutaneous endoscopic                                      substitute, cemented,
                            approach.                                                    open approach.
0SP948Z..................  Removal of spacer from      and   0SR90JA..................  Replacement of right hip
                            right hip joint,                                             joint with synthetic
                            percutaneous endoscopic                                      substitute, uncemented,
                            approach.                                                    open approach.
0SP948Z..................  Removal of spacer from      and   0SR90JZ..................  Replacement of right hip
                            right hip joint,                                             joint with synthetic
                            percutaneous endoscopic                                      substitute, open
                            approach.                                                    approach.
0SP948Z..................  Removal of spacer from      and   0SRA009..................  Replacement of right hip
                            right hip joint,                                             joint, acetabular
                            percutaneous endoscopic                                      surface with
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP948Z..................  Removal of spacer from      and   0SRA00A..................  Replacement of right hip
                            right hip joint,                                             joint, acetabular
                            percutaneous endoscopic                                      surface with
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP948Z..................  Removal of spacer from      and   0SRA00Z..................  Replacement of right hip
                            right hip joint,                                             joint, acetabular
                            percutaneous endoscopic                                      surface with
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP948Z..................  Removal of spacer from      and   0SRA019..................  Replacement of right hip
                            right hip joint,                                             joint, acetabular
                            percutaneous endoscopic                                      surface with metal
                            approach.                                                    synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SP948Z..................  Removal of spacer from      and   0SRA01A..................  Replacement of right hip
                            right hip joint,                                             joint, acetabular
                            percutaneous endoscopic                                      surface with metal
                            approach.                                                    synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SP948Z..................  Removal of spacer from      and   0SRA01Z..................  Replacement of right hip
                            right hip joint,                                             joint, acetabular
                            percutaneous endoscopic                                      surface with metal
                            approach.                                                    synthetic substitute,
                                                                                         open approach.
0SP948Z..................  Removal of spacer from      and   0SRA039..................  Replacement of right hip
                            right hip joint,                                             joint, acetabular
                            percutaneous endoscopic                                      surface with ceramic
                            approach.                                                    synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.

[[Page 49396]]

 
0SP948Z..................  Removal of spacer from      and   0SRA03A..................  Replacement of right hip
                            right hip joint,                                             joint, acetabular
                            percutaneous endoscopic                                      surface with ceramic
                            approach.                                                    synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SP948Z..................  Removal of spacer from      and   0SRA03Z..................  Replacement of right hip
                            right hip joint,                                             joint, acetabular
                            percutaneous endoscopic                                      surface with ceramic
                            approach.                                                    synthetic substitute,
                                                                                         open approach.
0SP948Z..................  Removal of spacer from      and   0SRA0J9..................  Replacement of right hip
                            right hip joint,                                             joint, acetabular
                            percutaneous endoscopic                                      surface with synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SP948Z..................  Removal of spacer from      and   0SRA0JA..................  Replacement of right hip
                            right hip joint,                                             joint, acetabular
                            percutaneous endoscopic                                      surface with synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SP948Z..................  Removal of spacer from      and   0SRA0JZ..................  Replacement of right hip
                            right hip joint,                                             joint, acetabular
                            percutaneous endoscopic                                      surface with synthetic
                            approach.                                                    substitute, open
                                                                                         approach.
0SP948Z..................  Removal of spacer from      and   0SRR019..................  Replacement of right hip
                            right hip joint,                                             joint, femoral surface
                            percutaneous endoscopic                                      with metal synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SP948Z..................  Removal of spacer from      and   0SRR01A..................  Replacement of right hip
                            right hip joint,                                             joint, femoral surface
                            percutaneous endoscopic                                      with metal synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SP948Z..................  Removal of spacer from      and   0SRR01Z..................  Replacement of right hip
                            right hip joint,                                             joint, femoral surface
                            percutaneous endoscopic                                      with metal synthetic
                            approach.                                                    substitute, open
                                                                                         approach.
0SP948Z..................  Removal of spacer from      and   0SRR039..................  Replacement of right hip
                            right hip joint,                                             joint, femoral surface
                            percutaneous endoscopic                                      with ceramic synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SP948Z..................  Removal of spacer from      and   0SRR03A..................  Replacement of right hip
                            right hip joint,                                             joint, femoral surface
                            percutaneous endoscopic                                      with ceramic synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SP948Z..................  Removal of spacer from      and   0SRR03Z..................  Replacement of right hip
                            right hip joint,                                             joint, femoral surface
                            percutaneous endoscopic                                      with ceramic synthetic
                            approach.                                                    substitute, open
                                                                                         approach.
0SP948Z..................  Removal of spacer from      and   0SRR0J9..................  Replacement of right hip
                            right hip joint,                                             joint, femoral surface
                            percutaneous endoscopic                                      with synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SP948Z..................  Removal of spacer from      and   0SRR0JA..................  Replacement of right hip
                            right hip joint,                                             joint, femoral surface
                            percutaneous endoscopic                                      with synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SP948Z..................  Removal of spacer from      and   0SRR0JZ..................  Replacement of right hip
                            right hip joint,                                             joint, femoral surface
                            percutaneous endoscopic                                      with synthetic
                            approach.                                                    substitute, open
                                                                                         approach.
0SP948Z..................  Removal of spacer from      and   0SU909Z..................  Supplement right hip
                            right hip joint,                                             joint with liner, open
                            percutaneous endoscopic                                      approach.
                            approach.
0SP948Z..................  Removal of spacer from      and   0SUA09Z..................  Supplement right hip
                            right hip joint,                                             joint, acetabular
                            percutaneous endoscopic                                      surface with liner,
                            approach.                                                    open approach.
0SP948Z..................  Removal of spacer from      and   0SUR09Z..................  Supplement right hip
                            right hip joint,                                             joint, femoral surface
                            percutaneous endoscopic                                      with liner, open
                            approach.                                                    approach.
0SP94JZ..................  Removal of synthetic        and   0SR9019..................  Replacement of right hip
                            substitute from right                                        joint with metal
                            hip joint, percutaneous                                      synthetic substitute,
                            endoscopic approach.                                         cemented, open
                                                                                         approach.
0SP94JZ..................  Removal of synthetic        and   0SR901A..................  Replacement of right hip
                            substitute from right                                        joint with metal
                            hip joint, percutaneous                                      synthetic substitute,
                            endoscopic approach.                                         uncemented, open
                                                                                         approach.
0SP94JZ..................  Removal of synthetic        and   0SR901Z..................  Replacement of right hip
                            substitute from right                                        joint with metal
                            hip joint, percutaneous                                      synthetic substitute,
                            endoscopic approach.                                         open approach.
0SP94JZ..................  Removal of synthetic        and   0SR9029..................  Replacement of right hip
                            substitute from right                                        joint with metal on
                            hip joint, percutaneous                                      polyethylene synthetic
                            endoscopic approach.                                         substitute, cemented,
                                                                                         open approach.
0SP94JZ..................  Removal of synthetic        and   0SR902A..................  Replacement of right hip
                            substitute from right                                        joint with metal on
                            hip joint, percutaneous                                      polyethylene synthetic
                            endoscopic approach.                                         substitute, uncemented,
                                                                                         open approach.
0SP94JZ..................  Removal of synthetic        and   0SR902Z..................  Replacement of right hip
                            substitute from right                                        joint with metal on
                            hip joint, percutaneous                                      polyethylene synthetic
                            endoscopic approach.                                         substitute, open
                                                                                         approach.
0SP94JZ..................  Removal of synthetic        and   0SR9039..................  Replacement of right hip
                            substitute from right                                        joint with ceramic
                            hip joint, percutaneous                                      synthetic substitute,
                            endoscopic approach.                                         cemented, open
                                                                                         approach.
0SP94JZ..................  Removal of synthetic        and   0SR903A..................  Replacement of right hip
                            substitute from right                                        joint with ceramic
                            hip joint, percutaneous                                      synthetic substitute,
                            endoscopic approach.                                         uncemented, open
                                                                                         approach.
0SP94JZ..................  Removal of synthetic        and   0SR903Z..................  Replacement of right hip
                            substitute from right                                        joint with ceramic
                            hip joint, percutaneous                                      synthetic substitute,
                            endoscopic approach.                                         open approach.
0SP94JZ..................  Removal of synthetic        and   0SR9049..................  Replacement of right hip
                            substitute from right                                        joint with ceramic on
                            hip joint, percutaneous                                      polyethylene synthetic
                            endoscopic approach.                                         substitute, cemented,
                                                                                         open approach.
0SP94JZ..................  Removal of synthetic        and   0SR904A..................  Replacement of right hip
                            substitute from right                                        joint with ceramic on
                            hip joint, percutaneous                                      polyethylene synthetic
                            endoscopic approach.                                         substitute, uncemented,
                                                                                         open approach.

[[Page 49397]]

 
0SP94JZ..................  Removal of synthetic        and   0SR904Z..................  Replacement of right hip
                            substitute from right                                        joint with ceramic on
                            hip joint, percutaneous                                      polyethylene synthetic
                            endoscopic approach.                                         substitute, open
                                                                                         approach.
0SP94JZ..................  Removal of synthetic        and   0SR90J9..................  Replacement of right hip
                            substitute from right                                        joint with synthetic
                            hip joint, percutaneous                                      substitute, cemented,
                            endoscopic approach.                                         open approach.
0SP94JZ..................  Removal of synthetic        and   0SR90JA..................  Replacement of right hip
                            substitute from right                                        joint with synthetic
                            hip joint, percutaneous                                      substitute, uncemented,
                            endoscopic approach.                                         open approach.
0SP94JZ..................  Removal of synthetic        and   0SR90JZ..................  Replacement of right hip
                            substitute from right                                        joint with synthetic
                            hip joint, percutaneous                                      substitute, open
                            endoscopic approach.                                         approach.
0SP94JZ..................  Removal of synthetic        and   0SRA009..................  Replacement of right hip
                            substitute from right                                        joint, acetabular
                            hip joint, percutaneous                                      surface with
                            endoscopic approach.                                         polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SP94JZ..................  Removal of synthetic        and   0SRA00A..................  Replacement of right hip
                            substitute from right                                        joint, acetabular
                            hip joint, percutaneous                                      surface with
                            endoscopic approach.                                         polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SP94JZ..................  Removal of synthetic        and   0SRA00Z..................  Replacement of right hip
                            substitute from right                                        joint, acetabular
                            hip joint, percutaneous                                      surface with
                            endoscopic approach.                                         polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SP94JZ..................  Removal of synthetic        and   0SRA019..................  Replacement of right hip
                            substitute from right                                        joint, acetabular
                            hip joint, percutaneous                                      surface with metal
                            endoscopic approach.                                         synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SP94JZ..................  Removal of synthetic        and   0SRA01A..................  Replacement of right hip
                            substitute from right                                        joint, acetabular
                            hip joint, percutaneous                                      surface with metal
                            endoscopic approach.                                         synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SP94JZ..................  Removal of synthetic        and   0SRA01Z..................  Replacement of right hip
                            substitute from right                                        joint, acetabular
                            hip joint, percutaneous                                      surface with metal
                            endoscopic approach.                                         synthetic substitute,
                                                                                         open approach.
0SP94JZ..................  Removal of synthetic        and   0SRA039..................  Replacement of right hip
                            substitute from right                                        joint, acetabular
                            hip joint, percutaneous                                      surface with ceramic
                            endoscopic approach.                                         synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SP94JZ..................  Removal of synthetic        and   0SRA03A..................  Replacement of right hip
                            substitute from right                                        joint, acetabular
                            hip joint, percutaneous                                      surface with ceramic
                            endoscopic approach.                                         synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SP94JZ..................  Removal of synthetic        and   0SRA03Z..................  Replacement of right hip
                            substitute from right                                        joint, acetabular
                            hip joint, percutaneous                                      surface with ceramic
                            endoscopic approach.                                         synthetic substitute,
                                                                                         open approach.
0SP94JZ..................  Removal of synthetic        and   0SRA0J9..................  Replacement of right hip
                            substitute from right                                        joint, acetabular
                            hip joint, percutaneous                                      surface with synthetic
                            endoscopic approach.                                         substitute, cemented,
                                                                                         open approach.
0SP94JZ..................  Removal of synthetic        and   0SRA0JA..................  Replacement of right hip
                            substitute from right                                        joint, acetabular
                            hip joint, percutaneous                                      surface with synthetic
                            endoscopic approach.                                         substitute, uncemented,
                                                                                         open approach.
0SP94JZ..................  Removal of synthetic        and   0SRA0JZ..................  Replacement of right hip
                            substitute from right                                        joint, acetabular
                            hip joint, percutaneous                                      surface with synthetic
                            endoscopic approach.                                         substitute, open
                                                                                         approach.
0SP94JZ..................  Removal of synthetic        and   0SRR019..................  Replacement of right hip
                            substitute from right                                        joint, femoral surface
                            hip joint, percutaneous                                      with metal synthetic
                            endoscopic approach.                                         substitute, cemented,
                                                                                         open approach.
0SP94JZ..................  Removal of synthetic        and   0SRR01A..................  Replacement of right hip
                            substitute from right                                        joint, femoral surface
                            hip joint, percutaneous                                      with metal synthetic
                            endoscopic approach.                                         substitute, uncemented,
                                                                                         open approach.
0SP94JZ..................  Removal of synthetic        and   0SRR01Z..................  Replacement of right hip
                            substitute from right                                        joint, femoral surface
                            hip joint, percutaneous                                      with metal synthetic
                            endoscopic approach.                                         substitute, open
                                                                                         approach.
0SP94JZ..................  Removal of synthetic        and   0SRR039..................  Replacement of right hip
                            substitute from right                                        joint, femoral surface
                            hip joint, percutaneous                                      with ceramic synthetic
                            endoscopic approach.                                         substitute, cemented,
                                                                                         open approach.
0SP94JZ..................  Removal of synthetic        and   0SRR03A..................  Replacement of right hip
                            substitute from right                                        joint, femoral surface
                            hip joint, percutaneous                                      with ceramic synthetic
                            endoscopic approach.                                         substitute, uncemented,
                                                                                         open approach.
0SP94JZ..................  Removal of synthetic        and   0SRR03Z..................  Replacement of right hip
                            substitute from right                                        joint, femoral surface
                            hip joint, percutaneous                                      with ceramic synthetic
                            endoscopic approach.                                         substitute, open
                                                                                         approach.
0SP94JZ..................  Removal of synthetic        and   0SRR0J9..................  Replacement of right hip
                            substitute from right                                        joint, femoral surface
                            hip joint, percutaneous                                      with synthetic
                            endoscopic approach.                                         substitute, cemented,
                                                                                         open approach.
0SP94JZ..................  Removal of synthetic        and   0SRR0JA..................  Replacement of right hip
                            substitute from right                                        joint, femoral surface
                            hip joint, percutaneous                                      with synthetic
                            endoscopic approach.                                         substitute, uncemented,
                                                                                         open approach.
0SP94JZ..................  Removal of synthetic        and   0SRR0JZ..................  Replacement of right hip
                            substitute from right                                        joint, femoral surface
                            hip joint, percutaneous                                      with synthetic
                            endoscopic approach.                                         substitute, open
                                                                                         approach.
0SP94JZ..................  Removal of synthetic        and   0SU909Z..................  Supplement right hip
                            substitute from right                                        joint with liner, open
                            hip joint, percutaneous                                      approach.
                            endoscopic approach.
0SP94JZ..................  Removal of synthetic        and   0SUA09Z..................  Supplement right hip
                            substitute from right                                        joint, acetabular
                            hip joint, percutaneous                                      surface with liner,
                            endoscopic approach.                                         open approach.

[[Page 49398]]

 
0SP94JZ..................  Removal of synthetic        and   0SUR09Z..................  Supplement right hip
                            substitute from right                                        joint, femoral surface
                            hip joint, percutaneous                                      with liner, open
                            endoscopic approach.                                         approach.
0SPB08Z..................  Removal of spacer from      and   0SRB019..................  Replacement of left hip
                            left hip joint, open                                         joint with metal
                            approach.                                                    synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SPB08Z..................  Removal of spacer from      and   0SRB01A..................  Replacement of left hip
                            left hip joint, open                                         joint with metal
                            approach.                                                    synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SPB08Z..................  Removal of spacer from      and   0SRB01Z..................  Replacement of left hip
                            left hip joint, open                                         joint with metal
                            approach.                                                    synthetic substitute,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SRB029..................  Replacement of left hip
                            left hip joint, open                                         joint with metal on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SRB02A..................  Replacement of left hip
                            left hip joint, open                                         joint with metal on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SRB02Z..................  Replacement of left hip
                            left hip joint, open                                         joint with metal on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB08Z..................  Removal of spacer from      and   0SRB039..................  Replacement of left hip
                            left hip joint, open                                         joint with ceramic
                            approach.                                                    synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SPB08Z..................  Removal of spacer from      and   0SRB03A..................  Replacement of left hip
                            left hip joint, open                                         joint with ceramic
                            approach.                                                    synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SPB08Z..................  Removal of spacer from      and   0SRB03Z..................  Replacement of left hip
                            left hip joint, open                                         joint with ceramic
                            approach.                                                    synthetic substitute,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SRB049..................  Replacement of left hip
                            left hip joint, open                                         joint with ceramic on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SRB04A..................  Replacement of left hip
                            left hip joint, open                                         joint with ceramic on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SRB04Z..................  Replacement of left hip
                            left hip joint, open                                         joint with ceramic on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB08Z..................  Removal of spacer from      and   0SRB0J9..................  Replacement of left hip
                            left hip joint, open                                         joint with synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SRB0JA..................  Replacement of left hip
                            left hip joint, open                                         joint with synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SRB0JZ..................  Replacement of left hip
                            left hip joint, open                                         joint with synthetic
                            approach.                                                    substitute, open
                                                                                         approach.
0SPB08Z..................  Removal of spacer from      and   0SRE009..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with
                                                                                         polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SRE00A..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with
                                                                                         polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SRE00Z..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with
                                                                                         polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB08Z..................  Removal of spacer from      and   0SRE019..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with metal
                                                                                         synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SPB08Z..................  Removal of spacer from      and   0SRE01A..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with metal
                                                                                         synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SPB08Z..................  Removal of spacer from      and   0SRE01Z..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with metal
                                                                                         synthetic substitute,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SRE039..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with ceramic
                                                                                         synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SPB08Z..................  Removal of spacer from      and   0SRE03A..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with ceramic
                                                                                         synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SPB08Z..................  Removal of spacer from      and   0SRE03Z..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with ceramic
                                                                                         synthetic substitute,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SRE0J9..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SRE0JA..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SRE0JZ..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with synthetic
                                                                                         substitute, open
                                                                                         approach.

[[Page 49399]]

 
0SPB08Z..................  Removal of spacer from      and   0SRS019..................  Replacement of left hip
                            left hip joint, open                                         joint, femoral surface
                            approach.                                                    with metal synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SRS01A..................  Replacement of left hip
                            left hip joint, open                                         joint, femoral surface
                            approach.                                                    with metal synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SRS01Z..................  Replacement of left hip
                            left hip joint, open                                         joint, femoral surface
                            approach.                                                    with metal synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB08Z..................  Removal of spacer from      and   0SRS039..................  Replacement of left hip
                            left hip joint, open                                         joint, femoral surface
                            approach.                                                    with ceramic synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SRS03A..................  Replacement of left hip
                            left hip joint, open                                         joint, femoral surface
                            approach.                                                    with ceramic synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SRS03Z..................  Replacement of left hip
                            left hip joint, open                                         joint, femoral surface
                            approach.                                                    with ceramic synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB08Z..................  Removal of spacer from      and   0SRS0J9..................  Replacement of left hip
                            left hip joint, open                                         joint, femoral surface
                            approach.                                                    with synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SRS0JA..................  Replacement of left hip
                            left hip joint, open                                         joint, femoral surface
                            approach.                                                    with synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SRS0JZ..................  Replacement of left hip
                            left hip joint, open                                         joint, femoral surface
                            approach.                                                    with synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB08Z..................  Removal of spacer from      and   0SUB09Z..................  Supplement left hip
                            left hip joint, open                                         joint with liner, open
                            approach.                                                    approach.
0SPB08Z..................  Removal of spacer from      and   0SUE09Z..................  Supplement left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with liner,
                                                                                         open approach.
0SPB08Z..................  Removal of spacer from      and   0SUS09Z..................  Supplement left hip
                            left hip joint, open                                         joint, femoral surface
                            approach.                                                    with liner, open
                                                                                         approach.
0SPB09Z..................  Removal of liner from       and   0SRB019..................  Replacement of left hip
                            left hip joint, open                                         joint with metal
                            approach.                                                    synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SPB09Z..................  Removal of liner from       and   0SRB01A..................  Replacement of left hip
                            left hip joint, open                                         joint with metal
                            approach.                                                    synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SPB09Z..................  Removal of liner from       and   0SRB01Z..................  Replacement of left hip
                            left hip joint, open                                         joint with metal
                            approach.                                                    synthetic substitute,
                                                                                         open approach.
0SPB09Z..................  Removal of liner from       and   0SRB029..................  Replacement of left hip
                            left hip joint, open                                         joint with metal on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB09Z..................  Removal of liner from       and   0SRB02A..................  Replacement of left hip
                            left hip joint, open                                         joint with metal on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB09Z..................  Removal of liner from       and   0SRB02Z..................  Replacement of left hip
                            left hip joint, open                                         joint with metal on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB09Z..................  Removal of liner from       and   0SRB039..................  Replacement of left hip
                            left hip joint, open                                         joint with ceramic
                            approach.                                                    synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SPB09Z..................  Removal of liner from       and   0SRB03A..................  Replacement of left hip
                            left hip joint, open                                         joint with ceramic
                            approach.                                                    synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SPB09Z..................  Removal of liner from       and   0SRB03Z..................  Replacement of left hip
                            left hip joint, open                                         joint with ceramic
                            approach.                                                    synthetic substitute,
                                                                                         open approach.
0SPB09Z..................  Removal of liner from       and   0SRB049..................  Replacement of left hip
                            left hip joint, open                                         joint with ceramic on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB09Z..................  Removal of liner from       and   0SRB04A..................  Replacement of left hip
                            left hip joint, open                                         joint with ceramic on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB09Z..................  Removal of liner from       and   0SRB04Z..................  Replacement of left hip
                            left hip joint, open                                         joint with ceramic on
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB09Z..................  Removal of liner from       and   0SRB0J9..................  Replacement of left hip
                            left hip joint, open                                         joint with synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SPB09Z..................  Removal of liner from       and   0SRB0JA..................  Replacement of left hip
                            left hip joint, open                                         joint with synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SPB09Z..................  Removal of liner from       and   0SRB0JZ..................  Replacement of left hip
                            left hip joint, open                                         joint with synthetic
                            approach.                                                    substitute, open
                                                                                         approach.
0SPB09Z..................  Removal of liner from       and   0SRE009..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with
                                                                                         polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB09Z..................  Removal of liner from       and   0SRE00A..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with
                                                                                         polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.

[[Page 49400]]

 
0SPB09Z..................  Removal of liner from       and   0SRE00Z..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with
                                                                                         polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB09Z..................  Removal of liner from       and   0SRE019..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with metal
                                                                                         synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SPB09Z..................  Removal of liner from       and   0SRE01A..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with metal
                                                                                         synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SPB09Z..................  Removal of liner from       and   0SRE01Z..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with metal
                                                                                         synthetic substitute,
                                                                                         open approach.
0SPB09Z..................  Removal of liner from       and   0SRE039..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with ceramic
                                                                                         synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SPB09Z..................  Removal of liner from       and   0SRE03A..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with ceramic
                                                                                         synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SPB09Z..................  Removal of liner from       and   0SRE03Z..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with ceramic
                                                                                         synthetic substitute,
                                                                                         open approach.
0SPB09Z..................  Removal of liner from       and   0SRE0J9..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB09Z..................  Removal of liner from       and   0SRE0JA..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB09Z..................  Removal of liner from       and   0SRE0JZ..................  Replacement of left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB09Z..................  Removal of liner from       and   0SRS019..................  Replacement of left hip
                            left hip joint, open                                         joint, femoral surface
                            approach.                                                    with metal synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB09Z..................  Removal of liner from       and   0SRS01A..................  Replacement of left hip
                            left hip joint, open                                         joint, femoral surface
                            approach.                                                    with metal synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB09Z..................  Removal of liner from       and   0SRS01Z..................  Replacement of left hip
                            left hip joint, open                                         joint, femoral surface
                            approach.                                                    with metal synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB09Z..................  Removal of liner from       and   0SRS039..................  Replacement of left hip
                            left hip joint, open                                         joint, femoral surface
                            approach.                                                    with ceramic synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB09Z..................  Removal of liner from       and   0SRS03A..................  Replacement of left hip
                            left hip joint, open                                         joint, femoral surface
                            approach.                                                    with ceramic synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB09Z..................  Removal of liner from       and   0SRS03Z..................  Replacement of left hip
                            left hip joint, open                                         joint, femoral surface
                            approach.                                                    with ceramic synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB09Z..................  Removal of liner from       and   0SRS0J9..................  Replacement of left hip
                            left hip joint, open                                         joint, femoral surface
                            approach.                                                    with synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB09Z..................  Removal of liner from       and   0SRS0JA..................  Replacement of left hip
                            left hip joint, open                                         joint, femoral surface
                            approach.                                                    with synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB09Z..................  Removal of liner from       and   0SRS0JZ..................  Replacement of left hip
                            left hip joint, open                                         joint, femoral surface
                            approach.                                                    with synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB09Z..................  Removal of liner from       and   0SUB09Z..................  Supplement left hip
                            left hip joint, open                                         joint with liner, open
                            approach.                                                    approach.
0SPB09Z..................  Removal of liner from       and   0SUE09Z..................  Supplement left hip
                            left hip joint, open                                         joint, acetabular
                            approach.                                                    surface with liner,
                                                                                         open approach.
0SPB09Z..................  Removal of liner from       and   0SUS09Z..................  Supplement left hip
                            left hip joint, open                                         joint, femoral surface
                            approach.                                                    with liner, open
                                                                                         approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRB019..................  Replacement of left hip
                            device from left hip                                         joint with metal
                            joint, open approach.                                        synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRB01A..................  Replacement of left hip
                            device from left hip                                         joint with metal
                            joint, open approach.                                        synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRB01Z..................  Replacement of left hip
                            device from left hip                                         joint with metal
                            joint, open approach.                                        synthetic substitute,
                                                                                         open approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRB029..................  Replacement of left hip
                            device from left hip                                         joint with metal on
                            joint, open approach.                                        polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRB02A..................  Replacement of left hip
                            device from left hip                                         joint with metal on
                            joint, open approach.                                        polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRB02Z..................  Replacement of left hip
                            device from left hip                                         joint with metal on
                            joint, open approach.                                        polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.

[[Page 49401]]

 
0SPB0BZ..................  Removal of resurfacing      and   0SRB039..................  Replacement of left hip
                            device from left hip                                         joint with ceramic
                            joint, open approach.                                        synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRB03A..................  Replacement of left hip
                            device from left hip                                         joint with ceramic
                            joint, open approach.                                        synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRB03Z..................  Replacement of left hip
                            device from left hip                                         joint with ceramic
                            joint, open approach.                                        synthetic substitute,
                                                                                         open approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRB049..................  Replacement of left hip
                            device from left hip                                         joint with ceramic on
                            joint, open approach.                                        polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRB04A..................  Replacement of left hip
                            device from left hip                                         joint with ceramic on
                            joint, open approach.                                        polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRB04Z..................  Replacement of left hip
                            device from left hip                                         joint with ceramic on
                            joint, open approach.                                        polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRB0J9..................  Replacement of left hip
                            device from left hip                                         joint with synthetic
                            joint, open approach.                                        substitute, cemented,
                                                                                         open approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRB0JA..................  Replacement of left hip
                            device from left hip                                         joint with synthetic
                            joint, open approach.                                        substitute, uncemented,
                                                                                         open approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRB0JZ..................  Replacement of left hip
                            device from left hip                                         joint with synthetic
                            joint, open approach.                                        substitute, open
                                                                                         approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRE009..................  Replacement of left hip
                            device from left hip                                         joint, acetabular
                            joint, open approach.                                        surface with
                                                                                         polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRE00A..................  Replacement of left hip
                            device from left hip                                         joint, acetabular
                            joint, open approach.                                        surface with
                                                                                         polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRE00Z..................  Replacement of left hip
                            device from left hip                                         joint, acetabular
                            joint, open approach.                                        surface with
                                                                                         polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRE019..................  Replacement of left hip
                            device from left hip                                         joint, acetabular
                            joint, open approach.                                        surface with metal
                                                                                         synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRE01A..................  Replacement of left hip
                            device from left hip                                         joint, acetabular
                            joint, open approach.                                        surface with metal
                                                                                         synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRE01Z..................  Replacement of left hip
                            device from left hip                                         joint, acetabular
                            joint, open approach.                                        surface with metal
                                                                                         synthetic substitute,
                                                                                         open approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRE039..................  Replacement of left hip
                            device from left hip                                         joint, acetabular
                            joint, open approach.                                        surface with ceramic
                                                                                         synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRE03A..................  Replacement of left hip
                            device from left hip                                         joint, acetabular
                            joint, open approach.                                        surface with ceramic
                                                                                         synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRE03Z..................  Replacement of left hip
                            device from left hip                                         joint, acetabular
                            joint, open approach.                                        surface with ceramic
                                                                                         synthetic substitute,
                                                                                         open approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRE0J9..................  Replacement of left hip
                            device from left hip                                         joint, acetabular
                            joint, open approach.                                        surface with synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRE0JA..................  Replacement of left hip
                            device from left hip                                         joint, acetabular
                            joint, open approach.                                        surface with synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRE0JZ..................  Replacement of left hip
                            device from left hip                                         joint, acetabular
                            joint, open approach.                                        surface with synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRS019..................  Replacement of left hip
                            device from left hip                                         joint, femoral surface
                            joint, open approach.                                        with metal synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRS01A..................  Replacement of left hip
                            device from left hip                                         joint, femoral surface
                            joint, open approach.                                        with metal synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRS01Z..................  Replacement of left hip
                            device from left hip                                         joint, femoral surface
                            joint, open approach.                                        with metal synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRS039..................  Replacement of left hip
                            device from left hip                                         joint, femoral surface
                            joint, open approach.                                        with ceramic synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRS03A..................  Replacement of left hip
                            device from left hip                                         joint, femoral surface
                            joint, open approach.                                        with ceramic synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.

[[Page 49402]]

 
0SPB0BZ..................  Removal of resurfacing      and   0SRS03Z..................  Replacement of left hip
                            device from left hip                                         joint, femoral surface
                            joint, open approach.                                        with ceramic synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRS0J9..................  Replacement of left hip
                            device from left hip                                         joint, femoral surface
                            joint, open approach.                                        with synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRS0JA..................  Replacement of left hip
                            device from left hip                                         joint, femoral surface
                            joint, open approach.                                        with synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB0BZ..................  Removal of resurfacing      and   0SRS0JZ..................  Replacement of left hip
                            device from left hip                                         joint, femoral surface
                            joint, open approach.                                        with synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB0BZ..................  Removal of resurfacing      and   0SUB09Z..................  Supplement left hip
                            device from left hip                                         joint with liner, open
                            joint, open approach.                                        approach.
0SPB0BZ..................  Removal of resurfacing      and   0SUE09Z..................  Supplement left hip
                            device from left hip                                         joint, acetabular
                            joint, open approach.                                        surface with liner,
                                                                                         open approach.
0SPB0BZ..................  Removal of resurfacing      and   0SUS09Z..................  Supplement left hip
                            device from left hip                                         joint, femoral surface
                            joint, open approach.                                        with liner, open
                                                                                         approach.
0SPB0JZ..................  Removal of synthetic        and   0SRB049..................  Replacement of left hip
                            substitute from left                                         joint with ceramic on
                            hip joint, open                                              polyethylene synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SPB0JZ..................  Removal of synthetic        and   0SRB04A..................  Replacement of left hip
                            substitute from left                                         joint with ceramic on
                            hip joint, open                                              polyethylene synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SPB0JZ..................  Removal of synthetic        and   0SRB04Z..................  Replacement of left hip
                            substitute from left                                         joint with ceramic on
                            hip joint, open                                              polyethylene synthetic
                            approach.                                                    substitute, open
                                                                                         approach.
0SPB48Z..................  Removal of spacer from      and   0SRB019..................  Replacement of left hip
                            left hip joint,                                              joint with metal
                            percutaneous endoscopic                                      synthetic substitute,
                            approach.                                                    cemented, open
                                                                                         approach.
0SPB48Z..................  Removal of spacer from      and   0SRB01A..................  Replacement of left hip
                            left hip joint,                                              joint with metal
                            percutaneous endoscopic                                      synthetic substitute,
                            approach.                                                    uncemented, open
                                                                                         approach.
0SPB48Z..................  Removal of spacer from      and   0SRB01Z..................  Replacement of left hip
                            left hip joint,                                              joint with metal
                            percutaneous endoscopic                                      synthetic substitute,
                            approach.                                                    open approach.
0SPB48Z..................  Removal of spacer from      and   0SRB029..................  Replacement of left hip
                            left hip joint,                                              joint with metal on
                            percutaneous endoscopic                                      polyethylene synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SPB48Z..................  Removal of spacer from      and   0SRB02A..................  Replacement of left hip
                            left hip joint,                                              joint with metal on
                            percutaneous endoscopic                                      polyethylene synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SPB48Z..................  Removal of spacer from      and   0SRB02Z..................  Replacement of left hip
                            left hip joint,                                              joint with metal on
                            percutaneous endoscopic                                      polyethylene synthetic
                            approach.                                                    substitute, open
                                                                                         approach.
0SPB48Z..................  Removal of spacer from      and   0SRB039..................  Replacement of left hip
                            left hip joint,                                              joint with ceramic
                            percutaneous endoscopic                                      synthetic substitute,
                            approach.                                                    cemented, open
                                                                                         approach.
0SPB48Z..................  Removal of spacer from      and   0SRB03A..................  Replacement of left hip
                            left hip joint,                                              joint with ceramic
                            percutaneous endoscopic                                      synthetic substitute,
                            approach.                                                    uncemented, open
                                                                                         approach.
0SPB48Z..................  Removal of spacer from      and   0SRB03Z..................  Replacement of left hip
                            left hip joint,                                              joint with ceramic
                            percutaneous endoscopic                                      synthetic substitute,
                            approach.                                                    open approach.
0SPB48Z..................  Removal of spacer from      and   0SRB049..................  Replacement of left hip
                            left hip joint,                                              joint with ceramic on
                            percutaneous endoscopic                                      polyethylene synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SPB48Z..................  Removal of spacer from      and   0SRB04A..................  Replacement of left hip
                            left hip joint,                                              joint with ceramic on
                            percutaneous endoscopic                                      polyethylene synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SPB48Z..................  Removal of spacer from      and   0SRB04Z..................  Replacement of left hip
                            left hip joint,                                              joint with ceramic on
                            percutaneous endoscopic                                      polyethylene synthetic
                            approach.                                                    substitute, open
                                                                                         approach.
0SPB48Z..................  Removal of spacer from      and   0SRB0J9..................  Replacement of left hip
                            left hip joint,                                              joint with synthetic
                            percutaneous endoscopic                                      substitute, cemented,
                            approach.                                                    open approach.
0SPB48Z..................  Removal of spacer from      and   0SRB0JA..................  Replacement of left hip
                            left hip joint,                                              joint with synthetic
                            percutaneous endoscopic                                      substitute, uncemented,
                            approach.                                                    open approach.
0SPB48Z..................  Removal of spacer from      and   0SRB0JZ..................  Replacement of left hip
                            left hip joint,                                              joint with synthetic
                            percutaneous endoscopic                                      substitute, open
                            approach.                                                    approach.
0SPB48Z..................  Removal of spacer from      and   0SRE009..................  Replacement of left hip
                            left hip joint,                                              joint, acetabular
                            percutaneous endoscopic                                      surface with
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB48Z..................  Removal of spacer from      and   0SRE00A..................  Replacement of left hip
                            left hip joint,                                              joint, acetabular
                            percutaneous endoscopic                                      surface with
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB48Z..................  Removal of spacer from      and   0SRE00Z..................  Replacement of left hip
                            left hip joint,                                              joint, acetabular
                            percutaneous endoscopic                                      surface with
                            approach.                                                    polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB48Z..................  Removal of spacer from      and   0SRE019..................  Replacement of left hip
                            left hip joint,                                              joint, acetabular
                            percutaneous endoscopic                                      surface with metal
                            approach.                                                    synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.

[[Page 49403]]

 
0SPB48Z..................  Removal of spacer from      and   0SRE01A..................  Replacement of left hip
                            left hip joint,                                              joint, acetabular
                            percutaneous endoscopic                                      surface with metal
                            approach.                                                    synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SPB48Z..................  Removal of spacer from      and   0SRE01Z..................  Replacement of left hip
                            left hip joint,                                              joint, acetabular
                            percutaneous endoscopic                                      surface with metal
                            approach.                                                    synthetic substitute,
                                                                                         open approach.
0SPB48Z..................  Removal of spacer from      and   0SRE039..................  Replacement of left hip
                            left hip joint,                                              joint, acetabular
                            percutaneous endoscopic                                      surface with ceramic
                            approach.                                                    synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SPB48Z..................  Removal of spacer from      and   0SRE03A..................  Replacement of left hip
                            left hip joint,                                              joint, acetabular
                            percutaneous endoscopic                                      surface with ceramic
                            approach.                                                    synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SPB48Z..................  Removal of spacer from      and   0SRE03Z..................  Replacement of left hip
                            left hip joint,                                              joint, acetabular
                            percutaneous endoscopic                                      surface with ceramic
                            approach.                                                    synthetic substitute,
                                                                                         open approach.
0SPB48Z..................  Removal of spacer from      and   0SRE0J9..................  Replacement of left hip
                            left hip joint,                                              joint, acetabular
                            percutaneous endoscopic                                      surface with synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SPB48Z..................  Removal of spacer from      and   0SRE0JA..................  Replacement of left hip
                            left hip joint,                                              joint, acetabular
                            percutaneous endoscopic                                      surface with synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SPB48Z..................  Removal of spacer from      and   0SRE0JZ..................  Replacement of left hip
                            left hip joint,                                              joint, acetabular
                            percutaneous endoscopic                                      surface with synthetic
                            approach.                                                    substitute, open
                                                                                         approach.
0SPB48Z..................  Removal of spacer from      and   0SRS019..................  Replacement of left hip
                            left hip joint,                                              joint, femoral surface
                            percutaneous endoscopic                                      with metal synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SPB48Z..................  Removal of spacer from      and   0SRS01A..................  Replacement of left hip
                            left hip joint,                                              joint, femoral surface
                            percutaneous endoscopic                                      with metal synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SPB48Z..................  Removal of spacer from      and   0SRS01Z..................  Replacement of left hip
                            left hip joint,                                              joint, femoral surface
                            percutaneous endoscopic                                      with metal synthetic
                            approach.                                                    substitute, open
                                                                                         approach.
0SPB48Z..................  Removal of spacer from      and   0SRS039..................  Replacement of left hip
                            left hip joint,                                              joint, femoral surface
                            percutaneous endoscopic                                      with ceramic synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SPB48Z..................  Removal of spacer from      and   0SRS03A..................  Replacement of left hip
                            left hip joint,                                              joint, femoral surface
                            percutaneous endoscopic                                      with ceramic synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SPB48Z..................  Removal of spacer from      and   0SRS03Z..................  Replacement of left hip
                            left hip joint,                                              joint, femoral surface
                            percutaneous endoscopic                                      with ceramic synthetic
                            approach.                                                    substitute, open
                                                                                         approach.
0SPB48Z..................  Removal of spacer from      and   0SRS0J9..................  Replacement of left hip
                            left hip joint,                                              joint, femoral surface
                            percutaneous endoscopic                                      with synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SPB48Z..................  Removal of spacer from      and   0SRS0JA..................  Replacement of left hip
                            left hip joint,                                              joint, femoral surface
                            percutaneous endoscopic                                      with synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SPB48Z..................  Removal of spacer from      and   0SRS0JZ..................  Replacement of left hip
                            left hip joint,                                              joint, femoral surface
                            percutaneous endoscopic                                      with synthetic
                            approach.                                                    substitute, open
                                                                                         approach.
0SPB48Z..................  Removal of spacer from      and   0SUB09Z..................  Supplement left hip
                            left hip joint,                                              joint with liner, open
                            percutaneous endoscopic                                      approach.
                            approach.
0SPB48Z..................  Removal of spacer from      and   0SUE09Z..................  Supplement left hip
                            left hip joint,                                              joint, acetabular
                            percutaneous endoscopic                                      surface with liner,
                            approach.                                                    open approach.
0SPB48Z..................  Removal of spacer from      and   0SUS09Z..................  Supplement left hip
                            left hip joint,                                              joint, femoral surface
                            percutaneous endoscopic                                      with liner, open
                            approach.                                                    approach.
0SPB4JZ..................  Removal of synthetic        and   0SRB019..................  Replacement of left hip
                            substitute from left                                         joint with metal
                            hip joint, percutaneous                                      synthetic substitute,
                            endoscopic approach.                                         cemented, open
                                                                                         approach.
0SPB4JZ..................  Removal of synthetic        and   0SRB01A..................  Replacement of left hip
                            substitute from left                                         joint with metal
                            hip joint, percutaneous                                      synthetic substitute,
                            endoscopic approach.                                         uncemented, open
                                                                                         approach.
0SPB4JZ..................  Removal of synthetic        and   0SRB01Z..................  Replacement of left hip
                            substitute from left                                         joint with metal
                            hip joint, percutaneous                                      synthetic substitute,
                            endoscopic approach.                                         open approach.
0SPB4JZ..................  Removal of synthetic        and   0SRB029..................  Replacement of left hip
                            substitute from left                                         joint with metal on
                            hip joint, percutaneous                                      polyethylene synthetic
                            endoscopic approach.                                         substitute, cemented,
                                                                                         open approach.
0SPB4JZ..................  Removal of synthetic        and   0SRB02A..................  Replacement of left hip
                            substitute from left                                         joint with metal on
                            hip joint, percutaneous                                      polyethylene synthetic
                            endoscopic approach.                                         substitute, uncemented,
                                                                                         open approach.
0SPB4JZ..................  Removal of synthetic        and   0SRB02Z..................  Replacement of left hip
                            substitute from left                                         joint with metal on
                            hip joint, percutaneous                                      polyethylene synthetic
                            endoscopic approach.                                         substitute, open
                                                                                         approach.
0SPB4JZ..................  Removal of synthetic        and   0SRB039..................  Replacement of left hip
                            substitute from left                                         joint with ceramic
                            hip joint, percutaneous                                      synthetic substitute,
                            endoscopic approach.                                         cemented, open
                                                                                         approach.
0SPB4JZ..................  Removal of synthetic        and   0SRB03A..................  Replacement of left hip
                            substitute from left                                         joint with ceramic
                            hip joint, percutaneous                                      synthetic substitute,
                            endoscopic approach.                                         uncemented, open
                                                                                         approach.

[[Page 49404]]

 
0SPB4JZ..................  Removal of synthetic        and   0SRB03Z..................  Replacement of left hip
                            substitute from left                                         joint with ceramic
                            hip joint, percutaneous                                      synthetic substitute,
                            endoscopic approach.                                         open approach.
0SPB4JZ..................  Removal of synthetic        and   0SRB049..................  Replacement of left hip
                            substitute from left                                         joint with ceramic on
                            hip joint, percutaneous                                      polyethylene synthetic
                            endoscopic approach.                                         substitute, cemented,
                                                                                         open approach.
0SPB4JZ..................  Removal of synthetic        and   0SRB04A..................  Replacement of left hip
                            substitute from left                                         joint with ceramic on
                            hip joint, percutaneous                                      polyethylene synthetic
                            endoscopic approach.                                         substitute, uncemented,
                                                                                         open approach.
0SPB4JZ..................  Removal of synthetic        and   0SRB04Z..................  Replacement of left hip
                            substitute from left                                         joint with ceramic on
                            hip joint, percutaneous                                      polyethylene synthetic
                            endoscopic approach.                                         substitute, open
                                                                                         approach.
0SPB4JZ..................  Removal of synthetic        and   0SRB0J9..................  Replacement of left hip
                            substitute from left                                         joint with synthetic
                            hip joint, percutaneous                                      substitute, cemented,
                            endoscopic approach.                                         open approach.
0SPB4JZ..................  Removal of synthetic        and   0SRB0JA..................  Replacement of left hip
                            substitute from left                                         joint with synthetic
                            hip joint, percutaneous                                      substitute, uncemented,
                            endoscopic approach.                                         open approach.
0SPB4JZ..................  Removal of synthetic        and   0SRB0JZ..................  Replacement of left hip
                            substitute from left                                         joint with synthetic
                            hip joint, percutaneous                                      substitute, open
                            endoscopic approach.                                         approach.
0SPB4JZ..................  Removal of synthetic        and   0SRE009..................  Replacement of left hip
                            substitute from left                                         joint, acetabular
                            hip joint, percutaneous                                      surface with
                            endoscopic approach.                                         polyethylene synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPB4JZ..................  Removal of synthetic        and   0SRE00A..................  Replacement of left hip
                            substitute from left                                         joint, acetabular
                            hip joint, percutaneous                                      surface with
                            endoscopic approach.                                         polyethylene synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPB4JZ..................  Removal of synthetic        and   0SRE00Z..................  Replacement of left hip
                            substitute from left                                         joint, acetabular
                            hip joint, percutaneous                                      surface with
                            endoscopic approach.                                         polyethylene synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPB4JZ..................  Removal of synthetic        and   0SRE019..................  Replacement of left hip
                            substitute from left                                         joint, acetabular
                            hip joint, percutaneous                                      surface with metal
                            endoscopic approach.                                         synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SPB4JZ..................  Removal of synthetic        and   0SRE01A..................  Replacement of left hip
                            substitute from left                                         joint, acetabular
                            hip joint, percutaneous                                      surface with metal
                            endoscopic approach.                                         synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SPB4JZ..................  Removal of synthetic        and   0SRE01Z..................  Replacement of left hip
                            substitute from left                                         joint, acetabular
                            hip joint, percutaneous                                      surface with metal
                            endoscopic approach.                                         synthetic substitute,
                                                                                         open approach.
0SPB4JZ..................  Removal of synthetic        and   0SRE039..................  Replacement of left hip
                            substitute from left                                         joint, acetabular
                            hip joint, percutaneous                                      surface with ceramic
                            endoscopic approach.                                         synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SPB4JZ..................  Removal of synthetic        and   0SRE03A..................  Replacement of left hip
                            substitute from left                                         joint, acetabular
                            hip joint, percutaneous                                      surface with ceramic
                            endoscopic approach.                                         synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SPB4JZ..................  Removal of synthetic        and   0SRE03Z..................  Replacement of left hip
                            substitute from left                                         joint, acetabular
                            hip joint, percutaneous                                      surface with ceramic
                            endoscopic approach.                                         synthetic substitute,
                                                                                         open approach.
0SPB4JZ..................  Removal of synthetic        and   0SRE0J9..................  Replacement of left hip
                            substitute from left                                         joint, acetabular
                            hip joint, percutaneous                                      surface with synthetic
                            endoscopic approach.                                         substitute, cemented,
                                                                                         open approach.
0SPB4JZ..................  Removal of synthetic        and   0SRE0JA..................  Replacement of left hip
                            substitute from left                                         joint, acetabular
                            hip joint, percutaneous                                      surface with synthetic
                            endoscopic approach.                                         substitute, uncemented,
                                                                                         open approach.
0SPB4JZ..................  Removal of synthetic        and   0SRE0JZ..................  Replacement of left hip
                            substitute from left                                         joint, acetabular
                            hip joint, percutaneous                                      surface with synthetic
                            endoscopic approach.                                         substitute, open
                                                                                         approach.
0SPB4JZ..................  Removal of synthetic        and   0SRS019..................  Replacement of left hip
                            substitute from left                                         joint, femoral surface
                            hip joint, percutaneous                                      with metal synthetic
                            endoscopic approach.                                         substitute, cemented,
                                                                                         open approach.
0SPB4JZ..................  Removal of synthetic        and   0SRS01A..................  Replacement of left hip
                            substitute from left                                         joint, femoral surface
                            hip joint, percutaneous                                      with metal synthetic
                            endoscopic approach.                                         substitute, uncemented,
                                                                                         open approach.
0SPB4JZ..................  Removal of synthetic        and   0SRS01Z..................  Replacement of left hip
                            substitute from left                                         joint, femoral surface
                            hip joint, percutaneous                                      with metal synthetic
                            endoscopic approach.                                         substitute, open
                                                                                         approach.
0SPB4JZ..................  Removal of synthetic        and   0SRS039..................  Replacement of left hip
                            substitute from left                                         joint, femoral surface
                            hip joint, percutaneous                                      with ceramic synthetic
                            endoscopic approach.                                         substitute, cemented,
                                                                                         open approach.
0SPB4JZ..................  Removal of synthetic        and   0SRS03A..................  Replacement of left hip
                            substitute from left                                         joint, femoral surface
                            hip joint, percutaneous                                      with ceramic synthetic
                            endoscopic approach.                                         substitute, uncemented,
                                                                                         open approach.
0SPB4JZ..................  Removal of synthetic        and   0SRS03Z..................  Replacement of left hip
                            substitute from left                                         joint, femoral surface
                            hip joint, percutaneous                                      with ceramic synthetic
                            endoscopic approach.                                         substitute, open
                                                                                         approach.
0SPB4JZ..................  Removal of synthetic        and   0SRS0J9..................  Replacement of left hip
                            substitute from left                                         joint, femoral surface
                            hip joint, percutaneous                                      with synthetic
                            endoscopic approach.                                         substitute, cemented,
                                                                                         open approach.

[[Page 49405]]

 
0SPB4JZ..................  Removal of synthetic        and   0SRS0JA..................  Replacement of left hip
                            substitute from left                                         joint, femoral surface
                            hip joint, percutaneous                                      with synthetic
                            endoscopic approach.                                         substitute, uncemented,
                                                                                         open approach.
0SPB4JZ..................  Removal of synthetic        and   0SRS0JZ..................  Replacement of left hip
                            substitute from left                                         joint, femoral surface
                            hip joint, percutaneous                                      with synthetic
                            endoscopic approach.                                         substitute, open
                                                                                         approach.
0SPB4JZ..................  Removal of synthetic        and   0SUB09Z..................  Supplement left hip
                            substitute from left                                         joint with liner, open
                            hip joint, percutaneous                                      approach.
                            endoscopic approach.
0SPB4JZ..................  Removal of synthetic        and   0SUE09Z..................  Supplement left hip
                            substitute from left                                         joint, acetabular
                            hip joint, percutaneous                                      surface with liner,
                            endoscopic approach.                                         open approach.
0SPB4JZ..................  Removal of synthetic        and   0SUS09Z..................  Supplement left hip
                            substitute from left                                         joint, femoral surface
                            hip joint, percutaneous                                      with liner, open
                            endoscopic approach.                                         approach.
0SPC09Z..................  Removal of liner from       and   0SRC0J9..................  Replacement of right
                            right knee joint, open                                       knee joint with
                            approach.                                                    synthetic substitute,
                                                                                         cemented, open
                                                                                         approach.
0SPC09Z..................  Removal of liner from       and   0SRC0JA..................  Replacement of right
                            right knee joint, open                                       knee joint with
                            approach.                                                    synthetic substitute,
                                                                                         uncemented, open
                                                                                         approach.
0SPC09Z..................  Removal of liner from       and   0SRC0JZ..................  Replacement of right
                            right knee joint, open                                       knee joint with
                            approach.                                                    synthetic substitute,
                                                                                         open approach.
0SPC09Z..................  Removal of liner from       and   0SRT0J9..................  Replacement of right
                            right knee joint, open                                       knee joint, femoral
                            approach.                                                    surface with synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPC09Z..................  Removal of liner from       and   0SRT0JA..................  Replacement of right
                            right knee joint, open                                       knee joint, femoral
                            approach.                                                    surface with synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPC09Z..................  Removal of liner from       and   0SRT0JZ..................  Replacement of right
                            right knee joint, open                                       knee joint, femoral
                            approach.                                                    surface with synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPC09Z..................  Removal of liner from       and   0SRV0J9..................  Replacement of right
                            right knee joint, open                                       knee joint, tibial
                            approach.                                                    surface with synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPC09Z..................  Removal of liner from       and   0SRV0JA..................  Replacement of right
                            right knee joint, open                                       knee joint, tibial
                            approach.                                                    surface with synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPC09Z..................  Removal of liner from       and   0SRV0JZ..................  Replacement of right
                            right knee joint, open                                       knee joint, tibial
                            approach.                                                    surface with synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPC0JZ..................  Removal of synthetic        and   0SRT0J9..................  Replacement of right
                            substitute from right                                        knee joint, femoral
                            knee joint, open                                             surface with synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SPC0JZ..................  Removal of synthetic        and   0SRT0JA..................  Replacement of right
                            substitute from right                                        knee joint, femoral
                            knee joint, open                                             surface with synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SPC0JZ..................  Removal of synthetic        and   0SRV0J9..................  Replacement of right
                            substitute from right                                        knee joint, tibial
                            knee joint, open                                             surface with synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SPC0JZ..................  Removal of synthetic        and   0SRV0JA..................  Replacement of right
                            substitute from right                                        knee joint, tibial
                            knee joint, open                                             surface with synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SPC4JZ..................  Removal of synthetic        and   0SRT0J9..................  Replacement of right
                            substitute from right                                        knee joint, femoral
                            knee joint,                                                  surface with synthetic
                            percutaneous endoscopic                                      substitute, cemented,
                            approach.                                                    open approach.
0SPC4JZ..................  Removal of synthetic        and   0SRT0JA..................  Replacement of right
                            substitute from right                                        knee joint, femoral
                            knee joint,                                                  surface with synthetic
                            percutaneous endoscopic                                      substitute, uncemented,
                            approach.                                                    open approach.
0SPC4JZ..................  Removal of synthetic        and   0SRV0J9..................  Replacement of right
                            substitute from right                                        knee joint, tibial
                            knee joint,                                                  surface with synthetic
                            percutaneous endoscopic                                      substitute, cemented,
                            approach.                                                    open approach.
0SPC4JZ..................  Removal of synthetic        and   0SRV0JA..................  Replacement of right
                            substitute from right                                        knee joint, tibial
                            knee joint,                                                  surface with synthetic
                            percutaneous endoscopic                                      substitute, uncemented,
                            approach.                                                    open approach.
0SPD09Z..................  Removal of liner from       and   0SRD0J9..................  Replacement of left knee
                            left knee joint, open                                        joint with synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SPD09Z..................  Removal of liner from       and   0SRD0JA..................  Replacement of left knee
                            left knee joint, open                                        joint with synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SPD09Z..................  Removal of liner from       and   0SRD0JZ..................  Replacement of left knee
                            left knee joint, open                                        joint with synthetic
                            approach.                                                    substitute, open
                                                                                         approach.
0SPD09Z..................  Removal of liner from       and   0SRU0J9..................  Replacement of left knee
                            left knee joint, open                                        joint, femoral surface
                            approach.                                                    with synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.
0SPD09Z..................  Removal of liner from       and   0SRU0JA..................  Replacement of left knee
                            left knee joint, open                                        joint, femoral surface
                            approach.                                                    with synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPD09Z..................  Removal of liner from       and   0SRU0JZ..................  Replacement of left knee
                            left knee joint, open                                        joint, femoral surface
                            approach.                                                    with synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPD09Z..................  Removal of liner from       and   0SRW0J9..................  Replacement of left knee
                            left knee joint, open                                        joint, tibial surface
                            approach.                                                    with synthetic
                                                                                         substitute, cemented,
                                                                                         open approach.

[[Page 49406]]

 
0SPD09Z..................  Removal of liner from       and   0SRW0JA..................  Replacement of left knee
                            left knee joint, open                                        joint, tibial surface
                            approach.                                                    with synthetic
                                                                                         substitute, uncemented,
                                                                                         open approach.
0SPD09Z..................  Removal of liner from       and   0SRW0JZ..................  Replacement of left knee
                            left knee joint, open                                        joint, tibial surface
                            approach.                                                    with synthetic
                                                                                         substitute, open
                                                                                         approach.
0SPD0JZ..................  Removal of synthetic        and   0SRU0J9..................  Replacement of left knee
                            substitute from left                                         joint, femoral surface
                            knee joint, open                                             with synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SPD0JZ..................  Removal of synthetic        and   0SRU0JA..................  Replacement of left knee
                            substitute from left                                         joint, femoral surface
                            knee joint, open                                             with synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SPD0JZ..................  Removal of synthetic        and   0SRW0J9..................  Replacement of left knee
                            substitute from left                                         joint, tibial surface
                            knee joint, open                                             with synthetic
                            approach.                                                    substitute, cemented,
                                                                                         open approach.
0SPD0JZ..................  Removal of synthetic        and   0SRW0JA..................  Replacement of left knee
                            substitute from left                                         joint, tibial surface
                            knee joint, open                                             with synthetic
                            approach.                                                    substitute, uncemented,
                                                                                         open approach.
0SPD0JZ..................  Removal of synthetic        and   0SRW0JZ..................  Replacement of left knee
                            substitute from left                                         joint, tibial surface
                            knee joint, open                                             with synthetic
                            approach.                                                    substitute, open
                                                                                         approach.
0SPD4JZ..................  Removal of synthetic        and   0SRU0J9..................  Replacement of left knee
                            substitute from left                                         joint, femoral surface
                            knee joint,                                                  with synthetic
                            percutaneous endoscopic                                      substitute, cemented,
                            approach.                                                    open approach.
0SPD4JZ..................  Removal of synthetic        and   0SRU0JA..................  Replacement of left knee
                            substitute from left                                         joint, femoral surface
                            knee joint,                                                  with synthetic
                            percutaneous endoscopic                                      substitute, uncemented,
                            approach.                                                    open approach.
0SPD4JZ..................  Removal of synthetic        and   0SRW0J9..................  Replacement of left knee
                            substitute from left                                         joint, tibial surface
                            knee joint,                                                  with synthetic
                            percutaneous endoscopic                                      substitute, cemented,
                            approach.                                                    open approach.
0SPD4JZ..................  Removal of synthetic        and   0SRW0JA..................  Replacement of left knee
                            substitute from left                                         joint, tibial surface
                            knee joint,                                                  with synthetic
                            percutaneous endoscopic                                      substitute, uncemented,
                            approach.                                                    open approach.
0SPD4JZ..................  Removal of synthetic        and   0SRW0JZ..................  Replacement of left knee
                            substitute from left                                         joint, tibial surface
                            knee joint,                                                  with synthetic
                            percutaneous endoscopic                                      substitute, open
                            approach.                                                    approach.
----------------------------------------------------------------------------------------------------------------

b. Spinal Fusion
    We received a request to revise the titles of MS-DRGs 456, 457, and 
458 (Spinal Fusion Except Cervical with Spinal Curvature/Malignancy/
Infection or 9+ Fusion with MCC, with CC, and without CC/MCC, 
respectively) for the ICD-10 MS-DRGs so that they more closely 
correspond to the terminology used to describe the ICD-10-PCS procedure 
codes without changing the ICD-10 MS-DRG logic. We agree with the 
requestor that revising the titles of these MS-DRGs would more 
appropriately identify the procedures classified under these groupings. 
Therefore, in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24395), we 
proposed new titles for these three MS-DRGs that would change the 
reference of ``9+ Fusions'' to ``Extensive Fusions.''
    We invited public comments on our proposal.
    Comment: Several commenters supported the proposal to modify the 
titles for ICD-10 MS-DRGs 456 through 458. The commenters stated that 
the proposal was reasonable, given the data and information provided.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to modify the titles for ICD-10 MS-DRGs 456 
through 458. The final title revisions to MS-DRGs 456, 457, and 458 for 
the FY 2016 ICD-10 MS-DRGs Version 33 are as follows:
     MS-DRG 456 (Spinal Fusion Except Cervical with Spinal 
Curvature/Malignancy/Infection or Extensive Fusion with MCC);
     MS-DRG 457 (Spinal Fusion Except Cervical with Spinal 
Curvature/Malignancy/Infection or Extensive Fusion with CC); and
     MS-DRG 458 (Spinal Fusion Except Cervical with Spinal 
Curvature/Malignancy/Infection or Extensive Fusion without CC/MCC).
5. MDC 14 (Pregnancy, Childbirth and the Puerperium): MS-DRG 775 
(Vaginal Delivery Without Complicating Diagnosis)
    We received a request to modify the logic for ICD-10 MS-DRG 775 
(Vaginal Delivery without Complicating Diagnosis) so that the procedure 
code for the induction of labor with a cervical ripening gel would not 
group to the incorrect MS-DRG when a normal delivery has occurred. ICD-
10-PCS procedure code 3E0P7GC (Introduction of other therapeutic 
substance into female reproductive, via natural or artificial opening) 
describes this procedure.
    We reviewed how this procedure code is currently classified under 
the ICD-10 MS-DRGs Version 32 and noted that it is currently designated 
as an operating room (O.R.) procedure code that affects MS-DRG 
assignment. In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24395), 
we agreed with the requestor that the current logic for ICD-10-PCS 
procedure code 3E0P7GC did not result in the appropriate MS-DRG 
assignment. The result of our analysis suggested that this code should 
not be designated as an O.R. code. Our clinical advisors agreed that 
this procedure did not require the intensity or complexity of service 
and resource utilization to merit an O.R. designation under ICD-10. 
Therefore, in the proposed rule, we proposed to make ICD-10-PCS 
procedure code 3E0P7GC a non-O.R. code so that cases reporting this 
procedure code will group to the appropriate MS-DRG assignment. We 
invited public comments on our proposal.
    Comment: Several commenters supported the proposal to modify the 
logic for ICD-10 MS-DRG 775 so that procedure code 3E0P7GC would not 
group to the incorrect MS-DRG when a normal delivery has occurred. The 
commenters stated that the proposal

[[Page 49407]]

was reasonable, given the data and information provided.
    Response: We appreciate the commenters' support for our proposal.
    After consideration of the public comments received, we are 
finalizing our proposal to modify the logic for ICD-10 MS-DRG 775 so 
that ICD-10-PCS procedure code 3E0P7GC will not group to the incorrect 
MS-DRG when a normal delivery has occurred.
    Our analysis of ICD-10-PCS procedure code 3E0P7GC also prompted the 
review of additional, similar codes that describe the introduction of a 
substance. We evaluated the following ICD-10-PCS procedure codes:
     3E0P76Z (Introduction of nutritional substance into female 
reproductive, via natural or artificial opening);
     3E0P77Z (Introduction of electrolytic and water balance 
substance into female reproductive, via natural or artificial opening);
     3E0P7SF (Introduction of other gas into female 
reproductive, via natural or artificial opening);
     3E0P83Z (Introduction of anti-inflammatory into female 
reproductive, via natural or artificial opening endoscopic);
     3E0P86Z (Introduction of nutritional substance into female 
reproductive, via natural or artificial opening endoscopic);
     3E0P87Z (Introduction of electrolytic and water balance 
substance into female reproductive, via natural or artificial opening 
endoscopic);
     3E0P8GC (Introduction of other therapeutic substance into 
female reproductive, via natural or artificial opening endoscopic); and
     3E0P8SF (Introduction of other gas into female 
reproductive, via natural or artificial opening endoscopic).
    From our analysis, we determined that these codes also are 
currently designated as O.R. codes which affect MS-DRG assignment. Our 
clinical advisors recommended that these codes should also be 
designated as non-O.R. because they do not require the intensity or 
complexity of service and resource utilization to merit an O.R. 
designation under the ICD-10 MS-DRGs. As a result of our analysis and 
based on our clinical advisors' recommendation, in the FY 2016 IPPS/
LTCH PPS proposed rule (80 FR 24395), we proposed to designate the 
above listed ICD-10-PCS procedure codes as non-O.R. procedure codes to 
ensure that these codes will group to the appropriate MS-DRG 
assignment.
    We invited public comments on our proposal.
    Comment: Several commenters agreed with the proposal to change the 
designation for the additional ICD-10-PCS codes listed in the proposed 
rule describing the introduction of a substance from O.R. to non-O.R. 
The commenters stated that the proposal was reasonable, given the data 
and information provided.
    Response: We appreciate the commenters' support.
    After consideration of the public comments received, we are 
finalizing our proposal to designate the following ICD-10-PCS procedure 
codes as non-O.R. for the FY 2016 ICD-10 MS-DRGs Version 33: 3E0P76Z; 
3E0P77Z; 3E0P7SF; 3E0P83Z; 3E0P86Z; 3E0P87Z; 3E0P8GC; and 3E0P8SF.
6. MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs): CroFab 
Antivenin Drug
    We received a request that CMS change the MS-DRG assignment for 
antivenom cases from MS-DRG 917 and 918 (Poisoning & Toxic Effects of 
Drugs with and without MCC, respectively). For the FY 2016 IPPS/LTCH 
PPS proposed rule, for these MS-DRGs, we examined claims data from the 
December 2014 update of the FY 2014 MedPAR file for cases reporting 
ICD-9-CM diagnosis codes of a principal diagnosis 989.5 (Toxic effect 
of venom), a secondary diagnosis ICD-9-CM E code of E905.0 (Venomous 
snakes and lizards), and the ICD-9-CM procedure code of 99.16 
(Injection of antidote), which is a non-O.R. code and does not impact 
the MS-DRG assignment.
    For the ICD-9-CM diagnosis code 989.5 (Toxic effect of venom), the 
ICD-10-CM provides more detailed diagnosis codes for these toxic 
effects of venom cases as shown in the following table:

      ICD-10-CM Code Translations for ICD-9-CM Diagnosis Code 989.5
------------------------------------------------------------------------
      ICD-10-CM Code                      Code description
------------------------------------------------------------------------
T63.001A.................  Toxic effect of unspecified snake venom,
                            accidental (unintentional), initial
                            encounter.
T63.011A.................  Toxic effect of rattlesnake venom, accidental
                            (unintentional) initial encounter.
T63.021A.................  Toxic effect of coral snake venom, accidental
                            (unintentional), initial encounter.
T63.031A.................  Toxic effect of taipan venom, accidental
                            (unintentional), initial encounter.
T63.041A.................  Toxic effect of cobra venom, accidental
                            (unintentional), initial encounter.
T63.061A.................  Toxic effect of venom of other North and
                            South American snake, accidental
                            (unintentional), initial encounter.
T63.71A..................  Toxic effect of venom of other Australian
                            snake, accidental (unintentional), initial
                            encounter.
T63.081A.................  Toxic effect of venom of other African and
                            Asian snake, accidental (unintentional),
                            initial encounter.
T63.091A.................  Toxic effect of venom of other snake,
                            accidental (unintentional), initial
                            encounter.
------------------------------------------------------------------------

    For the ICD-9-CM Supplementary Classification of External Causes of 
Injury and Poisoning code E905.0 (Venomous snakes and lizards), ICD-10-
CM provides more detailed diagnosis codes for these cases as shown in 
the following table:

          ICD-10-CM Code Translations for ICD-9-CM Code E905.0
------------------------------------------------------------------------
      ICD-10-CM Code                      Code description
------------------------------------------------------------------------
T63.001A.................  Toxic effect of unspecified snake venom,
                            accidental (unintentional), initial
                            encounter.
T63.011A.................  Toxic effect of rattlesnake venom, accidental
                            (unintentional) initial encounter.
T63.021A.................  Toxic effect of coral snake venom, accidental
                            (unintentional), initial encounter.
T63.031A.................  Toxic effect of taipan venom, accidental
                            (unintentional), initial encounter.
T63.041A.................  Toxic effect of cobra venom, accidental
                            (unintentional), initial encounter.
T63.061A.................  Toxic effect of venom of other North and
                            South American snake, accidental
                            (unintentional), initial encounter.

[[Page 49408]]

 
T63.71A..................  Toxic effect of venom of other Australian
                            snake, accidental (unintentional), initial
                            encounter.
T63.081A.................  Toxic effect of venom of other African and
                            Asian snake, accidental (unintentional),
                            initial encounter.
T63.091A.................  Toxic effect of venom of other snake,
                            accidental (unintentional), initial
                            encounter.
------------------------------------------------------------------------

    We examined claims data for reported cases involving injections for 
snake bites in MS-DRGs 917 and 918 from the December 2014 update of the 
FY 2014 MedPAR file. Our findings are displayed in the table below.

                                           Snake Bite With Injections
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 917--All cases...........................................          26,393            4.77          $9,983
MS-DRG 917--Cases with principal diagnosis code 989.5 and                      0               0               0
 secondary diagnosis code E905.0 with procedure code 99.16 (non-
 OR)............................................................
MS-DRG 918--All cases...........................................          24,557            2.90           4,953
MS-DRG 918--Cases with principal diagnosis code 989.5 and                     19            2.16          12,014
 secondary diagnosis code E905.0 with procedure code 99.16 (non-
 OR)............................................................
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, we identified 19 cases involving 
injections for snake bites reported in MS-DRG 918 only. In the FY 2016 
IPPS/LTCH PPS proposed rule, we pointed out that this small number of 
cases (19) does not provide justification to create a new MS-DRG. The 
cases are assigned to the same MS-DRG as are other types of poisonings 
and toxic effects. We were unable to identify another MS-DRG that would 
be a more appropriate MS-DRG assignment for these cases based on the 
clinical nature of this condition. The MS-DRGs are a classification 
system intended to group together diagnoses and procedures with similar 
clinical characteristics and utilization of resources. Basing a new MS-
DRG on such a small number of cases (19) could lead to distortions in 
the relative payment weights for the MS-DRG because several expensive 
cases could impact the overall relative payment weight. Having larger 
clinical cohesive groups within an MS-DRG provides greater stability 
for annual updates to the relative payment weights.
    Our clinical advisors reviewed the data, evaluated these 
conditions, and recommended that we not change the MS-DRG assignment 
for procedures involving the injection of the CroFab antivenom drug for 
snake bites because these cases are clinically similar to other 
poisoning cases currently assigned to MS-DRGs 917 and 918. Based on the 
findings in our data analysis and the recommendations of our clinical 
advisors, in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24397), we 
did not propose to create a new MS-DRG for cases of CroFab antivenom 
drugs for snake bites. We proposed to maintain the current assignment 
of diagnosis codes in MS-DRGs 917 and 918. We invited public comments 
on our proposal.
    Comment: A number of commenters supported the proposal to maintain 
the current MS-DRG assignment for procedures involving CroFab 
antivenom. The commenters stated that the proposal was reasonable, 
given the data and information provided.
    Response: We appreciate the commenters' support for our proposal.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the current MS-DRG assignment for 
procedures involving the CroFab antivenom drug for snakebites to MS-
DRGs 917 and 918.
7. MDC 22 (Burns): Additional Severity of Illness Level for MS-DRG 927 
(Extensive Burns or Full Thickness Burns With Mechanical Ventilation 
96+ Hours With Skin Graft)
    We received a request to add an additional severity level to MS-DRG 
927 (Extensive Burns or Full Thickness Burns with Mechanical 
Ventilation 96+ Hours with Skin Graft). The requestor was concerned 
about payment for severe burn cases that used dermal regenerative 
grafts. These grafts are captured by ICD-9-CM procedure code 86.67 
(Dermal regenerative graft). The requestor stated that the total cost 
of these graft cases is significantly greater than the average total 
costs for all cases in MS-DRG 927. The requestor stated that the dermal 
regenerative grafts are used to cover large burns where donor skin is 
not available. The requestor stated that the grafts provide permanent 
covering of the wound and thus immediate closure of the wound. The 
requestor asserted that the grafts offer benefits such as the avoidance 
of infections. The requestor pointed out that MS-DRG 927 is not 
subdivided into severity of illness levels and recommended an 
additional severity level be added to address any payment issues for 
dermal regenerative grafts within MS-DRG 927.
    ICD-10-PCS provides more detailed and specific codes for skin 
grafts. The ICD-10-PCS codes for skin grafts provide specific 
information on the part of the body receiving the skin graft, the type 
of graft, and the approach used to apply the graft. These codes can be 
found in the table labeled ``OHR (Replacement of Skin)'' in the ICD-10 
MS-DRG Version 32 Definitions Manual available on the Internet at: 
http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. As stated earlier, for the ICD-9-CM codes that result in 
greater than 50 ICD-10-PCS comparable code translations, we referred 
readers to Table 6P (ICD-10-PCS Code Translations for Final MS-DRG 
Changes), which is available via the Internet on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. The table includes the MDC topic, the 
ICD-9-CM code, and the ICD-10-PCS code translations. In Table 6P.2a, we 
show the comparable ICD-10-PCS codes for ICD-9-CM code 86.67 (Dermal 
regenerative graft).
    We examined claims data for cases reported in MS-DRG 927 from the 
December 2014 update of the FY 2014

[[Page 49409]]

MedPAR file. The following table shows our findings.

         Extensive Burns or Full Thickness Burns With Mechanical Ventilation 96+ Hours With Skin Graft)
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 927--All cases...........................................             171           29.92        $113,844
MS-DRG 927--Cases with procedure code 86.67.....................              22            33.5         146,903
MS-DRG 927--Cases with procedure code 86.67 and 96.72                         14            38.6         174,372
 (Mechanical ventilation for 96+ hours).........................
MS-DRG 927--Cases with procedure code 86.67 and without 96.72                  8            24.6          98,482
 (Mechanical ventilation for 96+ hours).........................
MS-DRG 927--All cases with MCC..................................             131           31.51         121,519
MS-DRG 927--All cases with CC...................................              38           25.21          91,910
MS-DRG 927--All cases without CC/MCC............................               2           15.00          27,872
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, we found a total of 171 cases in MS-
DRG 927. Of these 171 cases, there were 131 cases with an MCC, 38 cases 
with a CC, and 2 cases without a CC or an MCC. We determined that the 
requested new severity level did not meet all of the criteria 
established in the FY 2008 IPPS final rule (72 FR 47169), and described 
in section II.G.1.b. of the preamble of the proposed rule, that must be 
met to warrant the creation of a CC or an MCC subgroup within a base 
MS-DRG. Specifically, the requested new severity level did not meet the 
criterion that there are at least 500 cases in the CC or MCC subgroup.
    We also pointed out that the long-term mechanical ventilation cases 
are driving the costs to a greater extent than the graft cases. We 
found that the 22 cases that received a graft had average costs of 
$146,903. The 14 cases that had both 96+ hours of mechanical 
ventilation and a graft had average costs of $174,372. The 8 cases that 
had a graft but did not receive 96+ hours of mechanical ventilation had 
average costs of $98,482.
    Our clinical advisors reviewed this issue and recommended making no 
MS-DRG updates for MS-DRG 927. They advised us that the dermal 
regenerative graft cases are appropriately assigned to the MS-DRG 927 
because they are clinically similar to other cases within MS-DRG 927. 
Our clinical advisors also agreed that the cases in MS-DRG 927 do not 
meet the established criterion for creating a new severity level.
    Based on the findings of our data analysis, the fact that MS-DRG 
927 did not meet the criterion for the creation of an additional 
severity level, and the recommendations of our clinical advisors, in 
the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24397), we did not 
propose to create a new severity level for MS-DRG 927. We proposed to 
maintain the current MS-DRG 927 structure without additional severity 
levels. We invited public comments on our proposal.
    Comment: A number of commenters supported the proposal to maintain 
the current MS-DRG 927 structure without creating additional severity 
levels. The commenters stated that the proposal was reasonable, given 
the data and information provided.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the current MS-DRG 927 structure 
without creating additional severity levels.
8. Medicare Code Editor (MCE) Changes
    The Medicare Code Editor (MCE) is a software program that detects 
and reports errors in the coding of Medicare claims data. Patient 
diagnoses, procedure(s), and demographic information are entered into 
the Medicare claims processing systems and are subjected to a series of 
automated screens. The MCE screens are designed to identify cases that 
require further review before classification into an MS-DRG.
    As discussed in section II.G.1.a. of the preamble of the FY 2016 
IPPS/LTCH PPS proposed rule and this final rule, CMS prepared the ICD-
10 MS-DRGs Version 32 based on the FY 2015 MS-DRGs (Version 32) that we 
finalized in the FY 2015 IPPS/LTCH PPS final rule. In November 2014, we 
made available a Definitions Manual of the ICD-10 MS-DRGs Version 32 
and the MCE Version 32 on the ICD-10 MS-DRG Conversion Project Web site 
at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We also prepared a document that described the changes 
made between Version 31-R to Version 32 to help facilitate a review of 
the ICD-10 MS-DRGs logic. We produced mainframe and computer software 
for ICD-10 MS-DRGs Version 32 and MCE Version 32, which was made 
available to the public in January 2015. Information on ordering the 
mainframe and computer software through NTIS was made available on the 
CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Related Links'' section. We 
encouraged the public to submit to CMS any comments on areas where they 
believed the ICD-10 MS-DRG GROUPER and MCE did not accurately reflect 
the logic and edits found in the ICD-9-CM MS-DRG GROUPER and the MCE.
    For FY 2016, in order to be consistent with the ICD-9-CM MS-DRG 
GROUPER and MCE Version 32, we proposed to add the ICD-10-CM codes 
listed in the table below to the ICD-10 MCE Version 33 of the 
``Manifestation codes not allowed as principal diagnosis'' edit. Under 
the MCE, manifestation codes describe the ``manifestation'' of an 
underlying disease, not the disease itself. Because these codes do not 
describe the disease itself, they should not be used as principal 
diagnoses.

[[Page 49410]]



       ICD-10-CM Codes Proposed To Be Added to the Version 33 MCE
     ``Manifestation Codes Not Allowed as Principal Diagnosis'' Edit
------------------------------------------------------------------------
      ICD-10-CM Code                      Code description
------------------------------------------------------------------------
D75.81...................  Myelofibrosis.
E08.00...................  Diabetes mellitus due to underlying condition
                            with hyperosmolarity without nonketotic
                            hyperglycemic-hyperosmolar coma (NKHHC).
E08.01...................  Diabetes mellitus due to underlying condition
                            with hyperosmolarity with coma.
E08.10...................  Diabetes mellitus due to underlying condition
                            with ketoacidosis without coma.
E08.11...................  Diabetes mellitus due to underlying condition
                            with ketoacidosis with coma.
E08.21...................  Diabetes mellitus due to underlying condition
                            with diabetic nephropathy.
E08.22...................  Diabetes mellitus due to underlying condition
                            with diabetic chronic kidney disease.
E08.29...................  Diabetes mellitus due to underlying condition
                            with other diabetic kidney complication.
E08.311..................  Diabetes mellitus due to underlying condition
                            with unspecified diabetic retinopathy with
                            macular edema.
E08.319..................  Diabetes mellitus due to underlying condition
                            with unspecified diabetic retinopathy
                            without macular edema.
E08.321..................  Diabetes mellitus due to underlying condition
                            with mild nonproliferative diabetic
                            retinopathy with macular edema.
E08.329..................  Diabetes mellitus due to underlying condition
                            with mild nonproliferative diabetic
                            retinopathy without macular edema.
E08.331..................  Diabetes mellitus due to underlying condition
                            with moderate nonproliferative diabetic
                            retinopathy with macular edema.
E08.339..................  Diabetes mellitus due to underlying condition
                            with moderate nonproliferative diabetic
                            retinopathy without macular edema.
E08.341..................  Diabetes mellitus due to underlying condition
                            with severe nonproliferative diabetic
                            retinopathy with macular edema.
E08.349..................  Diabetes mellitus due to underlying condition
                            with severe nonproliferative diabetic
                            retinopathy without macular edema.
E08.351..................  Diabetes mellitus due to underlying condition
                            with proliferative diabetic retinopathy with
                            macular edema.
E08.359..................  Diabetes mellitus due to underlying condition
                            with proliferative diabetic retinopathy
                            without macular edema.
E08.36...................  Diabetes mellitus due to underlying condition
                            with diabetic cataract.
E08.39...................  Diabetes mellitus due to underlying condition
                            with other diabetic ophthalmic complication.
E08.40...................  Diabetes mellitus due to underlying condition
                            with diabetic neuropathy, unspecified.
E08.41...................  Diabetes mellitus due to underlying condition
                            with diabetic mononeuropathy.
E08.42...................  Diabetes mellitus due to underlying condition
                            with diabetic polyneuropathy.
E08.43...................  Diabetes mellitus due to underlying condition
                            with diabetic autonomic (poly)neuropathy.
E08.44...................  Diabetes mellitus due to underlying condition
                            with diabetic amyotrophy.
E08.49...................  Diabetes mellitus due to underlying condition
                            with other diabetic neurological
                            complication.
E08.51...................  Diabetes mellitus due to underlying condition
                            with diabetic peripheral angiopathy without
                            gangrene.
E08.52...................  Diabetes mellitus due to underlying condition
                            with diabetic peripheral angiopathy with
                            gangrene.
E08.59...................  Diabetes mellitus due to underlying condition
                            with other circulatory complications.
E08.610..................  Diabetes mellitus due to underlying condition
                            with diabetic neuropathic arthropathy.
E08.618..................  Diabetes mellitus due to underlying condition
                            with other diabetic arthropathy.
E08.620..................  Diabetes mellitus due to underlying condition
                            with diabetic dermatitis.
E08.621..................  Diabetes mellitus due to underlying condition
                            with foot ulcer.
E08.622..................  Diabetes mellitus due to underlying condition
                            with other skin ulcer.
E08.628..................  Diabetes mellitus due to underlying condition
                            with other skin complications.
E08.630..................  Diabetes mellitus due to underlying condition
                            with periodontal disease.
E08.638..................  Diabetes mellitus due to underlying condition
                            with other oral complications.
E08.641..................  Diabetes mellitus due to underlying condition
                            with hypoglycemia with coma.
E08.649..................  Diabetes mellitus due to underlying condition
                            with hypoglycemia without coma.
E08.65...................  Diabetes mellitus due to underlying condition
                            with hyperglycemia.
E08.69...................  Diabetes mellitus due to underlying condition
                            with other specified complication.
E08.8....................  Diabetes mellitus due to underlying condition
                            with unspecified complications.
E08.9....................  Diabetes mellitus due to underlying condition
                            without complications.
------------------------------------------------------------------------

    We invited public comment on our proposal to add the above list of 
ICD-10-CM diagnosis codes to the ``Manifestation codes not allowed as 
principal diagnosis'' edit in the FY 2016 ICD-10 MCE Version 33.
    Comment: Several commenters supported the proposal to add the above 
listed ICD-10-CM diagnosis codes to the ``Manifestation codes not 
allowed as principal diagnosis'' edit in the FY 2016 ICD-10 MCE Version 
33. The commenters stated that the proposed changes for the ICD-10 MCE 
seemed reasonable, given the data and information provided. However, 
one commenter asserted that the code description for ICD-10-CM 
diagnosis code D75.81, ``Myelofibrosis'', as displayed in the table in 
the proposed rule was inaccurate and that the more accurate long 
description is ``Secondary myelofibrosis''. The commenter stated that 
if the proposal for myelofibrosis under the ``Manifestation codes not 
allowed as principal diagnosis'' edit is restricted to ``secondary 
myelofibrosis,'' it would support the proposal. This commenter 
indicated that the disease of myelofibrosis is often the main reason 
for admission as it is a well-defined myeloproliferative neoplasm.
    The commenter also noted it recently participated in proposals 
related to expanding coverage indications for hematopoietic stem cell 
transplant to include patients with a principal diagnosis of 
myelofibrosis. The commenter stated that primary or idiopathic 
myelofibrosis is coded with ICD-9-CM code 238.76 (Myelofibrosis with 
myeloid metaplasia) and will be reported with ICD-10-PCS code D47.1 
(Chronic myeloproliferative disease). The commenter expressed a desire 
for coding of this condition to not create confusion as implementation 
of ICD-10 approaches and pledged to work with its members to confirm 
understanding.
    Response: We appreciate the commenters' support of our proposal to 
add the listed ICD-10-CM diagnosis codes to the ICD-10 MCE Version 33 
of the ``Manifestation codes not allowed as principal diagnosis'' edit. 
With regard to the commenter who asserted that the code description for 
ICD-10-CM diagnosis code D75.81 was inaccurate and that the more 
accurate long description is ``Secondary

[[Page 49411]]

myelofibrosis'', we point out that the official ICD-10-CM diagnosis 
code title description, as displayed in the 2015 Code Descriptions in 
Tabular Order file, which is available on the CMS ICD-10 Web site at 
http://www.cms.gov/Medicare/Coding/ICD10/2015-ICD-10-CM-and-GEMs.html 
in the Downloads section, is as presented in the FY 2016 IPPS/LTCH PPS 
proposed rule, ``Myelofibrosis''. In response to the commenter's 
statement that if the proposal for myelofibrosis under the 
``Manifestation codes not allowed as principal diagnosis'' edit is 
restricted to ``secondary myelofibrosis,'' the commenter would support 
it, we note that ICD-10-CM diagnosis code D75.81 (Myelofibrosis) has an 
inclusion term of ``Secondary myelofibrosis NOS''. (Within ICD-10-CM, 
an inclusion term is defined as a term that is included under certain 
codes. The term represents a condition for which that code is to be 
used. The term may also be a synonym of the code title. We refer the 
reader to the ICD-10-CM Official Guidelines for Coding and Reporting 
for additional information related to inclusion terms.) As such, we 
believe the proposal to include ICD-10-CM diagnosis code D75.81 
(Myelofibrosis) on the list of ``Manifestation codes not allowed as 
principal diagnosis'' edit is not inconsistent with the commenter's 
statement of support for a proposal restricted to ``secondary 
myelofibrosis.'' In response to the commenter indicating that the 
disease of myelofibrosis is often the main reason for admission as it 
is a well-defined myeloproliferative neoplasm, we note that, under both 
ICD-9-CM and ICD-10-CM, myelofibrosis is a manifestation code. As 
discussed previously, manifestation codes describe the manifestation of 
an underlying disease, not the disease itself, and therefore should not 
be used as a principal diagnosis. We also point out that a ``code 
first'' note appears at ICD-10-CM diagnosis code D75.81 
(Myelofibrosis). The ``code first'' note is an etiology/manifestation 
coding convention (additional detail can be found in the ICD-10-CM 
Official Guidelines for Coding and Reporting), indicating that the 
condition has both an underlying etiology and manifestation due to the 
underlying etiology.
    The commenter is correct that primary or idiopathic myelofibrosis 
is coded with ICD-9-CM code 238.76 (Myelofibrosis with myeloid 
metaplasia) and the comparable ICD-10-PCS procedure code translation is 
D47.1 (Chronic myeloproliferative disease). We also acknowledge and 
appreciate that the commenter stated its intent to work with its 
members to confirm understanding of coding as it relates to 
myelofibrosis as the transition to ICD-10 approaches. We encourage the 
commenter to review the ICD-10-CM Official Guidelines for Coding and 
Reporting to assist in that effort.
    After consideration of the public comments we received, for FY 
2016, we are finalizing our proposal to add the ICD-10-PCS codes listed 
earlier in this section to the ICD-10 MCE Version 33 ``Manifestation 
codes not allowed as principal diagnosis'' edit, which will ensure 
consistency with the ICD-9-CM MS-DRG GROUPER and MCE Version 32.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24398 through 
24399), we also proposed to revise the language describing the 
``Procedure inconsistent with LOS (Length of stay)'' edit which lists 
ICD-10-PCS code 5A1955Z (Respiratory ventilation, greater than 96 
consecutive hours), effective for the FY 2016 ICD-10 MCE Version 33. 
Currently, in Version 32 of the ICD-10 MCE, the language describing 
this ``Procedure inconsistent with LOS (Length of stay)'' edit states: 
``The following procedure should only be coded on claims with a length 
of stay of four days or greater.'' Because the code description of the 
ICD-10-PCS code is for ventilation that occurs greater than 96 
consecutive hours, we proposed to revise the language for the edit to 
read: ``The following procedure code should only be coded on claims 
with a length of stay greater than 4 days.'' This proposed revision 
would clarify the intent of this MCE edit. We invited public comments 
on our proposal.
    Comment: Several commenters supported the proposal to revise the 
language describing the ``Procedure inconsistent with LOS (Length of 
stay)'' edit. The commenters stated that the proposed changes seem 
reasonable, given the data and information provided.
    Response: We appreciate the commenters' support.
    Consistent with the proposal to revise the language for the 
``Procedure inconsistent with LOS (Length of stay)'' edit because the 
code description for ICD-10-PCS code 5A1955Z is for ventilation that 
occurs greater than 96 consecutive hours, we determined that it is also 
necessary to revise the language for the corresponding ICD-10 MS-DRG 
titles that currently reference the ICD-9-CM terminology for mechanical 
ventilation of ``96 + hours'' based on the ICD-9-CM procedure code 
96.72 (Continuous invasive mechanical ventilation for 96 consecutive 
hours or more) to instead reflect the terminology for the ICD-10-PCS 
code translation. Consistent with the logic for the ICD-9-CM MS-DRGs 
Version 32, ICD-10-PCS code 5A1955Z is assigned to these same MS-DRGs 
under the ICD-10 MS-DRGs Version 33. Under ICD-9-CM, the following six 
MS-DRGs contain GROUPER and MCE logic based on procedure code 96.72:
     MS-DRG 003 (ECMO or Tracheostomy with Mechanical 
Ventilation 96+ Hours or Principal Diagnosis Except, Face Mouth and 
Neck with Major Operating Room Procedure);
     MS-DRG 004 (Tracheostomy with Mechanical Ventilation 96+ 
Hours or Principal Diagnosis Except, Face Mouth and Neck without Major 
Operating Room Procedure);
     MS-DRG 207 (Respiratory System Diagnosis with Ventilator 
Support 96+Hours);
     MS-DRG 870 (Septicemia or Severe Sepsis with Mechanical 
Ventilation 96+ Hours);
     MS-DRG 927 (Extensive Burns or Full Thickness Burns with 
Mechanical Ventilation 96+ Hours with Skin Graft); and
     MS-DRG 933 (Extensive Burns or Full Thickness Burns with 
Mechanical Ventilation 96+ Hours without Skin Graft).
    The following two MS-DRGs do not include GROUPER and MCE logic 
based on procedure code 96.72. However, the titles currently include 
the terminology for without mechanical ventilation of ``96 + hours''.
     MS-DRG 871 (Septicemia or Severe Sepsis without Mechanical 
Ventilation 96+ Hours with MCC); and
     MS-DRG 872 (Septicemia or Severe Sepsis without Mechanical 
Ventilation 96+ Hours with CC).
    Therefore, we are revising the titles for the corresponding ICD-10 
MS-DRGs as the GROUPER and MCE logic include ICD-10-PCS code 5A1955Z 
(Respiratory ventilation, greater than 96 consecutive hours) or the 
language in the title of the MS-DRG includes without mechanical 
ventilation of ``96 + hours''. The revision to the titles is to add a 
``greater than'' sign (>) before the 96 to reflect ``> 96 consecutive 
hours'' and to remove the ``plus sign'' (+) after the 96.
    After consideration of the public comments received, we are 
finalizing our proposal to revise the language describing the 
``Procedure inconsistent with LOS (Length of stay)'' edit which lists 
ICD-10-PCS code 5A1955Z (Respiratory ventilation, greater than 96 
consecutive hours). Consistent with that proposal, we also are revising 
the ICD-

[[Page 49412]]

10 MS-DRG Version 33 titles as follows, effective for FY 2016.
     MS-DRG 003: ``(ECMO or Tracheostomy with Mechanical 
Ventilation >96 Hours or Principal Diagnosis Except, Face Mouth and 
Neck with Major Operating Room Procedure'';
     MS-DRG 004: ``Tracheostomy with Mechanical Ventilation >96 
Hours or Principal Diagnosis Except, Face Mouth and Neck without Major 
Operating Room Procedure'';
     MS-DRG 007: ``Respiratory System Diagnosis with Ventilator 
Support >96 Hours'';
     MS-DRG 870: ``Septicemia or Severe Sepsis with Mechanical 
Ventilation >96 Hours'';
     MS-DRG 871: ``Septicemia or Severe Sepsis without 
Mechanical Ventilation >96 Hours with MCC'';
     MS-DRG 872: ``Septicemia or Severe Sepsis without 
Mechanical Ventilation >96 Hours with CC'';
     MS-DRG 927: ``Extensive Burns or Full Thickness Burns with 
Mechanical Ventilation >96 Hours with Skin Graft''; and
     MS-DRG 933: ``Extensive Burns or Full Thickness Burns with 
Mechanical Ventilation >96 Hours without Skin Graft''.
9. Changes to Surgical Hierarchies
    Some inpatient stays entail multiple surgical procedures, each one 
of which, occurring by itself, could result in assignment of the case 
to a different MS-DRG within the MDC to which the principal diagnosis 
is assigned. Therefore, it is necessary to have a decision rule within 
the GROUPER by which these cases are assigned to a single MS-DRG. The 
surgical hierarchy, an ordering of surgical classes from most resource-
intensive to least resource-intensive, performs that function. 
Application of this hierarchy ensures that cases involving multiple 
surgical procedures are assigned to the MS-DRG associated with the most 
resource-intensive surgical class.
    Because the relative resource intensity of surgical classes can 
shift as a function of MS-DRG reclassification and recalibrations, for 
FY 2016, we reviewed the surgical hierarchy of each MDC, as we have for 
previous reclassifications and recalibrations, to determine if the 
ordering of classes coincides with the intensity of resource 
utilization.
    A surgical class can be composed of one or more MS-DRGs. For 
example, in MDC 11, the surgical class ``kidney transplant'' consists 
of a single MS-DRG (MS-DRG 652) and the class ``major bladder 
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655). 
Consequently, in many cases, the surgical hierarchy has an impact on 
more than one MS-DRG. The methodology for determining the most 
resource-intensive surgical class involves weighting the average 
resources for each MS-DRG by frequency to determine the weighted 
average resources for each surgical class. For example, assume surgical 
class A includes MS-DRGs 001 and 002 and surgical class B includes MS-
DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG 
001 are higher than that of MS-DRG 003, but the average costs of MS-
DRGs 004 and 005 are higher than the average costs of MS-DRG 002. To 
determine whether surgical class A should be higher or lower than 
surgical class B in the surgical hierarchy, we would weigh the average 
costs of each MS-DRG in the class by frequency (that is, by the number 
of cases in the MS-DRG) to determine average resource consumption for 
the surgical class. The surgical classes would then be ordered from the 
class with the highest average resource utilization to that with the 
lowest, with the exception of ``other O.R. procedures'' as discussed 
below.
    This methodology may occasionally result in assignment of a case 
involving multiple procedures to the lower-weighted MS-DRG (in the 
highest, most resource-intensive surgical class) of the available 
alternatives. However, given that the logic underlying the surgical 
hierarchy provides that the GROUPER search for the procedure in the 
most resource-intensive surgical class, in cases involving multiple 
procedures, this result is sometimes unavoidable.
    We note that, notwithstanding the foregoing discussion, there are a 
few instances when a surgical class with a lower average cost is 
ordered above a surgical class with a higher average cost. For example, 
the ``other O.R. procedures'' surgical class is uniformly ordered last 
in the surgical hierarchy of each MDC in which it occurs, regardless of 
the fact that the average costs for the MS-DRG or MS-DRGs in that 
surgical class may be higher than those for other surgical classes in 
the MDC. The ``other O.R. procedures'' class is a group of procedures 
that are only infrequently related to the diagnoses in the MDC, but are 
still occasionally performed on patients with cases assigned to the MDC 
with these diagnoses. Therefore, assignment to these surgical classes 
should only occur if no other surgical class more closely related to 
the diagnoses in the MDC is appropriate.
    A second example occurs when the difference between the average 
costs for two surgical classes is very small. We have found that small 
differences generally do not warrant reordering of the hierarchy 
because, as a result of reassigning cases on the basis of the hierarchy 
change, the average costs are likely to shift such that the higher-
ordered surgical class has lower average costs than the class ordered 
below it.
    Based on the changes that we proposed to make for FY 2016, as 
discussed in section II.G.3.e. of the preamble of the FY 2016 IPPS/LTCH 
PPS proposed rule, we proposed to revise the surgical hierarchy for MDC 
5 (Diseases and Disorders of the Circulatory System) (80 FR 24399). 
Specifically, we proposed to delete MS-DRG 237 (Major Cardiovascular 
Procedures with MCC) and MS-DRG 238 (Major Cardiovascular Procedures 
without MCC) from the surgical hierarchy. We proposed to sequence 
proposed new MS-DRG 268 (Aortic and Heart Assist Procedures Except 
Pulsation Balloon with MCC) and proposed new MS-DRG 269 (Aortic and 
Heart Assist Procedures Except Pulsation Balloon without MCC) above 
proposed new MS-DRG 270 (Other Major Cardiovascular Procedures with 
MCC), proposed new MS-DRG 271 (Other Major Cardiovascular Procedures 
with CC), and proposed new MS-DRG 272 (Other Major Cardiovascular 
Procedures without CC/MCC). We proposed to sequence proposed new MS-
DRGs 270, 271, and 272 above MS-DRG 239 (Amputation for Circulatory 
System Disorders Except Upper Limb & Toe with MCC). In addition, we 
proposed to sequence proposed new MS-DRG 273 (Percutaneous Intracardiac 
Procedures with MCC) and proposed new MS-DRG 274 (Percutaneous 
Intracardiac Procedures without MCC) above MS-DRG 246 (Percutaneous 
Cardiovascular Procedure with Drug-eluting Stent with MCC or 4+ 
Vessels/Stents).
    We invited public comments on our proposals.
    We did not receive any public comments on our proposals for the 
surgical hierarchy within MDC 5. Therefore, we are finalizing our 
proposals to delete ICD-9-CM MS-DRG 237 and ICD-9-CM MS-DRG 238 from 
the surgical hierarchy. We are adopting as final the sequencing of new 
ICD-10 MS-DRG 268 and new ICD-10 MS-DRG 269 above new ICD-10 MS-DRG 
270, new ICD-10MS-DRG 271, and new ICD-10 MS-DRG 272. We also are 
finalizing our proposal to sequence new ICD-10 MS-DRGs 270, 271, and 
272 above ICD-10 MS-DRG 239. Lastly, we are finalizing the sequencing 
of new ICD-10 MS-DRG 273 and new ICD-10 MS-DRG 274 above ICD-10 MS-DRG 
246.

[[Page 49413]]

10. Changes to the MS-DRG Diagnosis Codes for FY 2016
a. Major Complications or Comorbidities (MCCs) and Complications or 
Comorbidities (CC) Severity Levels for FY 2016
    A complete updated MCC, CC, and Non-CC Exclusion List is available 
via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as 
follows:
     Table 6I (Complete MCC list);
     Table 6J (Complete CC list); and
     Table 6K (Complete list of CC Exclusions).
b. Coronary Atherosclerosis Due to Calcified Coronary Lesion
    We received a request that we change the severity levels for ICD-9-
CM diagnosis codes 414.2 (Chronic total occlusion of coronary artery) 
and 414.4 (Coronary atherosclerosis due to calcified coronary lesion) 
from non-CCs to MCCs. The ICD-10-CM codes for these diagnoses are 
I25.82 (Chronic total occlusion of coronary artery) and I25.84 
(Coronary atherosclerosis due to calcified coronary lesion), 
respectively, and both of these codes are currently classified as non-
CCs.
    This issue was previously discussed in the FY 2014 IPPS/LTCH PPS 
proposed rule and final rule (78 FR 27522 and 78 FR 50541 through 
50542, respectively), and the FY 2015 IPPS/LTCH PPS proposed rule and 
final rule (79 FR 28018 and 28019 and 79 FR 49903 and 49904, 
respectively).
    We examined claims data from the December 2014 update of the FY 
2014 MedPAR file for ICD-9-CM diagnosis codes 414.2 and 414.4. The 
following table shows our findings.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     Cnt 1                 Cnt 2                 Cnt 3
              SDX                      SDX description                CC level            Cnt 1      impact     Cnt 2      impact     Cnt 3      impact
--------------------------------------------------------------------------------------------------------------------------------------------------------
414.2..........................  Chronic total occlusion of  Non-CC...................     14,655      1.393     21,222      2.098     20,615      3.046
                                  coronary artery.
414.4..........................  Coronary atherosclerosis    Non-CC...................      1,752      1.412      3,238      2.148      3,244      3.053
                                  due to calcified coronary
                                  lesion.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We ran the data using the criteria described in the FY 2008 IPPS 
final rule with comment period (72 FR 47169) to determine severity 
levels for procedures in MS-DRGs. The C1 value reflects a patient with 
no other secondary diagnosis or with all other secondary diagnoses that 
are non-CCs. The C2 value reflects a patient with at least one other 
secondary diagnosis that is a CC, but none that is an MCC. The C3 value 
reflects a patient with at least one other secondary diagnosis that is 
an MCC.
    The table above shows that the C1 finding is 1.393 for ICD-9-CM 
diagnosis code 414.2 and the C1 finding is 1.412 for ICD-9-CM diagnosis 
code 414.4. A value close to 1.0 in the C1 field suggests that the 
diagnosis produces the same expected value as a non-CC. A value close 
to 2.0 suggests the condition is more like a CC than a non-CC, but not 
as significant in resource usage as an MCC. A value close to 3.0 
suggests that the condition is expected to consume resources more 
similar to an MCC than a CC or a non-CC. The C2 finding was 2.098 for 
ICD-9-CM diagnosis code 414.2, and the C2 finding was 2.148 for ICD-9-
CM diagnosis code 414.4. A C2 value close to 2.0 suggests the condition 
is more like a CC than a non-CC, but not as significant in resource 
usage as an MCC when there is at least one other secondary diagnosis 
that is a CC but none that is an MCC. While the C1 value of 1.393 for 
ICD-9-CM diagnosis code 414.2 and the C1 value of 1.412 for ICD-9-CM 
diagnosis code 414.4 are above the 1.0 value for a non-CC, these values 
do not support the reclassification of diagnosis codes 414.2 and 414.4 
to MCCs. As stated earlier, a value close to 3.0 suggests the condition 
is expected to consume resources more similar to an MCC than a CC or a 
non-CC. The C2 finding of 2.098 for ICD-9-CM diagnosis code 414.2 and 
the C2 finding of 2.148 for ICD-9-CM diagnosis code 414.4 also do not 
support reclassifying these diagnosis codes to MCCs.
    Our clinical advisors reviewed the data and evaluated these 
conditions. They recommended that we not change the severity level of 
diagnosis codes 414.2 and 414.4 from a non-CC to an MCC. Our clinical 
advisors did not believe that these diagnoses would increase the 
severity of illness level of patients. Considering the C1 and C2 
ratings of both diagnosis codes 414.2 and 414.4 and the input from our 
clinical advisors, in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24399 through 24400), we did not propose to reclassify conditions 
represented by diagnosis codes 414.2 and 414.4 to MCCs. We proposed to 
maintain both of these conditions as non-CCs. As stated earlier, the 
equivalent ICD-10-CM codes for these conditions are codes I25.82 and 
I25.84, respectively. Therefore, based on the data and clinical 
analysis, we proposed to maintain ICD-10-CM diagnosis codes I25.82 and 
I25.84 as non-CCs. We invited public comments on our proposals.
    Comment: A number of commenters supported the proposals to maintain 
the designation of ICD-10-CM diagnosis codes I25.82 and I25.84 as non-
CCs. The commenters stated that the proposals were reasonable, given 
the information that was provided.
    One commenter disagreed with the proposal to maintain code I25.84 
as a non-CC. The commenter indicated that it was not able to duplicate 
the results of C1 and C2 described in the narrative and the table 
presented in the proposed rule, despite contacting CMS for assistance 
in running the data. The commenter disagreed with the CMS' clinical 
advisors that the ICD-9-CM code 414.4 and ICD-10-CM code I25.84 
represent conditions that are not at the MCC level. The commenter 
stated that patients with severe calcified lesions are more difficult 
to treat and, therefore, require greater resources. The commenter also 
expressed concerns that hospitals were underreporting cases of patients 
with calcified lesions.
    Response: We appreciate the commenters' support for our proposals. 
In response to the commenter who disagreed with our clinical advisors' 
determination that ICD-9-CM code 414.4 and ICD-10-CM code I25.84 
represent conditions that are not at the MCC level, we point out that 
ICD-9-CM code 414.4 captures patients who are diagnosed as having 
coronary atherosclerosis due to calcified coronary lesions. This 
diagnosis code includes patients with any range of calcified lesion, 
not just those with severe calcified lesions. Therefore, the use of 
ICD-9-CM code 414.4 is not restricted to those patients who have severe 
calcified lesions. Hospitals are correctly using this code to report 
all patients who are determined to have atherosclerosis due to 
calcified coronary lesions. The same is true for the use of ICD-10-CM 
code I25.84, which is not restricted to cases with severe calcified

[[Page 49414]]

lesions. We based our analysis on claims data reported by hospitals. We 
cannot speculate on the underreporting of this condition on submitted 
claims. It also appears that the commenter did not follow the correct 
methodology in attempting to replicate the results for C1 and C2. The 
categorization of diagnoses as an MCC, CC, or non-CC was accomplished 
using an iterative approach in which each diagnosis was evaluated to 
determine the extent to which its presence as a secondary diagnosis 
resulted in increased hospital resource use. We use the same cost 
calculations for computing the C1, C2, and C3 values that we use in 
calculating the relative weights. The cases for each ``C'' statistic 
are the cases with the secondary diagnosis codes for all the cases in 
that subset of non-CC cases, CC cases, or MCC cases. For example, the 
cases that are in the C3 statistic are those cases with one or more MCC 
secondary diagnosis codes in addition to the secondary diagnosis code 
under the specific review. Cases that are in the C2 statistic are those 
cases that do not have any MCC secondary diagnosis codes, but have one 
or more CC secondary diagnosis codes in addition to the secondary 
diagnosis code under review. The remaining cases are in the C1 
statistic and have only non-CC secondary diagnosis codes along with the 
secondary diagnosis code under review. Numerical resource impact values 
were assigned for each diagnosis as follows:

------------------------------------------------------------------------
              Value                               Meaning
------------------------------------------------------------------------
0................................  Significantly below expected value
                                    for the non CC subgroup.
1................................  Approximately equal to expected value
                                    for the non CC subgroup.
2................................  Approximately equal to expected value
                                    for the CC subgroup.
3................................  Approximately equal to expected value
                                    for the major CC subgroup.
4................................  Significantly above the expected
                                    value for the major CC subgroup.
------------------------------------------------------------------------

    Each diagnosis for which Medicare data were available was evaluated 
to determine its impact on resource use and to determine the most 
appropriate CC subclass (non-CC, CC, or MCC) assignment. In order to 
make this determination, the average cost for each subset of cases was 
compared to the expected cost of cases in that subset. An expected 
average cost is computed across all cases in the data analysis for each 
base MS-DRG and severity level (1=MCC, 2=CC, and 3=Non-CC). Then, for 
each case in a subset, the average expected cost is computed based on 
the base MS-DRG and severity level to which the cases are assigned. The 
following format was used to evaluate each diagnosis:

Code Diagnosis Cnt1 C1 Cnt2 C2 Cnt3 C3

    Where count (Cnt) is the number of patients in each subset and 
C1, C2, and C3 are a measure of the impact on resource use of 
patients in each of the subsets. A C1 value of 1.412 for a secondary 
diagnosis code 414.4 (Coronary atherosclerosis due to calcified 
coronary lesion) means that, for the subset of patients who have the 
secondary diagnosis and have either no other secondary diagnosis 
present, or all the other secondary diagnoses present are non-CCs, 
the impact on resource use of the secondary diagnoses is greater 
than the expected value for a non-CC by an amount equal to 41.2 
percent of the difference between the expected value of a CC and a 
non-CC (that is, the impact on resource use of the secondary 
diagnosis is closer to a CC than a non-CC).

    After consideration of the public comments we received, the 
findings from our claims data, and the input from our clinical advisors 
noted above, we are finalizing our proposal to maintain ICD-10-CM 
diagnosis codes I25.82 and I25.84 as non-CCs.
c. Hydronephrosis
    Some ICD-10-CM diagnosis codes express conditions that are normally 
coded in ICD-9-CM using two or more ICD-9-CM diagnosis codes. CMS' goal 
in developing the ICD-10 MS-DRGs was to ensure that a patient case is 
assigned to the same MS-DRG, regardless of whether the patient record 
were to be coded in ICD-9-CM or ICD-10-CM/PCS. When one of the ICD-10-
CM combination codes is used as a principal diagnosis, the cluster of 
ICD-9-CM codes that would be coded on an ICD-9-CM record was evaluated. 
If one of the ICD-9-CM codes in the cluster is a CC or an MCC, the 
single ICD-10-CM combination code used as a principal diagnosis also 
must imply that the CC or MCC is present. Appendix J of the ICD-10 MS-
DRG Definitions Manual Version 32 includes two lists. Part 1 is the 
list of principal diagnosis codes where the ICD-10-CM code is its own 
MCC. Part 2 is the list of principal diagnosis codes where the ICD-10-
CM code is its own CC. Appendix J of the ICD-10 MS-DRG Definitions 
Manual Version 32 is available via the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html.
    We received a request that the ICD-10-CM combination codes for 
hydronephrosis due to ureteral stricture and urinary stone (N13.1 and 
N13.2) be flagged as principal diagnoses that can act as their own CC 
for MS-DRG grouping purposes.
    In ICD-9-CM, code 591 (Hydronephrosis) is classified as a CC. In 
ICD-10-CM, hydronephrosis is reported with a combination code if the 
hydronephrosis is due to a ureteral stricture or urinary stone 
obstruction of N13.1 (Hydronephrosis with ureteral stricture, not 
elsewhere classified) and N13.2 (Hydronephrosis with renal and ureteral 
calculous obstruction). In ICD-10-CM, these two codes (N13.1 and N 
13.2) are classified as CCs, but these codes are not recognized as 
principal diagnoses that act as their own CC (they are not included in 
the Appendix J of the ICD-10 MS-DRG Definitions Manual Version 32).
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24400), we stated 
that we agreed with the requestor that ICD-10-CM diagnosis codes N13.1 
and N13.2 should be flagged as principal diagnosis codes that can act 
as their own CC for MS-DRG grouping purposes. Therefore, we proposed 
that diagnosis codes N13.1 and N13.2 be added to the list of principal 
diagnoses that act as their own CC in Appendix J of the ICD-10 MS-DRG 
Definitions Manual Version 33. We invited public comments on our 
proposal.
    Comment: A number of commenters supported the proposal. The 
commenters stated that the proposal was reasonable, given the data and 
information provided.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add diagnosis codes N13.1 and N13.2 to the 
list of principal diagnoses that can act as their own CC in Appendix J 
of the ICD-10 MS-DRG Definitions Manual Version 33.

[[Page 49415]]

11. Complications or Comorbidity (CC) Exclusions List for FY 2016
a. Background of the CC List and the CC Exclusions List
    Under the IPPS MS-DRG classification system, we have developed a 
standard list of diagnoses that are considered CCs. Historically, we 
developed this list using physician panels that classified each 
diagnosis code based on whether the diagnosis, when present as a 
secondary condition, would be considered a substantial complication or 
comorbidity. A substantial complication or comorbidity was defined as a 
condition that, because of its presence with a specific principal 
diagnosis, would cause an increase in the length of stay by at least 1 
day in at least 75 percent of the patients. However, depending on the 
principal diagnosis of the patient, some diagnoses on the basic list of 
complications and comorbidities may be excluded if they are closely 
related to the principal diagnosis. In FY 2008, we evaluated each 
diagnosis code to determine its impact on resource use and to determine 
the most appropriate CC subclassification (non-CC, CC, or MCC) 
assignment. We refer readers to sections II.D.2. and 3. of the preamble 
of the FY 2008 IPPS final rule with comment period for a discussion of 
the refinement of CCs in relation to the MS-DRGs we adopted for FY 2008 
(72 FR 47152 through 47171).
b. CC Exclusions List for FY 2016
    In the September 1, 1987 final notice (52 FR 33143) concerning 
changes to the DRG classification system, we modified the GROUPER logic 
so that certain diagnoses included on the standard list of CCs would 
not be considered valid CCs in combination with a particular principal 
diagnosis. We created the CC Exclusions List for the following reasons: 
(1) To preclude coding of CCs for closely related conditions; (2) to 
preclude duplicative or inconsistent coding from being treated as CCs; 
and (3) to ensure that cases are appropriately classified between the 
complicated and uncomplicated DRGs in a pair. As we indicated above, we 
developed a list of diagnoses, using physician panels, to include those 
diagnoses that, when present as a secondary condition, would be 
considered a substantial complication or comorbidity. In previous 
years, we have made changes to the list of CCs, either by adding new 
CCs or deleting CCs already on the list.
    In the May 19, 1987 proposed notice (52 FR 18877) and the September 
1, 1987 final notice (52 FR 33154), we explained that the excluded 
secondary diagnoses were established using the following five 
principles:
     Chronic and acute manifestations of the same condition 
should not be considered CCs for one another;
     Specific and nonspecific (that is, not otherwise specified 
(NOS)) diagnosis codes for the same condition should not be considered 
CCs for one another;
     Codes for the same condition that cannot coexist, such as 
partial/total, unilateral/bilateral, obstructed/unobstructed, and 
benign/malignant, should not be considered CCs for one another;
     Codes for the same condition in anatomically proximal 
sites should not be considered CCs for one another; and
     Closely related conditions should not be considered CCs 
for one another.
    The creation of the CC Exclusions List was a major project 
involving hundreds of codes. We have continued to review the remaining 
CCs to identify additional exclusions and to remove diagnoses from the 
master list that have been shown not to meet the definition of a CC.\6\
---------------------------------------------------------------------------

    \6\ We refer readers to the FY 1989 final rule (53 FR 38485, 
September 30, 1988) for the revision made for the discharges 
occurring in FY 1989; the FY 1990 final rule (54 FR 36552, September 
1, 1989) for the FY 1990 revision; the FY 1991 final rule (55 FR 
36126, September 4, 1990) for the FY 1991 revision; the FY 1992 
final rule (56 FR 43209, August 30, 1991) for the FY 1992 revision; 
the FY 1993 final rule (57 FR 39753, September 1, 1992) for the FY 
1993 revision; the FY 1994 final rule (58 FR 46278, September 1, 
1993) for the FY 1994 revisions; the FY 1995 final rule (59 FR 
45334, September 1, 1994) for the FY 1995 revisions; the FY 1996 
final rule (60 FR 45782, September 1, 1995) for the FY 1996 
revisions; the FY 1997 final rule (61 FR 46171, August 30, 1996) for 
the FY 1997 revisions; the FY 1998 final rule (62 FR 45966, August 
29, 1997) for the FY 1998 revisions; the FY 1999 final rule (63 FR 
40954, July 31, 1998) for the FY 1999 revisions; the FY 2001 final 
rule (65 FR 47064, August 1, 2000) for the FY 2001 revisions; the FY 
2002 final rule (66 FR 39851, August 1, 2001) for the FY 2002 
revisions; the FY 2003 final rule (67 FR 49998, August 1, 2002) for 
the FY 2003 revisions; the FY 2004 final rule (68 FR 45364, August 
1, 2003) for the FY 2004 revisions; the FY 2005 final rule (69 FR 
49848, August 11, 2004) for the FY 2005 revisions; the FY 2006 final 
rule (70 FR 47640, August 12, 2005) for the FY 2006 revisions; the 
FY 2007 final rule (71 FR 47870) for the FY 2007 revisions; the FY 
2008 final rule (72 FR 47130) for the FY 2008 revisions; the FY 2009 
final rule (73 FR 48510); the FY 2010 final rule (74 FR 43799); the 
FY 2011 final rule (75 FR 50114); the FY 2012 final rule (76 FR 
51542); the FY 2013 final rule (77 FR 53315); the FY 2014 final rule 
(78 FR 50541), and the FY 2015 final rule (79 FR 49905). In the FY 
2000 final rule (64 FR 41490, July 30, 1999), we did not modify the 
CC Exclusions List because we did not make any changes to the ICD-9-
CM codes for FY 2000.
---------------------------------------------------------------------------

    The ICD-10 MS-DRGs Version 32 CC Exclusion List is included as 
Appendix C in the Definitions Manual available via the Internet on the 
CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24401), we did 
not propose any changes to the CC Exclusion List for FY 2016. Because 
we did not propose any changes to the ICD-10 MS-DRGs CC Exclusion List 
for FY 2016, we did not publish Table 6G (Additions to the CC Exclusion 
List) or Table 6H (Deletions from the CC Exclusion List). We developed 
Table 6K (Complete List of CC Exclusions), which is available only via 
the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Because 
of the length of Table 6K, we did not publish it in the Addendum to the 
proposed rule.
    As we did for the proposed rule, because we are not making any 
changes to the ICD-10 MS-DRGs CC Exclusion List for FY 2016, we are not 
publishing Table 6G (Additions to the CC Exclusion List) or Table 6H 
(Deletions from the CC Exclusion List). We developed Table 6K (Complete 
List of CC Exclusions), which is available only via the Internet on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Because of the length of Table 
6K, we are not publishing it in the Addendum to this final rule. Each 
of the secondary diagnosis codes for which there is an exclusion is 
listed in Part 1 of Table 6K. Each of these secondary diagnosis codes 
is indicated as a CC or an MCC. If the CC or MCC is allowed with all 
principal diagnoses, the phrase ``NoExcl'' (for no exclusions) follows 
the CC/MCC indicator. Otherwise, a link is given to a collection of 
diagnosis codes which, when used as the principal diagnosis, will cause 
the CC or MCC to be considered as only a non-CC. Part 2 of Table 6K 
lists codes that are assigned as an MCC only for patients discharged 
alive. Otherwise, the codes are assigned as a non-CC.
    A complete updated MCC, CC, and Non-CC Exclusions List is available 
via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    Because there are no new, revised, or deleted ICD-10-CM diagnosis 
codes for FY 2016, we have not developed Table 6A (New Diagnosis 
Codes), Table 6C (Invalid Diagnosis Codes), or Table 6E (Revised 
Diagnosis Code Titles), for this final rule and they are not published 
as part of this final rule. We have developed Table 6B (New Procedure 
Codes) for new ICD-10-PCS codes which will be implemented on October 1, 
2015. Because there are no revised or

[[Page 49416]]

deleted procedure codes for FY 2016, we have not developed Table 6D 
(Invalid Procedure Codes) or Table 6F (Revised Procedure Codes).
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24401), we did 
not propose any additions or deletions to the MS-DRG MCC List for FY 
2016 nor any additions or deletions to the MS-DRG CC List for FY 2016. 
As we did for the proposed rule, for this final rule, we have not 
developed Tables 6I.1 (Additions to the MCC List), 6I.2 (Deletions to 
the MCC List), 6J.1 (Additions to the CC List), and 6J.2 (Deletions to 
the CC List), and they are not published as part of this final rule. We 
have developed Tables 6L (Principal Diagnosis Is Its Own MCC List) and 
6M (Principal Diagnosis Is Its Own CC List). As stated in the 
Definitions Manual of the ICD-10 MS DRGs Version 32 on the ICD-10 MS-
DRG Conversion Project Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html, a few ICD-10-CM diagnosis 
codes express conditions that are normally coded in ICD-9-CM using two 
or more ICD-9-CM diagnosis codes. In the interest of ensuring that the 
ICD-10 MS-DRGs place a patient in the same DRG, whenever one of these 
ICD-10-CM combination codes is used as principal diagnosis, the cluster 
of ICD-9-CM codes that would be coded on an ICD-9-CM record is 
considered. If one of the ICD-9-CM codes in the cluster is a CC or an 
MCC, the single ICD-10-CM combination code used as a principal 
diagnosis must also imply the CC or MCC that the ICD-9-CM cluster would 
have presented. The ICD-10-CM diagnoses for which this implication must 
be made are listed in these tables. We also have developed Table 6M.1 
(Additions to Principal Diagnosis Is Its Own CC) to show the two 
additions to this list for the two principal diagnosis codes acting as 
their own CC.
    The complete documentation of the ICD-10 MS-DRG Version 32 GROUPER 
logic, including the current CC Exclusions List, is available via the 
Internet on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. The complete documentation 
of the ICD-10 MS-DRG GROUPER logic also is available on the CMS Acute 
Inpatient PPS Web page at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
12. Review of Procedure Codes in MS-DRGs 981 Through 983, 984 Through 
986, and 987 Through 989
    Each year, we review cases assigned to former CMS DRG 468 
(Extensive O.R. Procedure Unrelated to Principal Diagnosis), CMS DRG 
476 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis), and 
CMS DRG 477 (Nonextensive O.R. Procedure Unrelated to Principal 
Diagnosis) to determine whether it would be appropriate to change the 
procedures assigned among these CMS DRGs. Under the MS-DRGs that we 
adopted for FY 2008, CMS DRG 468 was split three ways and became MS-
DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal 
Diagnosis with MCC, with CC, and without CC/MCC, respectively). CMS DRG 
476 became MS-DRGs 984, 985, and 986 (Prostatic O.R. Procedure 
Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively). CMS DRG 477 became MS-DRGs 987, 988, and 989 
(Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, 
with CC, and without CC/MCC, respectively).
    MS-DRGs 981 through 983, 984 through 986, and 987 through 989 
(formerly CMS DRGs 468, 476, and 477, respectively) are reserved for 
those cases in which none of the O.R. procedures performed are related 
to the principal diagnosis. These MS-DRGs are intended to capture 
atypical cases, that is, those cases not occurring with sufficient 
frequency to represent a distinct, recognizable clinical group. MS-DRGs 
984 through 986 (previously CMS DRG 476) are assigned to those 
discharges in which one or more of the following prostatic procedures 
are performed and are unrelated to the principal diagnosis:
     60.0 (Incision of prostate);
     60.12 (Open biopsy of prostate);
     60.15 (Biopsy of periprostatic tissue);
     60.18 (Other diagnostic procedures on prostate and 
periprostatic tissue);
     60.21 (Transurethral prostatectomy);
     60.29 (Other transurethral prostatectomy);
     60.61 (Local excision of lesion of prostate);
     60.69 (Prostatectomy, not elsewhere classified);
     60.81 (Incision of periprostatic tissue);
     60.82 (Excision of periprostatic tissue);
     60.93 (Repair of prostate);
     60.94 (Control of (postoperative) hemorrhage of prostate);
     60.95 (Transurethral balloon dilation of the prostatic 
urethra);
     60.96 (Transurethral destruction of prostate tissue by 
microwave thermotherapy);
     60.97 (Other transurethral destruction of prostate tissue 
by other thermotherapy); and
     60.99 (Other operations on prostate).
    All remaining O.R. procedures are assigned to MS-DRGs 981 through 
983 and 987 through 989, with MS-DRGs 987 through 989 assigned to those 
discharges in which the only procedures performed are nonextensive 
procedures that are unrelated to the principal diagnosis.\7\
---------------------------------------------------------------------------

    \7\ The original list of the ICD-9-CM procedure codes for the 
procedures we consider nonextensive procedures, if performed with an 
unrelated principal diagnosis, was published in Table 6C in section 
IV. of the Addendum to the FY 1989 final rule (53 FR 38591). As part 
of the FY 1991 final rule (55 FR 36135), the FY 1992 final rule (56 
FR 43212), the FY 1993 final rule (57 FR 23625), the FY 1994 final 
rule (58 FR 46279), the FY 1995 final rule (59 FR 45336), the FY 
1996 final rule (60 FR 45783), the FY 1997 final rule (61 FR 46173), 
and the FY 1998 final rule (62 FR 45981), we moved several other 
procedures from DRG 468 to DRG 477, and some procedures from DRG 477 
to DRG 468. No procedures were moved in FY 1999, as noted in the 
final rule (63 FR 40962), in the FY 2000 (64 FR 41496), in the FY 
2001 (65 FR 47064), or in the FY 2002 (66 FR 39852). In the FY 2003 
final rule (67 FR 49999), we did not move any procedures from DRG 
477. However, we did move procedure codes from DRG 468 and placed 
them in more clinically coherent DRGs. In the FY 2004 final rule (68 
FR 45365), we moved several procedures from DRG 468 to DRGs 476 and 
477 because the procedures are nonextensive. In the FY 2005 final 
rule (69 FR 48950), we moved one procedure from DRG 468 to 477. In 
addition, we added several existing procedures to DRGs 476 and 477. 
In FY 2006 (70 FR 47317), we moved one procedure from DRG 468 and 
assigned it to DRG 477. In FY 2007, we moved one procedure from DRG 
468 and assigned it to DRGs 479, 553, and 554. In FYs 2008, 2009, 
2010, 2011, 2012, 2013, 2014, and 2015, no procedures were moved, as 
noted in the FY 2008 final rule with comment period (72 FR 46241), 
in the FY 2009 final rule (73 FR 48513), in the FY 2010 final rule 
(74 FR 43796), in the FY 2011 final rule (75 FR 50122), in the FY 
2012 final rule (76 FR 51549), in the FY 2013 final rule (77 FR 
53321), in the FY 2014 final rule (78 FR 50545); and in the FY 2015 
final rule (79 FR 49906).
---------------------------------------------------------------------------

    Our review of MedPAR claims data showed that there are no cases 
that merited movement or should logically be assigned to any of the 
other MDCs. Therefore, for FY 2016, we did not propose to change the 
procedures assigned among these MS-DRGs. We invited public comments on 
our proposal.
    We did not receive any public comments on our proposal and, 
therefore, are adopting it as final.
a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-DRGs 987 
Through 989 into MDCs
    We annually conduct a review of procedures producing assignment to 
MS-DRGs 981 through 983 (Extensive

[[Page 49417]]

O.R. procedure unrelated to principal diagnosis with MCC, with CC, and 
without CC/MCC, respectively) or MS-DRGs 987 through 989 (Nonextensive 
O.R. procedure unrelated to principal diagnosis with MCC, with CC, and 
without CC/MCC, respectively) on the basis of volume, by procedure, to 
see if it would be appropriate to move procedure codes out of these MS-
DRGs into one of the surgical MS-DRGs for the MDC into which the 
principal diagnosis falls. The data are arrayed in two ways for 
comparison purposes. We look at a frequency count of each major 
operative procedure code. We also compare procedures across MDCs by 
volume of procedure codes within each MDC.
    We identify those procedures occurring in conjunction with certain 
principal diagnoses with sufficient frequency to justify adding them to 
one of the surgical MS-DRGs for the MDC in which the diagnosis falls. 
As noted above, there are no cases that merited movement or that should 
logically be assigned to any of the other MDCs. Therefore, for FY 2016, 
we did not propose to remove any procedures from MS-DRGs 981 through 
983 or MS-DRGs 987 through 989 into one of the surgical MS-DRGs for the 
MDC into which the principal diagnosis is assigned. We invited public 
comments on our proposal.
    We did not receive any public comments on our proposal and, 
therefore, are adopting it as final.
b. Reassignment of Procedures Among MS DRGs 981 Through 983, 984 
Through 986, and 987 Through 989
(1) Annual Review of Procedures
    We also annually review the list of ICD-9-CM procedures that, when 
in combination with their principal diagnosis code, result in 
assignment to MS-DRGs 981 through 983, 984 through 986 (Prostatic O.R. 
procedure unrelated to principal diagnosis with MCC, with CC, or 
without CC/MCC, respectively), and 987 through 989, to ascertain 
whether any of those procedures should be reassigned from one of these 
three MS DRGs to another of the three MS-DRGs based on average costs 
and the length of stay. We look at the data for trends such as shifts 
in treatment practice or reporting practice that would make the 
resulting MS-DRG assignment illogical. If we find these shifts, we 
would propose to move cases to keep the MS-DRGs clinically similar or 
to provide payment for the cases in a similar manner. Generally, we 
move only those procedures for which we have an adequate number of 
discharges to analyze the data.
    There are no cases representing shifts in treatment practice or 
reporting practice that would make the resulting MS-DRG assignment 
illogical, or that merited movement so that cases should logically be 
assigned to any of the other MDCs. Therefore, for FY 2016, we did not 
propose to move any procedure codes among these MS-DRGs.
    We did not receive any public comments on our proposal and, 
therefore, are adopting it as final.
(2) Review of Cases With Endovascular Embolization Procedures for 
Epistaxis
    During the comment period for the FY 2015 IPPS/LTCH PPS proposed 
rule, we received a public comment expressing concern regarding 
specific procedure codes that are assigned to MS-DRGs 981 through 983; 
984 through 986; and 987 through 989 in relation to our discussion of 
the annual review of these MS-DRGs in section II.G.12. of that proposed 
rule (79 FR 28020). The commenter noted that the endovascular 
embolization of the arteries of the branches of the internal maxillary 
artery is frequently performed for intractable posterior epistaxis 
(nosebleed). The commenter stated that, currently, diagnosis code 784.7 
(Epistaxis) reported with procedure codes 39.75 (Endovascular 
embolization or occlusion of vessel(s) of head or neck using bare 
coils) and 39.76 (Endovascular embolization or occlusion of vessel(s) 
of head or neck using bioactive coils) groups to MS-DRGs 981, 982, and 
983. The commenter indicated that it also found this grouping with the 
ICD-10 MS-DRGs Version 31 using ICD-10-CM diagnosis code R04.0 
(Epistaxis) reported with artery occlusion procedure codes. The 
commenter requested that CMS review these groupings and consider the 
possibility of reassigning these epistaxis cases with endovascular 
embolization procedure codes into a more specific MS-DRG.
    We considered this public comment to be outside of the scope of the 
FY 2015 IPPS/LTCH PPS proposed rule and, therefore, did not address it 
in the FY 2015 IPPS/LTCH PPS final rule. However, we indicated that we 
would consider this public comment for possible proposals in future 
rulemaking as part of our annual review process.
    ICD-10-PCS provides more detailed codes for endovascular 
embolization or occlusion of vessel(s) of head or neck using bare coils 
and bioactive coils which are listed in the following table:

ICD-10-PCS Codes for Endovascular Embolization or Occlusion of Vessel(s)
          of Head or Neck Using Bare Coils and Bioactive Coils
------------------------------------------------------------------------
     ICD-10-PCS code                      Code description
------------------------------------------------------------------------
03LG0BZ..................  Occlusion of intracranial artery with
                            bioactive intraluminal device, open
                            approach.
03LG0DZ..................  Occlusion of intracranial artery with
                            intraluminal device, open approach.
03LG3BZ..................  Occlusion of intracranial artery with
                            bioactive intraluminal device, percutaneous
                            approach.
03LG3DZ..................  Occlusion of intracranial artery with
                            intraluminal device, percutaneous approach.
03LG4BZ..................  Occlusion of intracranial artery with
                            bioactive intraluminal device, percutaneous
                            endoscopic approach.
03LG4DZ..................  Occlusion of intracranial artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03LH0BZ..................  Occlusion of right common carotid artery with
                            bioactive intraluminal device, open
                            approach.
03LH0DZ..................  Occlusion of right common carotid artery with
                            intraluminal device, open approach.
03LH3BZ..................  Occlusion of right common carotid artery with
                            bioactive intraluminal device, percutaneous
                            approach.
03LH3DZ..................  Occlusion of right common carotid artery with
                            intraluminal device, percutaneous approach.
03LH4BZ..................  Occlusion of right common carotid artery with
                            bioactive intraluminal device, percutaneous
                            endoscopic approach.
03LH4DZ..................  Occlusion of right common carotid artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03LJ0BZ..................  Occlusion of left common carotid artery with
                            bioactive intraluminal device, open
                            approach.
03LJ0DZ..................  Occlusion of left common carotid artery with
                            intraluminal device, open approach.
03LJ3BZ..................  Occlusion of left common carotid artery with
                            bioactive intraluminal device, percutaneous
                            approach.
03LJ3DZ..................  Occlusion of left common carotid artery with
                            intraluminal device, percutaneous approach.
03LJ4BZ..................  Occlusion of left common carotid artery with
                            bioactive intraluminal device, percutaneous
                            endoscopic approach.
03LJ4DZ..................  Occlusion of left common carotid artery with
                            intraluminal device, percutaneous endoscopic
                            approach.

[[Page 49418]]

 
03LK0BZ..................  Occlusion of right internal carotid artery
                            with bioactive intraluminal device, open
                            approach.
03LK0DZ..................  Occlusion of right internal carotid artery
                            with intraluminal device, open approach.
03LK3BZ..................  Occlusion of right internal carotid artery
                            with bioactive intraluminal device,
                            percutaneous approach.
03LK3DZ..................  Occlusion of right internal carotid artery
                            with intraluminal device, percutaneous
                            approach.
03LK4BZ..................  Occlusion of right internal carotid artery
                            with bioactive intraluminal device,
                            percutaneous endoscopic approach.
03LK4DZ..................  Occlusion of right internal carotid artery
                            with intraluminal device, percutaneous
                            endoscopic approach.
03LL0BZ..................  Occlusion of left internal carotid artery
                            with bioactive intraluminal device, open
                            approach.
03LL0DZ..................  Occlusion of left internal carotid artery
                            with intraluminal device, open approach.
03LL3BZ..................  Occlusion of left internal carotid artery
                            with bioactive intraluminal device,
                            percutaneous approach.
03LL3DZ..................  Occlusion of left internal carotid artery
                            with intraluminal device, percutaneous
                            approach.
03LL4BZ..................  Occlusion of left internal carotid artery
                            with bioactive intraluminal device,
                            percutaneous endoscopic approach.
03LL4DZ..................  Occlusion of left internal carotid artery
                            with intraluminal device, percutaneous
                            endoscopic approach.
03LM0BZ..................  Occlusion of right external carotid artery
                            with bioactive intraluminal device, open
                            approach.
03LM0DZ..................  Occlusion of right external carotid artery
                            with intraluminal device, open approach.
03LM3BZ..................  Occlusion of right external carotid artery
                            with bioactive intraluminal device,
                            percutaneous approach.
03LM3DZ..................  Occlusion of right external carotid artery
                            with intraluminal device, percutaneous
                            approach.
03LM4BZ..................  Occlusion of right external carotid artery
                            with bioactive intraluminal device,
                            percutaneous endoscopic approach.
03LM4DZ..................  Occlusion of right external carotid artery
                            with intraluminal device, percutaneous
                            endoscopic approach.
03LN0BZ..................  Occlusion of left external carotid artery
                            with bioactive intraluminal device, open
                            approach.
03LN0DZ..................  Occlusion of left external carotid artery
                            with intraluminal device, open approach.
03LN3BZ..................  Occlusion of left external carotid artery
                            with bioactive intraluminal device,
                            percutaneous approach.
03LN3DZ..................  Occlusion of left external carotid artery
                            with intraluminal device, percutaneous
                            approach.
03LN4BZ..................  Occlusion of left external carotid artery
                            with bioactive intraluminal device,
                            percutaneous endoscopic approach.
03LN4DZ..................  Occlusion of left external carotid artery
                            with intraluminal device, percutaneous
                            endoscopic approach.
03LP0BZ..................  Occlusion of right vertebral artery with
                            bioactive intraluminal device, open
                            approach.
03LP0DZ..................  Occlusion of right vertebral artery with
                            intraluminal device, open approach.
03LP3BZ..................  Occlusion of right vertebral artery with
                            bioactive intraluminal device, percutaneous
                            approach.
03LP3DZ..................  Occlusion of right vertebral artery with
                            intraluminal device, percutaneous approach.
03LP4BZ..................  Occlusion of right vertebral artery with
                            bioactive intraluminal device, percutaneous
                            endoscopic approach.
03LP4DZ..................  Occlusion of right vertebral artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03LQ0BZ..................  Occlusion of left vertebral artery with
                            bioactive intraluminal device, open
                            approach.
03LQ0DZ..................  Occlusion of left vertebral artery with
                            intraluminal device, open approach.
03LQ3BZ..................  Occlusion of left vertebral artery with
                            bioactive intraluminal device, percutaneous
                            approach.
03LQ3DZ..................  Occlusion of left vertebral artery with
                            intraluminal device, percutaneous approach.
03LQ4BZ..................  Occlusion of left vertebral artery with
                            bioactive intraluminal device, percutaneous
                            endoscopic approach.
03LQ4DZ..................  Occlusion of left vertebral artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03VG0BZ..................  Restriction of intracranial artery with
                            bioactive intraluminal device, open
                            approach.
03VG0DZ..................  Restriction of intracranial artery with
                            intraluminal device, open approach.
03VG3BZ..................  Restriction of intracranial artery with
                            bioactive intraluminal device, percutaneous
                            approach.
03VG3DZ..................  Restriction of intracranial artery with
                            intraluminal device, percutaneous approach.
03VG4BZ..................  Restriction of intracranial artery with
                            bioactive intraluminal device, percutaneous
                            endoscopic approach.
03VG4DZ..................  Restriction of intracranial artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03VH0BZ..................  Restriction of right common carotid artery
                            with bioactive intraluminal device, open
                            approach.
03VH0DZ..................  Restriction of right common carotid artery
                            with intraluminal device, open approach.
03VH3BZ..................  Restriction of right common carotid artery
                            with bioactive intraluminal device,
                            percutaneous approach.
03VH3DZ..................  Restriction of right common carotid artery
                            with intraluminal device, percutaneous
                            approach.
03VH4BZ..................  Restriction of right common carotid artery
                            with bioactive intraluminal device,
                            percutaneous endoscopic approach.
03VH4DZ..................  Restriction of right common carotid artery
                            with intraluminal device, percutaneous
                            endoscopic approach.
03VJ0BZ..................  Restriction of left common carotid artery
                            with bioactive intraluminal device, open
                            approach.
03VJ0DZ..................  Restriction of left common carotid artery
                            with intraluminal device, open approach.
03VJ3BZ..................  Restriction of left common carotid artery
                            with bioactive intraluminal device,
                            percutaneous approach.
03VJ3DZ..................  Restriction of left common carotid artery
                            with intraluminal device, percutaneous
                            approach.
03VJ4BZ..................  Restriction of left common carotid artery
                            with bioactive intraluminal device,
                            percutaneous endoscopic approach.
03VJ4DZ..................  Restriction of left common carotid artery
                            with intraluminal device, percutaneous
                            endoscopic approach.
03VK0BZ..................  Restriction of right internal carotid artery
                            with bioactive intraluminal device, open
                            approach.
03VK0DZ..................  Restriction of right internal carotid artery
                            with intraluminal device, open approach.
03VK3BZ..................  Restriction of right internal carotid artery
                            with bioactive intraluminal device,
                            percutaneous approach.
03VK3DZ..................  Restriction of right internal carotid artery
                            with intraluminal device, percutaneous
                            approach.
03VK4BZ..................  Restriction of right internal carotid artery
                            with bioactive intraluminal device,
                            percutaneous endoscopic approach.
03VK4DZ..................  Restriction of right internal carotid artery
                            with intraluminal device, percutaneous
                            endoscopic approach.
03VL0BZ..................  Restriction of left internal carotid artery
                            with bioactive intraluminal device, open
                            approach.
03VL0DZ..................  Restriction of left internal carotid artery
                            with intraluminal device, open approach.
03VL3BZ..................  Restriction of left internal carotid artery
                            with bioactive intraluminal device,
                            percutaneous approach.
03VL3DZ..................  Restriction of left internal carotid artery
                            with intraluminal device, percutaneous
                            approach.
03VL4BZ..................  Restriction of left internal carotid artery
                            with bioactive intraluminal device,
                            percutaneous endoscopic approach.
03VL4DZ..................  Restriction of left internal carotid artery
                            with intraluminal device, percutaneous
                            endoscopic approach.
03VM0BZ..................  Restriction of right external carotid artery
                            with bioactive intraluminal device, open
                            approach.
03VM0DZ..................  Restriction of right external carotid artery
                            with intraluminal device, open approach.
03VM3BZ..................  Restriction of right external carotid artery
                            with bioactive intraluminal device,
                            percutaneous approach.
03VM3DZ..................  Restriction of right external carotid artery
                            with intraluminal device, percutaneous
                            approach.

[[Page 49419]]

 
03VM4BZ..................  Restriction of right external carotid artery
                            with bioactive intraluminal device,
                            percutaneous endoscopic approach.
03VM4DZ..................  Restriction of right external carotid artery
                            with intraluminal device, percutaneous
                            endoscopic approach.
03VN0BZ..................  Restriction of left external carotid artery
                            with bioactive intraluminal device, open
                            approach.
03VN0DZ..................  Restriction of left external carotid artery
                            with intraluminal device, open approach.
03VN3BZ..................  Restriction of left external carotid artery
                            with bioactive intraluminal device,
                            percutaneous approach.
03VN3DZ..................  Restriction of left external carotid artery
                            with intraluminal device, percutaneous
                            approach.
03VN4BZ..................  Restriction of left external carotid artery
                            with bioactive intraluminal device,
                            percutaneous endoscopic approach.
03VN4DZ..................  Restriction of left external carotid artery
                            with intraluminal device, percutaneous
                            endoscopic approach.
03VP0BZ..................  Restriction of right vertebral artery with
                            bioactive intraluminal device, open
                            approach.
03VP0DZ..................  Restriction of right vertebral artery with
                            intraluminal device, open approach.
03VP3BZ..................  Restriction of right vertebral artery with
                            bioactive intraluminal device, percutaneous
                            approach.
03VP3DZ..................  Restriction of right vertebral artery with
                            intraluminal device, percutaneous approach.
03VP4BZ..................  Restriction of right vertebral artery with
                            bioactive intraluminal device, percutaneous
                            endoscopic approach.
03VP4DZ..................  Restriction of right vertebral artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03VQ0BZ..................  Restriction of left vertebral artery with
                            bioactive intraluminal device, open
                            approach.
03VQ0DZ..................  Restriction of left vertebral artery with
                            intraluminal device, open approach.
03VQ3BZ..................  Restriction of left vertebral artery with
                            bioactive intraluminal device, percutaneous
                            approach.
03VQ3DZ..................  Restriction of left vertebral artery with
                            intraluminal device, percutaneous approach.
03VQ4BZ..................  Restriction of left vertebral artery with
                            bioactive intraluminal device, percutaneous
                            endoscopic approach.
03VQ4DZ..................  Restriction of left vertebral artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03VR0DZ..................  Restriction of face artery with intraluminal
                            device, open approach.
03VR3DZ..................  Restriction of face artery with intraluminal
                            device, percutaneous approach.
03VR4DZ..................  Restriction of face artery with intraluminal
                            device, percutaneous endoscopic approach.
03VS0DZ..................  Restriction of right temporal artery with
                            intraluminal device, open approach.
03VS3DZ..................  Restriction of right temporal artery with
                            intraluminal device, percutaneous approach.
03VS4DZ..................  Restriction of right temporal artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03VT0DZ..................  Restriction of left temporal artery with
                            intraluminal device, open approach.
03VT3DZ..................  Restriction of left temporal artery with
                            intraluminal device, percutaneous approach.
03VT4DZ..................  Restriction of left temporal artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03VU0DZ..................  Restriction of right thyroid artery with
                            intraluminal device, open approach.
03VU3DZ..................  Restriction of right thyroid artery with
                            intraluminal device, percutaneous approach.
03VU4DZ..................  Restriction of right thyroid artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
03VV0DZ..................  Restriction of left thyroid artery with
                            intraluminal device, open approach.
03VV3DZ..................  Restriction of left thyroid artery with
                            intraluminal device, percutaneous approach.
03VV4DZ..................  Restriction of left thyroid artery with
                            intraluminal device, percutaneous endoscopic
                            approach.
------------------------------------------------------------------------

    We examined claims data from the December 2014 update of the FY 
2014 MedPAR file for cases with diagnosis code 784.7 reported with 
procedure codes 39.75 and 39.76 in MS-DRGs 981, 982, and 983. The 
following table shows our findings.

           Endovascular Embolization Procedures for Epistaxis
------------------------------------------------------------------------
                                                  Average
              MS-DRG                Number of    length of     Average
                                      cases         stay        costs
------------------------------------------------------------------------
MS-DRG 981--All cases............       21,118        12.38      $33,080
MS-DRG 981--Epistaxis cases with             8         6.50       34,655
 principal diagnosis code 784.7
 and procedure code 39.75........
MS-DRG 981--Epistaxis cases with             2        12.50       50,081
 principal diagnosis code 784.7
 and procedure code 39.76........
MS-DRG 982--All cases............       13,657         7.14       19,392
MS-DRG 982--Epistaxis cases with            22         3.14       17,725
 principal diagnosis code 784.7
 and procedure code 39.75........
MS-DRG 982--Epistaxis cases with             2          2.0       11,010
 principal diagnosis code 784.7
 and procedure code 39.76........
MS-DRG 983--All cases............        2,989         3.60       12,760
MS-DRG 983--Epistaxis cases with             5         2.60       10,532
 principal diagnosis code 784.7
 and procedure code 39.75........
MS-DRG 983--Epistaxis cases with             4         1.50       16,658
 principal diagnosis code 784.7
 and procedure code 39.76........
------------------------------------------------------------------------

    We found only 35 epistaxis cases with procedure code 39.75 reported 
and 8 cases with procedure code 39.76 reported among MS-DRGs 981, 982, 
and 983. The use of endovascular embolizations for epistaxis appears to 
be rare. The average costs for the cases with procedure code 39.75 in 
MS-DRGs 981, 982, and 983 are similar to the average costs for all 
cases in MS-DRGs 981, 982, and 983, respectively. The average costs for 
the cases with procedure code 39.75 in MS-DRGs 981, 982, and 983 were 
$34,655, $17,725, and $10,532, respectively, compared to $33,080, 
$19,392, and $12,760 for all cases in MS-DRGs 981, 982, and 983. The 
average costs for cases with procedure code 39.76 in MS-DRGs 981, 982, 
and 983 were $50,081, $11,010, and $16,658, respectively, and were 
significantly greater than all cases in MS-DRGs 981 and 983. However, 
as stated earlier, there were only 8 cases reported with procedure code 
39.76. As explained previously, MS-DRGs 981, 982, and 983 were created 
for operating

[[Page 49420]]

room procedures that are unrelated to the principal diagnosis. Because 
there were so few cases reported, this does not appear to be a common 
procedure for epistaxis. There were not enough cases to base a change 
of MS-DRG assignment for these cases.
    Our clinical advisors reviewed this issue and did not identify any 
new MS-DRG assignment that would be more appropriate for these rare 
cases. They advised us to maintain the current MS-DRG structure within 
MS-DRGs 981, 982, and 983.
    Based on the results of the examination of the claims data and the 
recommendations from our clinical advisors, in the FY 2016 IPPS/LTCH 
PPS proposed rule (80 FR 24403 through 24405), we did not propose to 
create new MS-DRG assignments for epistaxis cases receiving 
endovascular embolization procedures. We proposed to maintain the 
current MS-DRG structure for epistaxis cases receiving endovascular 
embolization procedures and did not propose any updates to MS-DRGs 981, 
982, and 983. We invited public comments on our proposal.
    Comment: A number of commenters supported the proposal. The 
commenters stated that the proposal was reasonable, given the data and 
information provided.
    Response: We appreciate the commenters' support for our proposal.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the current MS-DRG structure for 
epistaxis cases receiving endovascular embolization procedures and not 
make any updates to MS-DRGs 981, 982, and 983.
c. Adding Diagnosis or Procedure Codes to MDCs
    Based on the review of cases in the MDCs, as described above in 
sections II.G.2. through 7. of the preamble of this final rule, we did 
not propose to add any diagnosis or procedure codes to MDCs for FY 
2016. We invited public comments on our proposal.
    We did not receive any public comments on our proposal and, 
therefore, are adopting it as final.
13. Changes to the ICD-9-CM System
a. ICD-10 Coordination and Maintenance Committee
    In September 1985, the ICD-9-CM Coordination and Maintenance 
Committee was formed. This is a Federal interdepartmental committee, 
co-chaired by the National Center for Health Statistics (NCHS), the 
Centers for Disease Control and Prevention, and CMS, charged with 
maintaining and updating the ICD-9-CM system. The final update to ICD-
9-CM codes was to be made on October 1, 2013. Thereafter, the name of 
the Committee was changed to the ICD-10 Coordination and Maintenance 
Committee, effective with the March 19-20, 2014 meeting. The ICD-10 
Coordination and Maintenance Committee addresses updates to the ICD-10-
CM, ICD-10-PCS, and ICD-9-CM coding systems. The Committee is jointly 
responsible for approving coding changes, and developing errata, 
addenda, and other modifications to the coding systems to reflect newly 
developed procedures and technologies and newly identified diseases. 
The Committee is also responsible for promoting the use of Federal and 
non-Federal educational programs and other communication techniques 
with a view toward standardizing coding applications and upgrading the 
quality of the classification system.
    The official list of ICD-9-CM diagnosis and procedure codes by 
fiscal year can be found on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/codes.html. The official 
list of ICD-10-CM and ICD-10-PCS codes can be found on the CMS Web site 
at: http://www.cms.gov/Medicare/Coding/ICD10/index.html,
    The NCHS has lead responsibility for the ICD-10-CM and ICD-9-CM 
diagnosis codes included in the Tabular List and Alphabetic Index for 
Diseases, while CMS has lead responsibility for the ICD-10-PCS and ICD-
9-CM procedure codes included in the Tabular List and Alphabetic Index 
for Procedures.
    The Committee encourages participation in the above process by 
health-related organizations. In this regard, the Committee holds 
public meetings for discussion of educational issues and proposed 
coding changes. These meetings provide an opportunity for 
representatives of recognized organizations in the coding field, such 
as the American Health Information Management Association (AHIMA), the 
American Hospital Association (AHA), and various physician specialty 
groups, as well as individual physicians, health information management 
professionals, and other members of the public, to contribute ideas on 
coding matters. After considering the opinions expressed at the public 
meetings and in writing, the Committee formulates recommendations, 
which then must be approved by the agencies.
    The Committee presented proposals for coding changes for 
implementation in FY 2016 at a public meeting held on September 23-24, 
2014, and finalized the coding changes after consideration of comments 
received at the meetings and in writing by November 15, 2014.
    The Committee held its 2015 meeting on March 18-19, 2015. It was 
announced at this meeting that any new ICD-10-CM/PCS codes for which 
there was consensus of public support and for which complete tabular 
and indexing changes would be made by May 2015 would be included in the 
October 1, 2015 update to ICD-10-CM/ICD-10-PCS. For FY 2016, there are 
no new, revised, or deleted ICD-10-CM diagnosis codes. For FY 2016, 
there are new ICD-10-PCS procedure codes that are included in Table 6B 
(New Procedure Codes). However, there are no revised or deleted ICD-10-
PCS procedure codes. There also are no new ICD-9-CM diagnosis or 
procedure codes because ICD-9-CM will be replaced by ICD-10-CM/ICD-10-
PCS for services provided on or after October 1, 2015.
    Copies of the agenda, handouts, and access to the live stream 
videos for the procedure codes discussions at the Committee's September 
23-24, 2014 meeting and March 18-19, 2015 meeting can be obtained from 
the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/
icd9ProviderDiagnosticCodes/03_meetings.asp. The agenda, handouts and 
minutes of the diagnosis codes discussions at the September 23-24, 2014 
meeting and March 18-19, 2015 meeting are found at: http://www.cdc.gov/nchs/icd/icd9cm-maintenance.html. These Web sites also provide detailed 
information about the Committee, including information on requesting a 
new code, attending a Committee meeting, timeline requirements and 
meeting dates.
    We encourage commenters to address suggestions on coding issues 
involving diagnosis codes to: Donna Pickett, Co-Chairperson, ICD-10 
Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo 
Road, Hyattsville, MD 20782. Comments may be sent by Email to: 
[email protected].
    Questions and comments concerning the procedure codes should be 
addressed to: Patricia Brooks, Co-Chairperson, ICD-10 Coordination and 
Maintenance Committee, CMS, Center for Medicare, Hospital and 
Ambulatory Policy Group, Division of Acute Care, C4-08-06, 7500 
Security Boulevard, Baltimore, MD 21244-1850. Comments may be sent by 
Email to: [email protected].
    In the September 7, 2001 final rule implementing the IPPS new 
technology add-on payments (66 FR 46906), we

[[Page 49421]]

indicated we would attempt to include proposals for procedure codes 
that would describe new technology discussed and approved at the Spring 
meeting as part of the code revisions effective the following October.
    Section 503(a) of Public Law 108-173 included a requirement for 
updating ICD-9-CM codes twice a year instead of a single update on 
October 1 of each year. This requirement was included as part of the 
amendments to the Act relating to recognition of new technology under 
the IPPS. Section 503(a) amended section 1886(d)(5)(K) of the Act by 
adding a clause (vii) which states that the Secretary shall provide for 
the addition of new diagnosis and procedure codes on April 1 of each 
year, but the addition of such codes shall not require the Secretary to 
adjust the payment (or diagnosis-related group classification) until 
the fiscal year that begins after such date. This requirement improves 
the recognition of new technologies under the IPPS system by providing 
information on these new technologies at an earlier date. Data will be 
available 6 months earlier than would be possible with updates 
occurring only once a year on October 1.
    While section 1886(d)(5)(K)(vii) of the Act states that the 
addition of new diagnosis and procedure codes on April 1 of each year 
shall not require the Secretary to adjust the payment, or DRG 
classification, under section 1886(d) of the Act until the fiscal year 
that begins after such date, we have to update the DRG software and 
other systems in order to recognize and accept the new codes. We also 
publicize the code changes and the need for a mid-year systems update 
by providers to identify the new codes. Hospitals also have to obtain 
the new code books and encoder updates, and make other system changes 
in order to identify and report the new codes.
    The ICD-10 (previously the ICD-9-CM) Coordination and Maintenance 
Committee holds its meetings in the spring and fall in order to update 
the codes and the applicable payment and reporting systems by October 1 
of each year. Items are placed on the agenda for the Committee meeting 
if the request is received at least 2 months prior to the meeting. This 
requirement allows time for staff to review and research the coding 
issues and prepare material for discussion at the meeting. It also 
allows time for the topic to be publicized in meeting announcements in 
the Federal Register as well as on the CMS Web site. The public decides 
whether or not to attend the meeting based on the topics listed on the 
agenda. Final decisions on code title revisions are currently made by 
March 1 so that these titles can be included in the IPPS proposed rule. 
A complete addendum describing details of all diagnosis and procedure 
coding changes, both tabular and index, is published on the CMS and 
NCHS Web sites in May of each year. Publishers of coding books and 
software use this information to modify their products that are used by 
health care providers. This 5-month time period has proved to be 
necessary for hospitals and other providers to update their systems.
    A discussion of this timeline and the need for changes are included 
in the December 4-5, 2005 ICD-9-CM Coordination and Maintenance 
Committee Meeting minutes. The public agreed that there was a need to 
hold the fall meetings earlier, in September or October, in order to 
meet the new implementation dates. The public provided comment that 
additional time would be needed to update hospital systems and obtain 
new code books and coding software. There was considerable concern 
expressed about the impact this new April update would have on 
providers.
    In the FY 2005 IPPS final rule, we implemented section 
1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law 
108-173, by developing a mechanism for approving, in time for the April 
update, diagnosis and procedure code revisions needed to describe new 
technologies and medical services for purposes of the new technology 
add-on payment process. We also established the following process for 
making these determinations. Topics considered during the Fall ICD-10 
(previously ICD-9-CM) Coordination and Maintenance Committee meeting 
are considered for an April 1 update if a strong and convincing case is 
made by the requestor at the Committee's public meeting. The request 
must identify the reason why a new code is needed in April for purposes 
of the new technology process. The participants at the meeting and 
those reviewing the Committee meeting summary report are provided the 
opportunity to comment on this expedited request. All other topics are 
considered for the October 1 update. Participants at the Committee 
meeting are encouraged to comment on all such requests. There were no 
requests approved for an expedited April l, 2015 implementation of a 
code at the September 23-24, 2014 Committee meeting. Therefore, there 
were no new codes implemented on April 1, 2015.
    ICD-9-CM addendum and code title information is published on the 
CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/
icd9ProviderDiagnosticCodes/01overview.asp#TopofPage. ICD-10-CM and 
ICD-10-PCS addendum and code title information is published on the CMS 
Web site at http://www.cms.gov/Medicare/Coding/ICD10/index.html. 
Information on ICD-10-CM diagnosis codes, along with the Official ICD-
10-CM Coding Guidelines, can also be found on the CDC Web site at: 
http://www.cdc.gov/nchs/index.html. Information on new, revised, and 
deleted ICD-10-CM/ICD-10-PCS codes is also provided to the AHA for 
publication in the Coding Clinic for ICD-10. AHA also distributes 
information to publishers and software vendors.
    CMS also sends copies of all ICD-10-CM and ICD-10-PCS coding 
changes to its Medicare contractors for use in updating their systems 
and providing education to providers.
    The code titles are adopted as part of the ICD-10 (previously ICD-
9-CM) Coordination and Maintenance Committee process. Therefore, 
although we publish the code titles in the IPPS proposed and final 
rules, they are not subject to comment in the proposed or final rules.
b. Code Freeze
    In the January 16, 2009 ICD-10-CM and ICD-10-PCS final rule (74 FR 
3340), there was a discussion of the need for a partial or total freeze 
in the annual updates to both ICD-9-CM and ICD-10-CM and ICD-10-PCS 
codes. The public comment addressed in that final rule stated that the 
annual code set updates should cease l year prior to the implementation 
of ICD-10. The commenters stated that this freeze of code updates would 
allow for instructional and/or coding software programs to be designed 
and purchased early, without concern that an upgrade would take place 
immediately before the compliance date, necessitating additional 
updates and purchases.
    HHS responded to comments in the ICD-10 final rule that the ICD-9-
CM Coordination and Maintenance Committee has jurisdiction over any 
action impacting the ICD-9-CM and ICD-10 code sets. Therefore, HHS 
indicated that the issue of consideration of a moratorium on updates to 
the ICD-9-CM, ICD-10-CM, and ICD-10-PCS code sets in anticipation of 
the adoption of ICD-10-CM and ICD-10-PCS would be addressed through the 
Committee at a future public meeting.
    The code freeze was discussed at multiple meetings of the ICD-9-CM 
Coordination and Maintenance

[[Page 49422]]

Committee and public comment was actively solicited. The Committee 
evaluated all comments from participants attending the Committee 
meetings as well as written comments that were received. The Committee 
also considered the delay in implementation of ICD-10 until October 1, 
2014. There was an announcement at the September 19, 2012 ICD-9-CM 
Coordination and Maintenance Committee meeting that a partial freeze of 
both ICD-9-CM and ICD-10 codes will be implemented as follows:
     The last regular annual update to both ICD-9-CM and ICD-10 
code sets was made on October 1, 2011.
     On October 1, 2012 and October 1, 2013, there were to be 
only limited code updates to both ICD-9-CM and ICD-10 code sets to 
capture new technology and new diseases.
     On October 1, 2014, there were to be only limited code 
updates to ICD-10 code sets to capture new technology and diagnoses as 
required by section 503(a) of Public Law 108-173. There were to be no 
updates to ICD-9-CM on October 1, 2014.
     On October 1, 2015, one year after the originally 
scheduled implementation of ICD-10, regular updates to ICD-10 were to 
begin.
    On May 15, 2014, CMS posted an updated Partial Code Freeze schedule 
on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-9-CM-Coordination-and-Maintenance-Committee-Meetings.html. This updated 
schedule provided information on the extension of the partial code 
freeze until 1 year after the implementation of ICD-10. As stated 
earlier, on April 1, 2014, the Protecting Access to Medicare Act of 
2014 (PAMA) (Pub. L. 113-93) was enacted, which specified that the 
Secretary may not adopt ICD-10 prior to October 1, 2015. Accordingly, 
the U.S. Department of Health and Human Services released a final rule 
in the Federal Register on August 4, 2014 (79 FR 45128 through 45134) 
that included a new compliance date that requires the use of ICD-10 
beginning October 1, 2015. The August 4, 2014 final rule is available 
for viewing on the Internet at: http://www.gpo.gov/fdsys/pkg/FR-2014-08-04/pdf/2014-18347.pdf. That final rule also requires HIPAA covered 
entities to continue to use ICD-9-CM through September 30, 2015. 
Accordingly, the updated schedule for the partial code freeze is as 
follows:
     The last regular annual updates to both ICD-9-CM and ICD-
10 code sets were made on October 1, 2011.
     On October 1, 2012, October 1, 2013, and October 1, 2014, 
there were only limited code updates to both the ICD-9-CM and ICD-10 
code sets to capture new technologies and diseases as required by 
section 1886(d)(5)(K) of the Act.
     On October 1, 2015, there will be only limited code 
updates to ICD-10 code sets to capture new technologies and diagnoses 
as required by section 1886(d)(5)(K) of the Act. There will be no 
updates to ICD-9-CM, as it will no longer be used for reporting.
     On October 1, 2016 (1 year after implementation of ICD-
10), regular updates to ICD-10 will begin.
    The ICD-10 (previously ICD-9-CM) Coordination and Maintenance 
Committee announced that it would continue to meet twice a year during 
the freeze. At these meetings, the public will be encouraged to comment 
on whether or not requests for new diagnosis and procedure codes should 
be created based on the need to capture new technology and new 
diseases. Any code requests that do not meet the criteria will be 
evaluated for implementation within ICD-10 one year after the 
implementation of ICD-10, once the partial freeze is ended.
    Complete information on the partial code freeze and discussions of 
the issues at the Committee meetings can be found on the ICD-10 
Coordination and Maintenance Committee Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/meetings.html. A summary of 
the September 19, 2012 Committee meeting, along with both written and 
audio transcripts of this meeting, is posted on the Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials-Items/2012-09-19-MeetingMaterials.html.
    This partial code freeze has dramatically decreased the number of 
codes created each year as shown by the following information.

                   Total Number of Codes and Changes in Total Number of Codes per Fiscal Year
----------------------------------------------------------------------------------------------------------------
                        ICD-9-CM Codes                                   ICD-10-CM and ICD-10-PCS Codes
----------------------------------------------------------------------------------------------------------------
            Fiscal Year                 Number       Change           Fiscal Year          Number       Change
----------------------------------------------------------------------------------------------------------------
FY 2009 (October 1, 2008):                                      FY 2009:
    Diagnoses......................       14,025          348      ICD-10-CM..........       68,069           +5
    Procedures.....................        3,824           56      ICD-10-PCS.........       72,589      -14,327
FY 2010 (October 1, 2009):                                      FY 2010:
    Diagnoses......................       14,315          290      ICD-10-CM..........       69,099       +1,030
    Procedures.....................        3,838           14      ICD-10-PCS.........       71,957         -632
FY 2011 (October 1, 2010):
    Diagnoses......................       14,432          117      ICD-10-CM..........       69,368         +269
    Procedures.....................        3,859           21      ICD-10-PCS.........       72,081         +124
FY 2012 (October 1, 2011):                                      FY 2012:
    Diagnoses......................       14,567          135      ICD-10-CM..........       69,833         +465
    Procedures.....................        3,877           18      ICD-10-PCS.........       71,918         -163
FY 2013 (October 1, 2012):                                      FY 2013:
    Diagnoses......................       14,567            0      ICD-10-CM..........       69,832           -1
    Procedures.....................        3,878            1      ICD-10-PCS.........       71,920           +2
FY 2014 (October 1, 2013):                                      FY 2014:
    Diagnoses......................       14,567            0      ICD-10-CM..........       69,823           -9
    Procedures.....................        3,882            4      ICD-10-PCS.........       71,924           +4
FY 2015 (October 1, 2014):                                      FY 2015:
    Diagnoses......................       14,567            0      ICD-10-CM..........       69,823            0
    Procedures.....................        3,882            0      ICD-10-PCS.........       71,924            0
FY 2016 (October 1, 2015):                                      FY 2016:
    Diagnoses......................       14,567            0      ICD-10-CM..........       69,823            0
    Procedures.....................        3,882            0      ICD-10-PCS.........       71,974          +50
----------------------------------------------------------------------------------------------------------------


[[Page 49423]]

    As mentioned earlier, the public is provided the opportunity to 
comment on any requests for new diagnosis or procedure codes discussed 
at the ICD-10 Coordination and Maintenance Committee meeting. The 
public has supported only a limited number of new codes during the 
partial code freeze, as can be seen by data shown above. We have gone 
from creating several hundred new codes each year to creating only a 
limited number of new ICD-9-CM and ICD-10 codes.
    At the September 23-24, 2014 and March 18-19, 2015 Committee 
meetings, we discussed any requests we had received for new ICD-10-CM 
diagnosis and ICD-10-PCS procedure codes that were to be implemented on 
October 1, 2015. We did not discuss ICD-9-CM codes. The public was 
given the opportunity to comment on whether or not new ICD-10-CM and 
ICD-10-PCS codes should be created, based on the partial code freeze 
criteria. The public was to use the criteria as to whether codes were 
needed to capture new diagnoses or new technologies. If the codes do 
not meet those criteria for implementation during the partial code 
freeze, consideration was to be given as to whether the codes should be 
created after the partial code freeze ends 1 year after the 
implementation of ICD-10-CM/PCS. We invited public comments on any code 
requests discussed at the September 23-24, 2014 and March 18-19, 2015 
Committee meetings for implementation as part of the October 1, 2015 
update. The deadline for commenting on code proposals discussed at the 
September 23-24, 2014 Committee meeting was November 21, 2014. The 
deadline for commenting on code proposals discussed at the March 18-19, 
2015 Committee meeting was April 17, 2015.
14. Other Policy Changes: Replaced Devices Offered Without Cost or With 
a Credit
a. Background
    In the FY 2008 IPPS final rule with comment period (72 FR 47246 
through 47251), we discussed the topic of Medicare payment for devices 
that are replaced without cost or where credit for a replaced device is 
furnished to the hospital. We implemented a policy to reduce a 
hospital's IPPS payment for certain MS-DRGs where the implantation of a 
device that has been recalled determined the base MS-DRG assignment. We 
specified that if a hospital received a credit for a recalled device 
equal to 50 percent or more of the cost of the device, we would reduce 
a hospital's IPPS payment for those MS-DRGs.
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51556 and 51557), we 
clarified this policy to state that the policy applies if the hospital 
received a credit equal to 50 percent or more of the cost of the 
replacement device and issued instructions to hospitals accordingly.
b. Request for Clarification on Policy Relating to ``Device-Dependent'' 
MS-DRGs
    After publication of the FY 2015 IPPS/LTCH PPS final rule, we 
received a request to clarify the list of ``device-dependent'' MS-DRGs 
subject to the policy for payment under the IPPS for replaced devices 
offered without cost or with a credit. Specifically, a requestor noted 
that ICD-9-CM procedure codes that previously grouped to MS-DRGs 216 
through 221 (Cardiac Valve & Other Major Cardiothoracic Procedure with 
and without Cardiac Catheterization, with MCC, with CC, without CC/MCC, 
respectively) and were subject to the policy for payment under the IPPS 
as ``device-dependent'' MS-DRGs had been reassigned to new MS-DRGs 266 
and 267 (Endovascular Cardiac Valve Replacement with MCC and without 
MCC, respectively). The requestor suggested that MS-DRGs 266 and 267 
also should be considered ``device-dependent'' MS-DRGs and added to the 
list of MS-DRGs subject to the IPPS payment policy for replaced devices 
offered without cost or with a credit.
    As noted by the requestor, as final policy for FY 2015, certain 
ICD-9-CM procedure codes that previously grouped to MS-DRGs 216 through 
221, which are on the list of MS-DRGs subject to the policy for payment 
under the IPPS for replaced devices offered without cost or with a 
credit, were reassigned to MS-DRGs 266 and 267. We agree that MS-DRGs 
266 and 267 should be included in the list of ``device-dependent'' MS-
DRGs subject to the IPPS policy. We generally map new MS-DRGs onto the 
list when they are formed from procedures previously assigned to MS-
DRGs that are already on the list. Therefore, in the FY 2016 IPPS/LTCH 
PPS proposed rule (80 FR 24409), we proposed to add MS-DRGs 266 and 267 
to the list of ``device dependent'' MS-DRGs subject to the policy for 
payment under the IPPS for replaced devices offered without cost or 
with a credit.
    In addition, as discussed in section II.G.4.e. of the preamble of 
the proposed rule, for FY 2016, we proposed to delete MS-DRGs 237 and 
238 (Major Cardiovascular Procedures with MCC and without MCC, 
respectively) and create new MS-DRGs 268 and 269 (Aortic and Heart 
Assist Procedures Except Pulsation Balloon with MCC and without MCC, 
respectively), as well as new MS-DRGs 270, 271, and 272 (Other Major 
Cardiovascular Procedures with MCC, with CC, and without CC/MCC, 
respectively). Currently, MS-DRGs 237 and 238 are on the list of MS-
DRGs subject to the policy for payment under the IPPS for replaced 
devices offered without cost or with a credit. As stated previously, we 
generally map new MS-DRGs onto the list when they are formed from 
procedures previously assigned to MS-DRGs that are already on the list. 
Therefore, we indicated that if we finalized these proposed MS-DRG 
changes, we also would add proposed new MS-DRGs 268 through 272 to the 
list of MS-DRGs subject to the policy for payment under the IPPS for 
replaced devices offered without cost or with a credit. We invited 
public comments on our proposed list of MS-DRGs to be subject to the 
IPPS policy for replaced devices offered without cost or with a credit 
for FY 2016 (80 FR 24409 through 24410).
    Comment: Commenters supported the proposal to add MS-DRGs 266 and 
267 to the list of MS-DRGs subject to the IPPS payment policy for 
replaced devices offered without cost or with a credit. We did not 
receive any public comments in response to our proposal to delete ICD-
9-CM MS-DRGs 237 and 238 and add any of the finalized new ICD-10 MS-
DRGs to the list.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
adding MS-DRGs 266 and 267 to the list of MS-DRGs subject to the policy 
for payment under the IPPS for replaced devices offered without cost or 
with a credit, and consistent with the applicable finalized MS-DRG 
changes, also removing existing MS-DRGs 237 and 238 and adding new MS-
DRGs 268 through 272. The list of MS-DRGs that are subject to the IPPS 
policy for replaced devices offered without cost or with a credit for 
FY 2016 is displayed below. We also intend to issue this list to 
providers in the form of a Change Request (CR).

[[Page 49424]]



 List of MS-DRGs Subject to the IPPS Policy for Replaced Devices Offered
                      Without Cost or With a Credit
------------------------------------------------------------------------
            MDC                MS-DRG             MS-DRG title
------------------------------------------------------------------------
PreMDC.....................        001  Heart Transplant or Implant of
                                         Heart Assist System with MCC.
PreMDC.....................        002  Heart Transplant or Implant of
                                         Heart Assist System without
                                         MCC.
MDC 01.....................        023  Craniotomy with Major Device
                                         Implant/Acute Complex CNS PDX
                                         with MCC or Chemo Implant.
MDC 01.....................        024  Craniotomy with Major Device
                                         Implant/Acute Complex CNS PDX
                                         without MCC.
MDC 01.....................        025  Craniotomy & Endovascular
                                         Intracranial Procedures with
                                         MCC.
MDC 01.....................        026  Craniotomy & Endovascular
                                         Intracranial Procedures with
                                         CC.
MDC 01.....................        027  Craniotomy & Endovascular
                                         Intracranial Procedures without
                                         CC/MCC.
MDC 01.....................        040  Peripheral/Cranial Nerve & Other
                                         Nervous System Procedures with
                                         MCC.
MDC 01.....................        041  Peripheral/Cranial Nerve & Other
                                         Nervous System Procedures with
                                         CC or Peripheral
                                         Neurostimulation.
MDC 01.....................        042  Peripheral/Cranial Nerve & Other
                                         Nervous System Procedures
                                         without CC/MCC.
MDC 03.....................        129  Major Head & Neck Procedures
                                         with CC/MCC or Major Device.
MDC 03.....................        130  Major Head & Neck Procedures
                                         without CC/MCC.
MDC 05.....................        215  Other Heart Assist System
                                         Implant.
MDC 05.....................        216  Cardiac Valve & Other Major
                                         Cardiothoracic Procedures with
                                         Cardiac Catheterization with
                                         MCC.
MDC 05.....................        217  Cardiac Valve & Other Major
                                         Cardiothoracic Procedures with
                                         Cardiac Catheterization with
                                         CC.
MDC 05.....................        218  Cardiac Valve & Other Major
                                         Cardiothoracic Procedures with
                                         Cardiac Catheterization without
                                         CC/MCC.
MDC 05.....................        219  Cardiac Valve & Other Major
                                         Cardiothoracic Procedures
                                         without Cardiac Catheterization
                                         with MCC.
MDC 05.....................        220  Cardiac Valve & Other Major
                                         Cardiothoracic Procedures
                                         without Cardiac Catheterization
                                         with CC.
MDC 05.....................        221  Cardiac Valve & Other Major
                                         Cardiothoracic Procedures
                                         without Cardiac Catheterization
                                         without CC/MCC.
MDC 05.....................        222  Cardiac Defibrillator Implant
                                         with Cardiac Catheterization
                                         with AMI/HF/Shock with MCC.
MDC 05.....................        223  Cardiac Defibrillator Implant
                                         with Cardiac Catheterization
                                         with AMI/HF/Shock without MCC.
MDC 05.....................        224  Cardiac Defibrillator Implant
                                         with Cardiac Catheterization
                                         without AMI/HF/Shock with MCC.
MDC 05.....................        225  Cardiac Defibrillator Implant
                                         with Cardiac Catheterization
                                         without AMI/HF/Shock without
                                         MCC.
MDC 05.....................        226  Cardiac Defibrillator Implant
                                         without Cardiac Catheterization
                                         with MCC.
MDC 05.....................        227  Cardiac Defibrillator Implant
                                         without Cardiac Catheterization
                                         without MCC.
MDC 05.....................        242  Permanent Cardiac Pacemaker
                                         Implant with MCC.
MDC 05.....................        243  Permanent Cardiac Pacemaker
                                         Implant with CC.
MDC 05.....................        244  Permanent Cardiac Pacemaker
                                         Implant without CC/MCC.
MDC 05.....................        245  AICD Generator Procedures.
MDC 05.....................        258  Cardiac Pacemaker Device
                                         Replacement with MCC.
MDC 05.....................        259  Cardiac Pacemaker Device
                                         Replacement without MCC.
MDC 05.....................        260  Cardiac Pacemaker Revision
                                         Except Device Replacement with
                                         MCC.
MDC 05.....................        261  Cardiac Pacemaker Revision
                                         Except Device Replacement with
                                         CC.
MDC 05.....................        262  Cardiac Pacemaker Revision
                                         Except Device Replacement
                                         without CC/MCC.
MDC 05.....................        265  AICD Lead Procedures.
MDC 05.....................        266  Endovascular Cardiac Valve
                                         Replacement with MCC.
MDC 05.....................        267  Endovascular Cardiac Valve
                                         Replacement without MCC.
MDC 05.....................        268  Aortic and Heart Assist
                                         Procedures Except Pulsation
                                         Balloon with MCC.
MDC 05.....................        269  Aortic and Heart Assist
                                         Procedures Except Pulsation
                                         Balloon without MCC.
MDC 05.....................        270  Other Major Cardiovascular
                                         Procedures with MCC.
MDC 05.....................        271  Other Major Cardiovascular
                                         Procedures with CC.
MDC 05.....................        272  Other Major Cardiovascular
                                         Procedures without CC/MCC.
MDC 08.....................        461  Bilateral or Multiple Major
                                         Joint Procedures of Lower
                                         Extremity with MCC.
MDC 08.....................        462  Bilateral or Multiple Major
                                         Joint Procedures of Lower
                                         Extremity without MCC.
MDC 08.....................        466  Revision of Hip or Knee
                                         Replacement with MCC.
MDC 08.....................        467  Revision of Hip or Knee
                                         Replacement with CC.
MDC 08.....................        468  Revision of Hip or Knee
                                         Replacement without CC/MCC.
MDC 08.....................        469  Major Joint Replacement or
                                         Reattachment of Lower Extremity
                                         with MCC.
MDC 08.....................        470  Major Joint Replacement or
                                         Reattachment of Lower Extremity
                                         without MCC.
------------------------------------------------------------------------

15. Out of Scope Public Comments
    We received public comments regarding two MS-DRG issues that were 
outside of the scope of the proposals included in the FY 2016 IPPS/LTCH 
proposed rule. These comments were as follows:
     Several commenters requested the creation of a new MS-DRG 
for primary total ankle replacements and revisions of total ankle 
replacement procedures.
     Several commenters requested the creation of a new MS-DRG 
for hip fractures for individuals who receive total hip replacements.
    However, because we consider these public comments to be outside of 
the scope of the proposed rule, we are not addressing them in this 
final rule. As stated in section II.G.1.b. of the preamble of this 
final rule, we encourage individuals with comments about MS-DRG 
classification to submit these comments no later than December 7 of 
each year so that they can be considered for possible inclusion in the 
annual proposed rule and, if included, may be subjected to public 
review and comment. We will consider these public comments for possible 
proposals in future rulemaking as part of our annual review process.

H. Recalibration of the FY 2016 MS-DRG Relative Weights

1. Data Sources for Developing the Relative Weights
    In developing the FY 2016 system of weights, we used two data 
sources: claims data and cost report data. As in previous years, the 
claims data source is the MedPAR file. This file is based on fully 
coded diagnostic and procedure data for all Medicare inpatient hospital 
bills. The FY 2014 MedPAR data used in this final rule include 
discharges occurring on October 1, 2013, through September 30, 2014, 
based on bills received by CMS through March 31,

[[Page 49425]]

2015, from all hospitals subject to the IPPS and short-term, acute care 
hospitals in Maryland (which at that time were under a waiver from the 
IPPS). The FY 2014 MedPAR file used in calculating the relative weights 
includes data for approximately 9,682,319 Medicare discharges from IPPS 
providers. Discharges for Medicare beneficiaries enrolled in a Medicare 
Advantage managed care plan are excluded from this analysis. These 
discharges are excluded when the MedPAR ``GHO Paid'' indicator field on 
the claim record is equal to ``1'' or when the MedPAR DRG payment 
field, which represents the total payment for the claim, is equal to 
the MedPAR ``Indirect Medical Education (IME)'' payment field, 
indicating that the claim was an ``IME only'' claim submitted by a 
teaching hospital on behalf of a beneficiary enrolled in a Medicare 
Advantage managed care plan. In addition, the March 31, 2015 update of 
the FY 2014 MedPAR file complies with version 5010 of the X12 HIPAA 
Transaction and Code Set Standards, and includes a variable called 
``claim type.'' Claim type ``60'' indicates that the claim was an 
inpatient claim paid as fee-for-service. Claim types ``61,'' ``62,'' 
``63,'' and ``64'' relate to encounter claims, Medicare Advantage IME 
claims, and HMO no-pay claims. Therefore, the calculation of the 
relative weights for FY 2016 also excludes claims with claim type 
values not equal to ``60.'' The data exclude CAHs, including hospitals 
that subsequently became CAHs after the period from which the data were 
taken. We note that the FY 2016 relative weights are based on the ICD-
9-CM diagnoses and procedures codes from the MedPAR claims data, 
grouped through the ICD-9-CM version of the FY 2016 GROUPER (Version 
33).
    The second data source used in the cost-based relative weighting 
methodology is the Medicare cost report data files from the HCRIS. 
Normally, we use the HCRIS dataset that is 3 years prior to the IPPS 
fiscal year. Specifically, we used cost report data from the March 31, 
2015 update of the FY 2013 HCRIS for calculating the FY 2016 cost-based 
relative weights.
2. Methodology for Calculation of the Relative Weights
    As we explain in section II.E.2. of the preamble of this final 
rule, we calculated the FY 2016 relative weights based on 19 CCRs, as 
we did for FY 2015. The methodology we used to calculate the FY 2016 
MS-DRG cost-based relative weights based on claims data in the FY 2014 
MedPAR file and data from the FY 2013 Medicare cost reports is as 
follows:
     To the extent possible, all the claims were regrouped 
using the FY 2016 MS-DRG classifications discussed in sections II.B. 
and II.G. of the preamble of this final rule.
     The transplant cases that were used to establish the 
relative weights for heart and heart-lung, liver and/or intestinal, and 
lung transplants (MS-DRGs 001, 002, 005, 006, and 007, respectively) 
were limited to those Medicare-approved transplant centers that have 
cases in the FY 2014 MedPAR file. (Medicare coverage for heart, heart-
lung, liver and/or intestinal, and lung transplants is limited to those 
facilities that have received approval from CMS as transplant centers.)
     Organ acquisition costs for kidney, heart, heart-lung, 
liver, lung, pancreas, and intestinal (or multivisceral organs) 
transplants continue to be paid on a reasonable cost basis. Because 
these acquisition costs are paid separately from the prospective 
payment rate, it is necessary to subtract the acquisition charges from 
the total charges on each transplant bill that showed acquisition 
charges before computing the average cost for each MS-DRG and before 
eliminating statistical outliers.
     Claims with total charges or total lengths of stay less 
than or equal to zero were deleted. Claims that had an amount in the 
total charge field that differed by more than $10.00 from the sum of 
the routine day charges, intensive care charges, pharmacy charges, 
special equipment charges, therapy services charges, operating room 
charges, cardiology charges, laboratory charges, radiology charges, 
other service charges, labor and delivery charges, inhalation therapy 
charges, emergency room charges, blood charges, and anesthesia charges 
were also deleted.
     At least 92.1 percent of the providers in the MedPAR file 
had charges for 14 of the 19 cost centers. All claims of providers that 
did not have charges greater than zero for at least 14 of the 19 cost 
centers were deleted. In other words, a provider must have no more than 
five blank cost centers. If a provider did not have charges greater 
than zero in more than five cost centers, the claims for the provider 
were deleted.
     Statistical outliers were eliminated by removing all cases 
that were beyond 3.0 standard deviations from the geometric mean of the 
log distribution of both the total charges per case and the total 
charges per day for each MS-DRG.
     Effective October 1, 2008, because hospital inpatient 
claims include a POA indicator field for each diagnosis present on the 
claim, only for purposes of relative weight-setting, the POA indicator 
field was reset to ``Y'' for ``Yes'' for all claims that otherwise have 
an ``N'' (No) or a ``U'' (documentation insufficient to determine if 
the condition was present at the time of inpatient admission) in the 
POA field.
    Under current payment policy, the presence of specific HAC codes, 
as indicated by the POA field values, can generate a lower payment for 
the claim. Specifically, if the particular condition is present on 
admission (that is, a ``Y'' indicator is associated with the diagnosis 
on the claim), it is not a HAC, and the hospital is paid for the higher 
severity (and, therefore, the higher weighted MS-DRG). If the 
particular condition is not present on admission (that is, an ``N'' 
indicator is associated with the diagnosis on the claim) and there are 
no other complicating conditions, the DRG GROUPER assigns the claim to 
a lower severity (and, therefore, the lower weighted MS-DRG) as a 
penalty for allowing a Medicare inpatient to contract a HAC. While the 
POA reporting meets policy goals of encouraging quality care and 
generates program savings, it presents an issue for the relative 
weight-setting process. Because cases identified as HACs are likely to 
be more complex than similar cases that are not identified as HACs, the 
charges associated with HAC cases are likely to be higher as well. 
Therefore, if the higher charges of these HAC claims are grouped into 
lower severity MS-DRGs prior to the relative weight-setting process, 
the relative weights of these particular MS-DRGs would become 
artificially inflated, potentially skewing the relative weights. In 
addition, we want to protect the integrity of the budget neutrality 
process by ensuring that, in estimating payments, no increase to the 
standardized amount occurs as a result of lower overall payments in a 
previous year that stem from using weights and case-mix that are based 
on lower severity MS-DRG assignments. If this would occur, the 
anticipated cost savings from the HAC policy would be lost.
    To avoid these problems, we reset the POA indicator field to ``Y'' 
only for relative weight-setting purposes for all claims that otherwise 
have an ``N'' or a ``U'' in the POA field. This resetting ``forced'' 
the more costly HAC claims into the higher severity MS-DRGs as 
appropriate, and the relative weights calculated for each MS-DRG more 
closely reflect the true costs of those cases.

[[Page 49426]]

    In addition, in the FY 2013 IPPS/LTCH PPS final rule, for FY 2013 
and subsequent fiscal years, we finalized a policy to treat hospitals 
that participate in the Bundled Payments for Care Improvement (BPCI) 
initiative the same as prior fiscal years for the IPPS payment modeling 
and ratesetting process without regard to hospitals' participation 
within these bundled payment models (that is, as if hospitals were not 
participating in those models under the BPCI initiative). The BPCI 
initiative, developed under the authority of section 3021 of the 
Affordable Care Act (codified at section 1115A of the Act), is 
comprised of four broadly defined models of care, which link payments 
for multiple services beneficiaries receive during an episode of care. 
Under the BPCI initiative, organizations enter into payment 
arrangements that include financial and performance accountability for 
episodes of care. For FY 2016, as we proposed, we are continuing to 
include all applicable data from subsection (d) hospitals participating 
in BPCI Models 1, 2, and 4 in our IPPS payment modeling and ratesetting 
calculations. We refer readers to the FY 2013 IPPS/LTCH PPS final rule 
for a complete discussion on our final policy for the treatment of 
hospitals participating in the BPCI initiative in our ratesetting 
process. For additional information on the BPCI initiative, we refer 
readers to the CMS' Center for Medicare and Medicaid Innovation's Web 
site at: http://innovation.cms.gov/initiatives/Bundled-Payments/index.html and to section IV.H.4. of the preamble of the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53341 through 53343).
    Once the MedPAR data were trimmed and the statistical outliers were 
removed, the charges for each of the 19 cost groups for each claim were 
standardized to remove the effects of differences in area wage levels, 
IME and DSH payments, and for hospitals located in Alaska and Hawaii, 
the applicable cost-of-living adjustment. Because hospital charges 
include charges for both operating and capital costs, we standardized 
total charges to remove the effects of differences in geographic 
adjustment factors, cost-of-living adjustments, and DSH payments under 
the capital IPPS as well. Charges were then summed by MS-DRG for each 
of the 19 cost groups so that each MS-DRG had 19 standardized charge 
totals. These charges were then adjusted to cost by applying the 
national average CCRs developed from the FY 2013 cost report data.
    The 19 cost centers that we used in the relative weight calculation 
are shown in the following table. The table shows the lines on the cost 
report and the corresponding revenue codes that we used to create the 
19 national cost center CCRs.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                       Medicare charges
                                                     Revenue codes                          Cost from HCRIS     Charges from HCRIS        from HCRIS
  Cost center group name  (19     MedPAR charge       contained in     Cost report line   (Worksheet C, Part    (Worksheet C, Part        (Worksheet
            total)                    field          MedPAR charge       description     1, Column 5 and line   1, Columns 6 and 7     D[dash]3, Column
                                                         field                             number)  Form CMS-    and line number)      and line number)
                                                                                                2552-10          Form CMS-2552-10      Form CMS-2552-10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Routine Days..................  Private Room       011X and 014X....  Adults &           C_1_C5_30             C_1_C6_30             D3_HOS_C2_30
                                 Charges.                              Pediatrics
                                                                       (General Routine
                                                                       Care).
                                Semi-Private Room  012X, 013X and
                                 Charges.           016X-019X
                                Ward Charges.....  015X
Intensive Days................  Intensive Care     020X.............  Intensive Care     C_1_C5_31             C_1_C6_31             D3_HOS_C2_31
                                 Charges.                              Unit.
                                Coronary Care      021X.............  Coronary Care      C_1_C5_32             C_1_C6_32             D3_HOS_C2_32
                                 Charges.                              Unit.
                                                                      Burn Intensive     C_1_C5_33             C_1_C6_33             D3_HOS_C2_33
                                                                       Care Unit.
                                                                      Surgical           C_1_C5_34             C_1_C6_34             D3_HOS_C2_34
                                                                       Intensive Care
                                                                       Unit.
                                                                      Other Special      C_1_C5_35             C_1_C6_35             D3_HOS_C2_35
                                                                       Care Unit.
Drugs.........................  Pharmacy Charges.  025X, 026X and     Intravenous        C_1_C5_64             C_1_C6_64             D3_HOS_C2_64
                                                    063X.              Therapy.
                                                                                                               C_1_C7_64
                                                                      Drugs Charged To   C_1_C5_73             C_1_C6_73             D3_HOS_C2_73
                                                                       Patient.
                                                                                                               C_1_C7_73
Supplies and Equipment........  Medical/Surgical   0270, 0271, 0272,  Medical Supplies   C_1_C5_71             C_1_C6_71             D3_HOS_C2_71
                                 Supply Charges.    0273, 0274,        Charged to
                                                    0277, 0279, and    Patients.
                                                    0621, 0622, 0623.
                                                                                                               C_1_C7_71
                                Durable Medical    0290, 0291, 0292   DME-Rented.......  C_1_C5_96             C_1_C6_96             D3_HOS_C2_96
                                 Equipment          and 0294-0299.
                                 Charges.
                                                                                                               C_1_C7_96
                                Used Durable       0293.............  DME-Sold.........  C_1_C5_97             C_1_C6_97             D3_HOS_C2_97
                                 Medical Charges.
                                                                                                               C_1_C7_97
Implantable Devices...........  .................  0275, 0276, 0278,  Implantable        C_1_C5_72             C_1_C6_72             D3_HOS_C2_72
                                                    0624.              Devices Charged
                                                                       to Patients.
                                                                                                               C_1_C7_72

[[Page 49427]]

 
Therapy Services..............  Physical Therapy   042X.............  Physical Therapy.  C_1_C5_66             C_1_C6_66             D3_HOS_C2_66
                                 Charges.
                                                                                                               C_1_C7_66
                                Occupational       043X.............  Occupational       C_1_C5_67             C_1_C6_67             D3_HOS_C2_67
                                 Therapy Charges.                      Therapy.
                                                                                                               C_1_C7_67
                                Speech Pathology   044X and 047X....  Speech Pathology.  C_1_C5_68             C_1_C6_68             D3_HOS_C2_68
                                 Charges.
                                                                                                               C_1_C7_68
Inhalation Therapy............  Inhalation         041X and 046X....  Respiratory        C_1_C5_65             C_1_C6_65             D3_HOS_C2_65
                                 Therapy Charges.                      Therapy.
                                                                                                               C_1_C7_65
Operating Room................  Operating Room     036X.............  Operating Room...  C_1_C5_50             C_1_C6_50             D3_HOS_C2_50
                                 Charges.
                                                                                                               C_1_C7_50
                                                   071X.............  Recovery Room....  C_1_C5_51             C_1_C6_51             D3_HOS_C2_51
                                                                                                               C_1_C7_51
Labor & Delivery..............  Operating Room     072X.............  Delivery Room and  C_1_C5_52             C_1_C6_52             D3_HOS_C2_52
                                 Charges.                              Labor Room.
                                                                                                               C_1_C7_52
Anesthesia....................  Anesthesia         037X.............  Anes thesi ology.  C_1_C5_53             C_1_C6_53             D3_HOS_C2_53
                                 Charges.
                                                                                                               C_1_C7_53
Cardiology....................  Cardiology         048X and 073X....  Electro            C_1_C5_69             C_1_C6_69             D3_HOS_C2_69
                                 Charges.                              cardiology.
                                                                                                               C_1_C7_69
Cardiac Catheteri zation......  .................  0481.............  Cardiac Catheteri  C_1_C5_59             C_1_C6_59             D3_HOS_C2_59
                                                                       zation.
                                                                                                               C_1_C7_59
Laboratory....................  Laboratory         030X, 031X, and    Laboratory.......  C_1_C5_60             C_1_C6_60             D3_HOS_C2_60
                                 Charges.           075X.
                                                                                                               C_1_C7_60
                                                                      PBP Clinic         C_1_C5_61             C_1_C6_61             D3_HOS_C2_61
                                                                       Laboratory
                                                                       Services.
                                                                                                               C_1_C7_61
                                                   074X, 086X.......  Electro-Enceph     C_1_C5_70             C_1_C6_70             D3_HOS_C2_70
                                                                       alography.
                                                                                                               C_1_C7_70
Radiology.....................  Radiology Charges  032X, 040X.......  Radiology--Diagno  C_1_C5_54             C_1_C6_54             D3_HOS_C2_54
                                                                       stic.
                                                                                                               C_1_C7_54
                                                   028x, 0331, 0332,  Radiology--Therap  C_1_C5_55             C_1_C6_55             D3_HOS_C2_55
                                                    0333, 0335,        eutic.
                                                    0339, 0342.
                                                   0343 and 344.....  Radioisotope.....  C_1_C5_56             C_1_C6_56             D3_HOS_C2_56
                                                                                                               C_1_C7_56
Computed Tomography (CT) Scan.  CT Scan Charges..  035X.............  Computed           C_1_C5_57             C_1_C6_57             D3_HOS_C2_57
                                                                       Tomography (CT)
                                                                       Scan.
                                                                                                               C_1_C7_57
Magnetic Resonance Imaging      MRI Charges......  061X.............  Magnetic           C_1_C5_58             C_1_C6_58             D3_HOS_C2_58
 (MRI).                                                                Resonance
                                                                       Imaging (MRI).
                                                                                                               C_1_C7_58
Emergency Room................  Emergency Room     045x.............  Emergency........  C_1_C5_91             C_1_C6_91             D3_HOS_C2_91
                                 Charges.
                                                                                                               C_1_C7_91
Blood and Blood Products......  Blood Charges....  038x.............  Whole Blood &      C_1_C5_62             C_1_C6_62             D3_HOS_C2_62
                                                                       Packed Red Blood
                                                                       Cells.
                                                   0819 (for                                                   C_1_C7_62
                                                    acquisition
                                                    charges
                                                    associated with
                                                    MS-DRG 014 only).
                                Blood Storage/     039x.............  Blood Storing,     C_1_C5_63             C_1_C6_63             D3_HOS_C2_63
                                 Processing.                           Processing, &
                                                                       Transfusing.
                                                                                                               C_1_C7_63

[[Page 49428]]

 
Other Services................  Other Service      0002-0099, 022X,
                                 Charge.            023X,
                                                    024X,052X,053X.
                                                   055X-060X, 064X-
                                                    070X, 076X-078X,
                                                    090X-095X and
                                                    099X.
                                Renal Dialysis...  0800X............  Renal Dialysis...  C_1_C5_74             C_1_C6_74             D3_HOS_C2_74
                                ESRD Revenue       080X and 082X-                                              C_1_C7_74
                                 Setting Charges.   088X.
                                                                      Home Program       C_1_C5_94             C_1_C6_94             D3_HOS_C2_94
                                                                       Dialysis.
                                                                                                               C_1_C7_94
                                Outpatient         049X.............  ASC (Non Distinct  C_1_C5_75             C_1_C6_75             D3_HOS_C2_75
                                 Service Charges.                      Part).
                                Lithotripsy        079X.............                                           C_1_C7_75
                                 Charge.
                                                                      Other Ancillary..  C_1_C5_76             C_1_C6_76             D3_HOS_C2_76
                                                                                                               C_1_C7_76
                                Clinic Visit       051X.............  Clinic...........  C_1_C5_90             C_1_C6_90             D3_HOS_C2_90
                                 Charges.
                                                                                                               C_1_C7_90
                                                                      Observation beds.  C_1_C5_92.01          C_1_C6_92.01          D3_HOS_C2_92.01
                                                                                                               C_1_C7_92.01
                                Professional Fees  096X, 097X, and    Other Outpatient   C_1_C5_93             C_1_C6_93             D3_HOS_C2_93
                                 Charges.           098X.              Services.
                                                                                                               C_1_C7_93
                                Ambulance Charges  054X.............  Ambulance........  C_1_C5_95             C_1_C6_95             D3_HOS_C2_95
                                                                                                               C_1_C7_95
                                                                      Rural Health       C_1_C5_88             C_1_C6_88             D3_HOS_C2_88
                                                                       Clinic.
                                                                                                               C_1_C7_88
                                                                      FQHC.............  C_1_C5_89             C_1_C6_89             D3_HOS_C2_89
                                                                                                               C_1_C7_89
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR 
48462) for a discussion on the revenue codes included in the Supplies 
and Equipment and Implantable Devices CCRs, respectively.

3. Development of National Average CCRs

    We developed the national average CCRs as follows:
    Using the FY 2013 cost report data, we removed CAHs, Indian Health 
Service hospitals, all-inclusive rate hospitals, and cost reports that 
represented time periods of less than 1 year (365 days). We included 
hospitals located in Maryland because we include their charges in our 
claims database. We then created CCRs for each provider for each cost 
center (see prior table for line items used in the calculations) and 
removed any CCRs that were greater than 10 or less than 0.01. We 
normalized the departmental CCRs by dividing the CCR for each 
department by the total CCR for the hospital for the purpose of 
trimming the data. We then took the logs of the normalized cost center 
CCRs and removed any cost center CCRs where the log of the cost center 
CCR was greater or less than the mean log plus/minus 3 times the 
standard deviation for the log of that cost center CCR. Once the cost 
report data were trimmed, we calculated a Medicare-specific CCR. The 
Medicare-specific CCR was determined by taking the Medicare charges for 
each line item from Worksheet D-3 and deriving the Medicare-specific 
costs by applying the hospital-specific departmental CCRs to the 
Medicare-specific charges for each line item from Worksheet D-3. Once 
each hospital's Medicare-specific costs were established, we summed the 
total Medicare-specific costs and divided by the sum of the total 
Medicare-specific charges to produce national average, charge-weighted 
CCRs.
    After we multiplied the total charges for each MS-DRG in each of 
the 19 cost centers by the corresponding national average CCR, we 
summed the 19 ``costs'' across each MS-DRG to produce a total 
standardized cost for the MS-DRG. The average standardized cost for 
each MS-DRG was then computed as the total standardized cost for the 
MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The 
average cost for each MS-DRG was then divided by the national average 
standardized cost per case to determine the relative weight.
    The FY 2016 cost-based relative weights were then normalized by an 
adjustment factor of 1.678947 so that the average case weight after 
recalibration was equal to the average case weight before 
recalibration. The normalization adjustment is intended to ensure that 
recalibration by itself neither increases nor decreases total payments 
under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act.
    The 19 national average CCRs for FY 2016 are as follows:

[[Page 49429]]



------------------------------------------------------------------------
                           Group                                 CCR
------------------------------------------------------------------------
Routine Days...............................................        0.480
Intensive Days.............................................        0.393
Drugs......................................................        0.191
Supplies & Equipment.......................................        0.297
Implantable Devices........................................        0.337
Therapy Services...........................................        0.332
Laboratory.................................................        0.125
Operating Room.............................................        0.199
Cardiology.................................................        0.118
Cardiac Catheterization....................................        0.124
Radiology..................................................        0.159
MRIs.......................................................        0.085
CT Scans...................................................        0.041
Emergency Room.............................................        0.183
Blood and Blood Products...................................        0.336
Other Services.............................................        0.368
Labor & Delivery...........................................        0.404
Inhalation Therapy.........................................        0.177
Anesthesia.................................................        0.106
------------------------------------------------------------------------

    Since FY 2009, the relative weights have been based on 100 percent 
cost weights based on our MS-DRG grouping system.
    When we recalibrated the DRG weights for previous years, we set a 
threshold of 10 cases as the minimum number of cases required to 
compute a reasonable weight. In the FY 2016 IPPS/LTCH PPS proposed 
rule, we proposed to use that same case threshold in recalibrating the 
MS-DRG relative weights for FY 2016. In the FY 2016 IPPS/LTCH PPS 
proposed rule, we stated that, using data from the FY 2014 MedPAR file, 
there were 8 MS-DRGs that contain fewer than 10 cases (80 FR 24414). 
However, we mistakenly included MS-DRG 768 (Vaginal Delivery with O.R. 
Procedure Except Sterilization and/or D&C) as a low-volume MS-DRG, 
which, using data from the December 2014 update of the FY 2014 MedPAR 
file, had more than 10 cases. For this final rule, using data from the 
March 2015 update of the FY 2014 MedPAR file, there continue to be 7 
MS-DRGs that contain fewer than 10 cases, as reflected in the table 
below. Under the MS-DRGs, we have fewer low-volume DRGs than under the 
CMS DRGs because we no longer have separate MS-DRGs for patients aged 0 
to 17 years. With the exception of newborns, we previously separated 
some MS-DRGs based on whether the patient was age 0 to 17 years or age 
17 years and older. Other than the age split, cases grouping to these 
MS-DRGs are identical. The MS-DRGs for patients aged 0 to 17 years 
generally have very low volumes because children are typically 
ineligible for Medicare. In the past, we have found that the low volume 
of cases for the pediatric MS-DRGs could lead to significant year-to-
year instability in their relative weights. Although we have always 
encouraged non-Medicare payers to develop weights applicable to their 
own patient populations, we have received frequent complaints from 
providers about the use of the Medicare relative weights in the 
pediatric population. We believe that eliminating this age split in the 
MS-DRGs will provide more stable payment for pediatric cases by 
determining their payment using adult cases that are much higher in 
total volume. Newborns are unique and require separate MS-DRGs that are 
not mirrored in the adult population. Therefore, it remains necessary 
to retain separate MS-DRGs for newborns. All of the low-volume MS-DRGs 
listed below are for newborns. For FY 2016, because we do not have 
sufficient MedPAR data to set accurate and stable cost relative weights 
for the following low-volume MS-DRGs, as we proposed, we computed 
relative weights for the low-volume MS-DRGs by adjusting their final FY 
2015 relative weights by the percentage change in the average weight of 
the cases in other MS-DRGs. The crosswalk table is shown below:

------------------------------------------------------------------------
    Low-volume  MS-DRG         MS-DRG Title        Crosswalk to MS-DRG
------------------------------------------------------------------------
789......................  Neonates, Died or    Final FY 2015 relative
                            Transferred to       weight (adjusted by
                            Another Acute Care   percent change in
                            Facility.            average weight of the
                                                 cases in other MS-
                                                 DRGs).
790......................  Extreme Immaturity   Final FY 2015 relative
                            or Respiratory       weight (adjusted by
                            Distress Syndrome,   percent change in
                            Neonate.             average weight of the
                                                 cases in other MS-
                                                 DRGs).
791......................  Prematurity with     Final FY 2015 relative
                            Major Problems.      weight (adjusted by
                                                 percent change in
                                                 average weight of the
                                                 cases in other MS-
                                                 DRGs).
792......................  Prematurity without  Final FY 2015 relative
                            Major Problems.      weight (adjusted by
                                                 percent change in
                                                 average weight of the
                                                 cases in other MS-
                                                 DRGs).
793......................  Full-Term Neonate    Final FY 2015 relative
                            with Major           weight (adjusted by
                            Problems.            percent change in
                                                 average weight of the
                                                 cases in other MS-
                                                 DRGs).
794......................  Neonate with Other   Final FY 2015 relative
                            Significant          weight (adjusted by
                            Problems.            percent change in
                                                 average weight of the
                                                 cases in other MS
                                                 DRGs).
795......................  Normal Newborn.....  Final FY 2015 relative
                                                 weight (adjusted by
                                                 percent change in
                                                 average weight of the
                                                 cases in other MS-
                                                 DRGs).
------------------------------------------------------------------------

    Comment: One commenter stated that the relative weight for MS-DRG 
014 (Allogeneic Bone Marrow Transplant) may be understated due to the 
omission of costs and charges associated with revenue code 0819 which 
was not included in column 3 of the table of cost report lines and 
revenue codes on pages 24412 and 24413 of the FY 2016 IPPS/LTCH PPS 
proposed rule. This commenter also noted that, in the FY 2016 IPPS/LTCH 
PPS proposed rule (80 FR 24411), CMS removes claims from the relative 
weight calculation that had an amount in the total charge field that 
differed by more than $10 from the sum of the routine day charges, 
intensive care charges, pharmacy charges, special equipment charges, 
therapy services charges, operating room charges, cardiology charges, 
laboratory charges, radiology charges, other service charges, labor and 
delivery charges, inhalation therapy charges, emergency room charges, 
blood charges, and anesthesia charges. The commenter asserted that if 
revenue code 0819 is not included in the mapped charges, a difference 
of greater than $10 would always result on any claim with revenue code 
0819, causing the claims with revenue code 0819 to be deleted from the 
dataset, and the relative weight for MS-DRG 014 to be understated. 
Another commenter noted that, in response to its question in the past 
regarding the absence of revenue code 0819 from the cost centers 
crosswalk table, CMS had indicated that the national Blood and Blood 
Products CCR is what is used to reduce revenue code 0819 line item 
charges to costs on inpatient claims. The commenter believed this 
should be reflected in the table in the final rule so that hospitals 
are able to use this information to evaluate their internal cost 
reporting practices. The commenter also mentioned the variability in 
cost reporting among hospitals related to the Blood and Blood Products 
cost centers, and noted that some hospitals report

[[Page 49430]]

costs and charges related to stem cell transplantation on lines 62 or 
63 of the Medicare cost report Form CMS-2552-10, while other hospitals 
report these costs and charges on line 112, ``Other Organ 
Acquisition''. The commenter asserted that CMS' use of a cost center 
group that may have no relation to where and how donor related charges 
and costs are actually being captured by providers could be one 
explanation for why the payment rate for MS-DRG 014 does not 
appropriately account for all donor related costs incurred by providers 
who perform stem cell transplantations. The commenter expressed hope 
that, as CMS reviews the use of nonstandard and subscripted cost 
centers, it also will undertake a review of where and how SCT charges 
and costs associated with donor related services reported through 
revenue code 0819 are being accounted for by hospitals in the cost 
reports. The commenter also was concerned there are no donor source 
codes in the ICD-10-PCS coding system and urged CMS to address this 
matter as soon as possible so that provider reporting of donor source 
codes is not interrupted with the implementation of ICD-10.
    Response: Section 90.3.3.A.1 of Chapter 3 of the Medicare Claims 
Processing Manual states that payment for acquisition services 
associated with allogeneic stem cell transplants is included in the MS-
DRG payment for the allogeneic stem cell transplant when the transplant 
occurs in the inpatient setting. The MAC will not make separate payment 
for these acquisition services because hospitals may bill and receive 
payment only for services provided to a Medicare beneficiary who is the 
recipient of the stem cell transplant and whose illness is being 
treated with the stem cell transplant. Unlike the acquisition costs of 
solid organs for transplant (for example, hearts and kidneys), which 
are paid on a reasonable cost basis, acquisition costs for allogeneic 
stem cells are included in the prospective payment. We note that, in 
each proposed and final IPPS rule, in the description of the 
calculation of the MS-DRG relative weights, we state that organ 
acquisition costs are paid on a reasonable cost basis, and therefore, 
we deduct the acquisition charges from the total charges on each 
transplant bill that showed acquisition charges before computing the 
average cost for each MS-DRG. (We refer readers to the FY 2016 IPPS/
LTCH PPS proposed rule 80 FR 24410 through 24411.) Under section 
90.3.3.A.2 of the Medicare Claims Processing Manual, hospitals are to 
identify stem cell acquisition charges for allogeneic bone marrow/stem 
cell transplants separately by using revenue code 0819 (Other Organ 
Acquisition).
    Accordingly, charges for allogeneic bone marrow transplants are, in 
fact, included in the MS-DRG relative weights calculation, in the 
``Blood and Blood Products'' CCR. That is, for claims that group into 
MS-DRG 014, CMS includes the acquisition charges in the blood charges 
and uses the Blood and Blood Products CCR to adjust those charges to 
cost. Therefore, contrary to the concern expressed by the first 
commenter, the relative weight for MS-DRG 014 does reflect costs and 
charges associated with revenue code 0819, and claims containing 
revenue code 0819 are not systematically deleted from the dataset. In 
this final rule and for subsequent rules, we are modifying the 
crosswalk table for the entry of the Blood and Blood Products cost 
center group to include revenue code 0819, but we are specifying that 
only the charges associated with MS-DRG 014 are mapped to the Blood and 
Blood Products cost center. We are continuing to exclude other 081x 
revenue codes from the crosswalk table, as these codes are associated 
with Organ Acquisition, which are otherwise excluded from the relative 
weights calculation because, as explained above, organ acquisition 
costs are paid on a reasonable cost basis and not under the prospective 
payment rate.
    Regarding the comment which stated that some hospitals report costs 
and charges related to stem cell transplantation on lines 62 or 63 of 
the Medicare cost report Form CMS-2552-10, while other hospitals report 
these costs and charges on line 112, ``Other Organ Acquisition,'' we 
note that because the charges associated with revenue code 0819 are 
being mapped by CMS to the Blood and Blood Products cost centers from 
line 62 (Whole Blood and Packed Red Blood Cells) and line 63 (Blood 
Storing, Processing, and Transfusions), the appropriate cost centers 
for hospitals to report the attending costs of allogeneic bone marrow/
stem cell transplants are lines 62 and 63 of CMS Form-2552-10. (The 
cost report instructions for Worksheet A in the Provider Reimbursement 
Manual (PRM), Part II (Pub. 15-2, Chapter 40, Section 4013, state that 
hospitals are to include on line 62 ``the direct expenses incurred in 
obtaining blood directly from donors as well as obtaining whole blood, 
packed red blood cells, and blood derivatives,'' and ``the processing 
fee charged by suppliers.'' We also note that line 112, along with the 
other organ transplant lines 105 through 111, are excluded from the 
calculation of the CCRs and the IPPS relative weights (and therefore 
are not listed on the crosswalk table). Consequently, any costs related 
to charges billed under revenue code 0819 that are reported on line 112 
would not be captured in the MS-DRG relative weight calculations.
    Regarding the commenter's concern that donor related costs are not 
being properly reported on the Medicare cost report, and that CMS 
should undertake a review of where and how donor related services 
reported through revenue code 0819 are being accounted for by hospitals 
on the cost reports, we believe this is related to overall 
inconsistencies in cost reporting, particularly with nonstandard cost 
centers, which we discuss in section II.E.2. of this final rule. As we 
state in response to comments received in that section, we appreciate 
the comments that stakeholders have submitted and will continue to 
explore ways in which CMS can improve the accuracy of the cost report 
data and the calculation of CCRs used in the cost estimation process. 
To the extent possible, we will continue to seek stakeholder input in 
an effort to limit the impact on hospitals.
    Regarding the commenter's concerns that there are no donor source 
codes under ICD-10-PCS, we note that the donor source is an integral 
part of all transplant and transfusion codes within ICD-10-PCS. Donor 
source information is captured in the seventh character qualifiers. For 
example, the root term ``Transplantation'' provides the following 
seventh character qualifier values as options to describe donor source: 
Syngeneic (live related); Allogeneic (live non-related); and Zooplastic 
(animal). We note that bone marrow transplant procedures are coded to 
the root operation ``Transfusion'' as stated in the ICD-10-PCS 
Reference Manual (which is available on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/2016-ICD-10-PCS-and-GEMs.html). The 
root term ``Transfusion'' provides the seventh character qualifier 
values of Autologous and Nonautologous as options to describe donor 
source. For specific questions related to coding for transplants and 
transfusions, we refer readers to the American Hospital Association 
(AHA). The AHA Central OfficeTM is the national 
clearinghouse for medical coding advice. Coding inquiries may be 
directed to the following AHA Web site: http://www.CodingClinicAdvisor.com.
    Comment: One commenter pointed out that the proposed MS-DRG 
relative weight for MS-DRG 619 (O.R. Procedures for Obesity with MCC) 
is 2.8830, which is less than the MS-DRG relative weight for this MS-
DRG for FY

[[Page 49431]]

2015 of 3.2890. The commenter stated that, while this category 
represents a small percentage of the total bariatric procedures 
performed on Medicare beneficiaries, patients with conditions described 
in this MS-DRG are at the greatest risk for readmission and require the 
greatest support and coordination of postoperative resources to ensure 
a safe and efficient recovery, and that providers will be unable to 
provide such support and resources if payment is so drastically 
reduced. The commenter asked CMS to reconsider the reduction, and 
consider an increase of 1.1 percent in the relative weight for MS-DRG 
619 in keeping with Hospital IQR Program and meaningful electronic 
health record (EHR) user incentives. The commenter asked that, for 
hospitals not participating in the Hospital IQR Program or the EHR 
Incentive Program, CMS keep the relative weight for MS-DRG 619 neutral.
    Response: We note that, while the proposed FY 2016 relative weight 
for MS-DRG 619 was 2.8830, the final FY 2016 relative weight for MS-DRG 
619 is 2.9418 (as reflected in Table 5 associated with this final rule 
and available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2016-IPPS-Final-Rule-Home-Page.html). While we are sympathetic to the commenter's 
concerns, we note that the reduction in the relative weight from FY 
2015 to FY 2016 is a function of the relative weight calculation, as 
described in section II.H. of the FY 2016 IPPS/LTCH PPS proposed rule 
and this final rule, which is comprised of hospitals' billed charges 
for MS-DRG 619 and the costs reported on hospitals' cost reports. The 
reduction in the relative weight may be attributed to the change in the 
number of cases and average charges for MS-DRG 619 used to develop the 
relative weight for FY 2015 and the final FY 2016 relative weight. 
Specifically, we observed that FY 2015 cases were 896, and FY 2016 
cases are 1,037, while FY 2015 average charges were $90,806, and FY 
2016 average charges are $84,592.
    We are finalizing the methodology for recalibration of the MS-DRG 
relative weights specified in this final rule for FY 2016 as proposed.
4. Discussion and Acknowledgement of Public Comments Received on 
Expanding the Bundled Payments for Care Improvement (BPCI) Initiative
a. Background
    Since 2011, CMS has been working to develop and test models of 
bundling Medicare payments under the authority of section 1115A of the 
Act. Through these models, CMS plans to evaluate whether bundled 
payments result in higher quality and more coordinated care at a lower 
cost to Medicare. CMS is currently testing the Bundled Payments for 
Care Improvement (BPCI) initiative. Under this initiative, 
organizations enter into payment arrangements that include financial 
and performance accountability for episodes of care.
    The BPCI initiative is comprised of four related payment models, 
which link payments for multiple services that Medicare beneficiaries 
receive during an episode of care into a bundled payment. Episodes of 
care under the BPCI initiative begin with either (1) an inpatient 
hospital stay or (2) postacute care services following a qualifying 
inpatient hospital stay. More information on the four models under the 
BPCI initiative can be found on the CMS Center for Medicare and 
Medicaid Innovation's Web site at: http://innovation.cms.gov/initiatives/bundled-payments/.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24414 through 
24418), we presented a discussion of the models in the BPCI initiative 
and solicited public comments regarding policy and operational issues 
related to a potential expansion of the BPCI initiative in the future. 
Section 1115A(c) of the Act, as added by section 3021 of the Affordable 
Care Act, provides the Secretary with the authority to expand through 
rulemaking the duration and scope of a model that is being tested under 
section 1115A(b) of the Act, such as the BPCI initiative (including 
implementation on a nationwide basis), if the following findings are 
made, taking into account the evaluation of the model under section 
1115A(b)(4) of the Act: (1) The Secretary determines that the expansion 
is expected to either reduce Medicare spending without reducing the 
quality of care or improve the quality of patient care without 
increasing spending; (2) the CMS Chief Actuary certifies that the 
expansion would reduce (or would not result in any increase in) net 
Medicare program spending; and (3) the Secretary determines that the 
expansion would not deny or limit the coverage or provision of Medicare 
benefits. The decision of whether or not to expand will be made by the 
Secretary in coordination with CMS and the Office of the Chief Actuary 
based on whether findings about the initiative meet the statutory 
criteria for expansion under section 1115A(c) of the Act. Given that 
further evaluation of the BPCI initiative is needed to determine its 
impact on both Medicare cost and quality of care, we did not propose an 
expansion of any models within the initiative or any policy changes 
associated with it in the FY 2016 IPPS/LTCH PPS proposed rule.
    Consistent with our continuing commitment to engaging stakeholders 
in CMS' work, we sought public comments on a variety of issues to 
broaden and deepen our understanding of the important issues and 
challenges regarding bundled payments in the current health care 
marketplace. Among other subject-matter areas, we sought public 
comments on the scope of any expansion, episode definitions, bundled 
payment amounts, data needs, and the use of health information 
technology. In response to our solicitation, we received over 75 timely 
and informative public comments suggesting matters to consider in a 
potential future expansion of the BPCI initiative, including the 
evaluation of the BPCI models, further testing of the BPCI initiative, 
target pricing methodologies, data collection and reporting, quality 
measures, episode definitions, payment methodologies, and precedence 
rules. We appreciate the commenters' views and recommendations. We will 
consider the public comments we received if the BPCI initiative is 
expanded in the future through rulemaking.

I. Add-On Payments for New Services and Technologies for FY 2016

1. Background
    Sections 1886(d)(5)(K) and (L) of the Act establish a process of 
identifying and ensuring adequate payment for new medical services and 
technologies (sometimes collectively referred to in this section as 
``new technologies'') under the IPPS. Section 1886(d)(5)(K)(vi) of the 
Act specifies that a medical service or technology will be considered 
new if it meets criteria established by the Secretary after notice and 
opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act 
specifies that a new medical service or technology may be considered 
for new technology add-on payment if, based on the estimated costs 
incurred with respect to discharges involving such service or 
technology, the DRG prospective payment rate otherwise applicable to 
such discharges under this subsection is inadequate. We note that, 
beginning with discharges occurring in FY 2008, CMS transitioned from 
CMS-DRGs to MS-DRGs.
    The regulations at 42 CFR 412.87 implement these provisions and 
specify three criteria for a new medical service or technology to 
receive the additional payment: (1) The medical service or

[[Page 49432]]

technology must be new; (2) the medical service or technology must be 
costly such that the DRG rate otherwise applicable to discharges 
involving the medical service or technology is determined to be 
inadequate; and (3) the service or technology must demonstrate a 
substantial clinical improvement over existing services or 
technologies. Below we highlight some of the major statutory and 
regulatory provisions relevant to the new technology add-on payment 
criteria as well as other information. For a complete discussion on the 
new technology add-on payment criteria, we refer readers to the FY 2012 
IPPS/LTCH PPS final rule (76 FR 51572 through 51574).
    Under the first criterion, as reflected in Sec.  412.87(b)(2), a 
specific medical service or technology will be considered ``new'' for 
purposes of new medical service or technology add-on payments until 
such time as Medicare data are available to fully reflect the cost of 
the technology in the MS-DRG weights through recalibration. We note 
that we do not consider a service or technology to be new if it is 
substantially similar to one or more existing technologies. That is, 
even if a technology receives a new FDA approval, it may not 
necessarily be considered ``new'' for purposes of new technology add-on 
payments if it is ``substantially similar'' to a technology that was 
approved by FDA and has been on the market for more than 2 to 3 years. 
In the FY 2006 IPPS final rule (70 FR 47351) and the FY 2010 IPPS/RY 
2010 LTCH PPS final rule (74 FR 43813 and 43814), we explained our 
policy regarding substantial similarity in detail.
    Under the second criterion, Sec.  412.87(b)(3) further provides 
that, to be eligible for the add-on payment for new medical services or 
technologies, the MS-DRG prospective payment rate otherwise applicable 
to the discharge involving the new medical services or technologies 
must be assessed for adequacy. Under the cost criterion, consistent 
with the formula specified in section 1886(d)(5)(K)(ii)(I) of the Act, 
to assess the adequacy of payment for a new technology paid under the 
applicable MS-DRG prospective payment rate, we evaluate whether the 
charges for cases involving the new technology exceed certain threshold 
amounts. We update the thresholds in Table 10 of each final rule that 
apply for the upcoming fiscal year. Table 10 that was released with the 
FY 2015 IPPS/LTCH PPS final rule contains the final thresholds that we 
used to evaluate applications for new medical service and new 
technology add-on payments for FY 2016. We refer readers to the CMS Web 
site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2015-IPPS-Final-Rule-Home-Page-Items/FY2015-Final-Rule-Tables.html to download and view Table 10.
    In the September 7, 2001 final rule that established the new 
technology add-on payment regulations (66 FR 46917), we discussed the 
issue of whether the Health Insurance Portability and Accountability 
Act (HIPAA) Privacy Rule at 45 CFR parts 160 and 164 applies to claims 
information that providers submit with applications for new medical 
service and new technology add-on payments. We refer readers to the FY 
2012 IPPS/LTCH PPS final rule (76 FR 51573) for complete information on 
this issue.
    Under the third criterion, Sec.  412.87(b)(1) of our existing 
regulations provides that a new technology is an appropriate candidate 
for an additional payment when it represents an advance that 
substantially improves, relative to technologies previously available, 
the diagnosis or treatment of Medicare beneficiaries. For example, a 
new technology represents a substantial clinical improvement when it 
reduces mortality, decreases the number of hospitalizations or 
physician visits, or reduces recovery time compared to the technologies 
previously available. (We refer readers to the September 7, 2001 final 
rule for a more detailed discussion of this criterion (66 FR 46902).)
    The new medical service or technology add-on payment policy under 
the IPPS provides additional payments for cases with relatively high 
costs involving eligible new medical services or technologies while 
preserving some of the incentives inherent under an average-based 
prospective payment system. The payment mechanism is based on the cost 
to hospitals for the new medical service or technology. Under Sec.  
412.88, if the costs of the discharge (determined by applying cost-to-
charge ratios (CCRs) as described in Sec.  412.84(h)) exceed the full 
DRG payment (including payments for IME and DSH, but excluding outlier 
payments), Medicare will make an add-on payment equal to the lesser of: 
(1) 50 percent of the estimated costs of the new technology or medical 
service (if the estimated costs for the case including the new 
technology or medical service exceed Medicare's payment); or (2) 50 
percent of the difference between the full DRG payment and the 
hospital's estimated cost for the case. Unless the discharge qualifies 
for an outlier payment, the additional Medicare payment is limited to 
the full MS-DRG payment plus 50 percent of the estimated costs of the 
new technology or new medical service.
    Section 503(d)(2) of Public Law 108-173 provides that there shall 
be no reduction or adjustment in aggregate payments under the IPPS due 
to add-on payments for new medical services and technologies. 
Therefore, in accordance with section 503(d)(2) of Public Law 108-173, 
add-on payments for new medical services or technologies for FY 2005 
and later years have not been subjected to budget neutrality.
    In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we 
modified our regulations at Sec.  412.87 to codify our longstanding 
practice of how CMS evaluates the eligibility criteria for new medical 
service or technology add-on payment applications. That is, we first 
determine whether a medical service or technology meets the newness 
criterion, and only if so, do we then make a determination as to 
whether the technology meets the cost threshold and represents a 
substantial clinical improvement over existing medical services or 
technologies. We amended Sec.  412.87(c) to specify that all applicants 
for new technology add-on payments must have FDA approval or clearance 
for their new medical service or technology by July 1 of each year 
prior to the beginning of the fiscal year that the application is being 
considered.
    The Council on Technology and Innovation (CTI) at CMS oversees the 
agency's cross-cutting priority on coordinating coverage, coding and 
payment processes for Medicare with respect to new technologies and 
procedures, including new drug therapies, as well as promoting the 
exchange of information on new technologies and medical services 
between CMS and other entities. The CTI, composed of senior CMS staff 
and clinicians, was established under section 942(a) of Public Law 108-
173. The Council is co-chaired by the Director of the Center for 
Clinical Standards and Quality (CCSQ) and the Director of the Center 
for Medicare (CM), who is also designated as the CTI's Executive 
Coordinator.
    The specific processes for coverage, coding, and payment are 
implemented by CM, CCSQ, and the local claims-payment contractors (in 
the case of local coverage and payment decisions). The CTI supplements, 
rather than replaces, these processes by working to assure that all of 
these activities reflect the agency-wide priority to promote high-
quality, innovative care. At the same time, the CTI also works to 
streamline, accelerate, and improve coordination of these processes to 
ensure that they remain up to date as new issues arise.

[[Page 49433]]

To achieve its goals, the CTI works to streamline and create a more 
transparent coding and payment process, improve the quality of medical 
decisions, and speed patient access to effective new treatments. It is 
also dedicated to supporting better decisions by patients and doctors 
in using Medicare-covered services through the promotion of better 
evidence development, which is critical for improving the quality of 
care for Medicare beneficiaries.
    To improve the understanding of CMS' processes for coverage, 
coding, and payment and how to access them, the CTI has developed an 
``Innovator's Guide'' to these processes. The intent is to consolidate 
this information, much of which is already available in a variety of 
CMS documents and in various places on the CMS Web site, in a user-
friendly format. This guide was published in 2010 and is available on 
the CMS Web site at: http://www.cms.gov/CouncilonTechInnov/Downloads/InnovatorsGuide5_10_10.pdf.
    As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we 
invite any product developers or manufacturers of new medical services 
or technologies to contact the agency early in the process of product 
development if they have questions or concerns about the evidence that 
would be needed later in the development process for the agency's 
coverage decisions for Medicare.
    The CTI aims to provide useful information on its activities and 
initiatives to stakeholders, including Medicare beneficiaries, 
advocates, medical product manufacturers, providers, and health policy 
experts. Stakeholders with further questions about Medicare's coverage, 
coding, and payment processes, or who want further guidance about how 
they can navigate these processes, can contact the CTI at 
[email protected].
    We note that applicants for add-on payments for new medical 
services or technologies for FY 2017 must submit a formal request, 
including a full description of the clinical applications of the 
medical service or technology and the results of any clinical 
evaluations demonstrating that the new medical service or technology 
represents a substantial clinical improvement, along with a significant 
sample of data to demonstrate that the medical service or technology 
meets the high-cost threshold. Complete application information, along 
with final deadlines for submitting a full application, will be posted 
as it becomes available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html. To allow interested parties to identify the new medical 
services or technologies under review before the publication of the 
proposed rule for FY 2017, the CMS Web site also will post the tracking 
forms completed by each applicant.
2. Public Input Before Publication of a Notice of Proposed Rulemaking 
on Add-On Payments
    Section 1886(d)(5)(K)(viii) of the Act, as amended by section 
503(b)(2) of Public Law 108-173, provides for a mechanism for public 
input before publication of a notice of proposed rulemaking regarding 
whether a medical service or technology represents a substantial 
clinical improvement or advancement. The process for evaluating new 
medical service and technology applications requires the Secretary to--
     Provide, before publication of a proposed rule, for public 
input regarding whether a new service or technology represents an 
advance in medical technology that substantially improves the diagnosis 
or treatment of Medicare beneficiaries;
     Make public and periodically update a list of the services 
and technologies for which applications for add-on payments are 
pending;
     Accept comments, recommendations, and data from the public 
regarding whether a service or technology represents a substantial 
clinical improvement; and
     Provide, before publication of a proposed rule, for a 
meeting at which organizations representing hospitals, physicians, 
manufacturers, and any other interested party may present comments, 
recommendations, and data regarding whether a new medical service or 
technology represents a substantial clinical improvement to the 
clinical staff of CMS.
    In order to provide an opportunity for public input regarding add-
on payments for new medical services and technologies for FY 2016 prior 
to publication of the FY 2016 IPPS/LTCH PPS proposed rule, we published 
a notice in the Federal Register on November 21, 2014 (79 FR 69490), 
and held a town hall meeting at the CMS Headquarters Office in 
Baltimore, MD, on February 3, 2015. In the announcement notice for the 
meeting, we stated that the opinions and alternatives provided during 
the meeting would assist us in our evaluations of applications by 
allowing public discussion of the substantial clinical improvement 
criterion for each of the FY 2016 new medical service and technology 
add-on payment applications before the publication of the FY 2016 IPPS/
LTCH PPS proposed rule.
    Approximately 95 individuals registered to attend the town hall 
meeting in person, while additional individuals listened over an open 
telephone line. We also live-streamed the town hall meeting and posted 
the town hall on the CMS YouTube Web page at: https://www.youtube.com/watch?v=dn-R5KGQu-M. We considered each applicant's presentation made 
at the town hall meeting, as well as written comments submitted on the 
applications that were received by the due date of January 19, 2015, in 
our evaluation of the new technology add-on payment applications for FY 
2016 in the proposed rule.
    In response to the published notice and the New Technology Town 
Hall meeting, we received written comments regarding the applications 
for FY 2016 new technology add-on payments. We summarized these 
comments in the preamble of the proposed rule or, if applicable, 
indicated that there were no comments received, at the end of each 
discussion of the individual applications in the proposed rule. We are 
not reprinting those summations in this final rule and refer readers to 
the FY 2016 IPPS/LTCH PPS proposed rule for this discussion.
    We also received public comments in response to the proposed rule 
relating to topics such as marginal cost factors for new technology 
add-on payments, mapping new technologies to the appropriate MS-DRG, 
additional criteria for substantial clinical improvement, and changing 
the newness criterion. Because we did not request public comments nor 
propose to make any changes to any of the issues above, we are not 
summarizing these public comments nor responding to them in this final 
rule.
    Comment: One commenter stated that it is not appropriate for CMS to 
continue to add requirements or to impose standards that exceed 
realistic requirements for clinical trials. The commenter cited the 
WATCHMAN[supreg] System as an example where CMS suggested that 
substantial clinical improvement should be based on a superiority trial 
rather than the noninferiority trial that was used.
    Response: We received a similar public comment last year and 
responded to it in the FY 2015 IPPS/LTCH PPS final rule. We refer the 
readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 49925 through 
49926) for a complete response to this issue.

[[Page 49434]]

3. Implementation of ICD-10-PCS Section ``X'' Codes for Certain New 
Medical Services and Technologies for FY 2016
    As discussed in section II.G.1.a. of the preamble of this final 
rule, HIPAA covered entities are required, as of October 1, 2015, to 
use the ICD-10 coding system (ICD-10-PCS codes for procedures and ICD-
10-CM codes for diagnosis), instead of the ICD-9-CM coding system, to 
report diagnoses and procedures for Medicare hospital inpatient 
services provided to Medicare beneficiaries as classified under the MS-
DRG system and paid for under the IPPS. HIPAA covered entities must 
continue to use ICD-9-CM codes and coding guidelines through September 
30, 2015. We refer readers to section II.G.1.a. of the preamble of this 
final rule for a complete discussion of the adoption of the ICD-10 
coding system.
    As part of the transition to the ICD-10-CM/PCS coding system, at 
the September 23-24, 2014 ICD-10 Coordination and Maintenance Committee 
meeting, CMS received a request to create a new section within the ICD-
10-PCS to capture new medical services and technologies that might not 
appropriately align with the current structure of the ICD-10-PCS codes. 
Examples of these types of new medical services and technologies 
included drugs, biologicals, and newer medical devices being tested in 
clinical trials that are not currently captured within the ICD-9-CM or 
the ICD-10-PCS. The requestor indicated that there may be a need to 
identify and report these technologies and inpatient services for 
purposes of approving new technology add-on payment applications and 
initiating subsequent new technology add-on payments based on approval 
or tracking and analyzing the use of these new technologies and 
services. Although several commenters have opposed including these 
types of technologies and services within the current structure of the 
ICD-10-PCS codes during past ICD-10 Coordination and Maintenance 
Committee meetings, as well as in public comments, CMS has evaluated 
these suggestions and considered them to be valid. As a result, CMS has 
created a new component within the ICD-10-PCS codes, labeled Section 
``X'' codes, to identify and describe these new technologies and 
services. The new Section ``X'' codes identify new medical services and 
technologies that are not usually captured by coders, or that do not 
usually have the desired specificity within the current ICD-10-PCS 
structure required to capture the use of these new services and 
technologies. As mentioned earlier, examples of these types of services 
and technologies include specific drugs, biologicals, and newer medical 
devices being tested in clinical trials. The new Section ``X'' codes 
within the ICD-10-PCS structure will be implemented on October 1, 2015, 
and will be used to identify new technologies and medical services 
approved under the new technology add-on payment policy for payment 
purposes beginning October 1, 2015. The Section ``X'' codes also will 
be used to identify procedures or services that are not commonly 
captured within the definitions and descriptions included in most 
coding systems or procedures or services that require definitions and 
descriptions that contain greater detail or specificity, which may be 
needed for a variety of health care data needs. An overview of Section 
``X'' codes was provided at the March 18-19, 2015 ICD-10 Coordination 
and Maintenance Committee meeting. We also have posted an article on 
the CMS Web site that explains the creation and use of ICD-10-PCS 
Section ``X'' codes. This article can be found on the CMS 2016 ICD-10-
PCS and GEMs Web site at http://www.cms.gov/Medicare/Coding/ICD10/2016-ICD-10-PCS-and-GEMs.html. Further information regarding the new Section 
``X'' codes and their use within the ICD-10-PCS can be found on the CMS 
Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html 
through the ``CMS Coordination and Maintenance Committee Meeting'' 
link.
    In addition, on June 18, 2015, CMS held a National ICD-10 
Teleconference (Preparing for Implementation and New ICD-10-PCS Section 
``X'' MLN Connects National Provider Call) to explain the Section ``X'' 
codes under the ICD-10. The agenda, slides, and audio from this 
teleconference are posted on the CMS Web site at: http://www.cms.gov/Outreach-and-Education/Outreach/NPC/National-Provider-Calls-and-Events-Items/2015-06-18-ICD10.html?DLPage=1&DLSort=0&DLSortDir=descending.
    As stated earlier, the ICD-10-PCS includes a new section containing 
the new Section ``X'' codes, which will be used beginning with 
discharges occurring on or after October 1, 2015. Decisions regarding 
changes to ICD-10-PCS Section ``X'' codes will be handled in the same 
manner as the decisions for all of the other ICD-10-PCS code changes. 
That is, proposals to create, delete, or revise Section ``X'' codes 
under the ICD-10-PCS structure will be referred to the ICD-10 
Coordination and Maintenance Committee. In addition, several of the new 
medical services and technologies that have been, or may be, approved 
for new technology add-on payments may now, and in the future, be 
assigned a Section ``X'' code within the structure of the ICD-10-PCS. 
The FY 2016 ICD-10-PCS, which includes the new Section ``X'' codes, was 
posted in June 2015 via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/2016-ICD-10-PCS-and-GEMs.html. We 
also posted the FY 2016 ICD-10-PCS Guidelines on this CMS Web site that 
also includes guidelines for ICD-10-PCS ``X'' codes. We encourage 
providers to view the material provided on ICD-10-PCS Section ``X'' 
codes.
    Comment: Several commenters supported the creation of the new ICD-
10-PCS Section ``X'' codes as a means to more specifically identify new 
technologies or more precise information about certain services. The 
commenters recognized the challenges of maintaining a partial code 
freeze while at the same time finding a way to capture new procedures. 
One commenter who supported the creation of the new Section ``X'' codes 
to identify new medical services and technologies stated that it was 
important to have a more robust coding system that will allow for 
recognition of more technologies, procedures, and variations in 
patients' conditions.
    Another commenter recognized the need to conserve code values 
within the regular ICD-10-PCS sections, as well as the exponential 
effect that adding a new value has on the large number of codes, and 
noted the importance of using Section ``X'' codes specifically for 
certain types of new technologies. The commenter stated that Section 
``X'' codes are especially important to identify drugs and 
intraoperative supplies related to MS-DRG new technology add-on 
payments.
    Response: We appreciate the commenters' support.
    Comment: Several commenters expressed concern that payers may 
mistakenly consider ICD-10-PCS Section ``X'' codes as interchangeable 
with CPT Category III codes. The commenters stated that, although CPT 
Category III codes also represent emerging technologies, the 
technologies lack substantive support in professional literature, and 
the codes used for these technologies often describe noncovered 
procedures that are experimental or investigational. In contrast, the 
commenter recognized that ICD-10-PCS Section ``X'' codes describe new 
technologies or services that frequently are FDA approved. However, the

[[Page 49435]]

commenters asked that CMS clarify that ICD-10-PCS Section ``X'' codes 
will not be used to specifically identify experimental or unproven 
procedures.
    Response: Section ``X'' codes were created to more specifically 
identify new technologies, procedures that have historically not been 
captured through ICD-9-CM codes, or to more precisely describe 
information on a specific procedure or technology than is found with 
the other sections of ICD-10-PCS. Section ``X'' codes were not created, 
nor intended to be used, to identify experimental or investigational 
procedures.
    Comment: Several commenters expressed concerns about the decision 
to create new codes during the partial code freeze, in particular the 
creation of the ICD-10-PCS Section ``X'' during the partial code 
freeze. The commenters believed that it would be more appropriate to 
delay the implementation of this section of the ICD-10-PCS and the use 
of Section ``X'' codes until after the ICD-10 coding system is 
implemented and the partial code freeze ends. The commenters also 
requested clarifications on how the new Section ``X'' codes would be 
used.
    Response: We acknowledge that it has been a challenge for CMS to 
implement the ICD-10-PCS/CM coding system, particularly in light of the 
partial code freeze and several delays of the implementation of ICD-10. 
However, the partial code freeze has allowed sufficient time and the 
ability to capture new technologies or new medical services under the 
new coding system. Many participants at the ICD-10 Coordination and 
Maintenance Committee have voiced opposition to the creation of any new 
codes during the partial code freeze. Other participants have actively 
encouraged the creation of more code updates beyond those that capture 
new technologies or new medical services. We have given consideration 
to all of the public comments presented at the ICD-10 Coordination and 
Maintenance Committee meetings and have attempted to make updates to 
the ICD-10-CM/PCS in a manner that is most appropriate and results in 
less burden on the majority of users. Any updates to ICD-10-CM/PCS, 
including updates to the Section ``X'' codes, will be presented at 
future ICD-10 Coordination and Maintenance Committee meetings for 
public comments. For those individuals who are interested in 
participating in future ICD-10 Coordination and Maintenance Committee 
meetings, information on the Committee can be found on the CMS Web site 
at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/meetings.html. We encourage public participation at these meetings 
either in person, by conference lines, or by the livestream provided by 
CMS. As discussed earlier, CMS has posted the FY 2016 ICD-10-PCS 
guidelines, which include guidelines on the use of Section ``X'' codes 
and an article explaining why ICD-10-PCS Section ``X'' codes were 
created and how to use them on the CMS Web site. We believe that this 
detailed information will assist coders in using the new Section ``X'' 
codes.
4. FY 2016 Status of Technologies Approved for FY 2015 Add-On Payments
a. Glucarpidase (Voraxaze[supreg])
    BTG International, Inc. submitted an application for new technology 
add-on payments for Glucarpidase (Voraxaze[supreg]) for FY 2013. 
Glucarpidase is used in the treatment of patients who have been 
diagnosed with toxic methotrexate (MTX) concentrations as of result of 
renal impairment. The administration of Glucarpidase causes a rapid and 
sustained reduction of toxic MTX concentrations.
    Voraxaze[supreg] was approved by the FDA on January 17, 2012. 
Beginning in 1993, certain patients could obtain expanded access for 
treatment use to Voraxaze[supreg] as an investigational drug. Since 
2007, the applicant has been authorized to recover the costs of making 
Voraxaze[supreg] available through its expanded access program. We 
describe expanded access for treatment use of investigational drugs and 
authorization to recover certain costs of investigational drugs in the 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53346 through 53350). 
Voraxaze[supreg] was available on the market in the United States as a 
commercial product to the larger population as of April 30, 2012. In 
the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27936 through 27939), we 
expressed concerns about whether Voraxaze[supreg] could be considered 
new for FY 2013. After consideration of all of the public comments 
received, in the FY 2013 IPPS/LTCH PPS final rule, we stated that we 
considered Voraxaze[supreg] to be ``new'' as of April 30, 2012, which 
is the date of U.S. market availability.
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology payments for Voraxaze[supreg] 
and consideration of the public comments we received in response to the 
FY 2013 IPPS/LTCH PPS proposed rule, we approved Voraxaze[supreg] for 
new technology add-on payments for FY 2013. Cases of Voraxaze[supreg] 
are identified with ICD-9-CM procedure code 00.95 (Injection or 
infusion of glucarpidase). As stated in the FY 2015 IPPS/LTCH PPS final 
rule correction notice (79 FR 59679), the cost of Voraxaze[supreg] is 
$23,625 per vial. The applicant stated that an average of four vials is 
used per Medicare beneficiary. Therefore, the average cost per case for 
Voraxaze[supreg] is $94,500 ($23,625 x 4). Under Sec.  412.88(a)(2), we 
limit new technology add-on payments to the lesser of 50 percent of the 
average cost of the technology or 50 percent of the costs in excess of 
the MS-DRG payment for the case. As a result, the maximum new 
technology add-on payment for Voraxaze[supreg] is $47,250 per case.
    As stated above, the new technology add-on payment regulations 
provide that a medical service or technology may be considered new 
within 2 or 3 years after the point at which data begin to become 
available reflecting the ICD-9-CM code assigned to the new service or 
technology (Sec.  412.87(b)(2)). Our practice has been to begin and end 
new technology add-on payments on the basis of a fiscal year, and we 
have generally followed a guideline that uses a 6-month window before 
and after the start of the fiscal year to determine whether to extend 
the new technology add-on payment for an additional fiscal year. In 
general, we extend add-on payments for an additional year only if the 
3-year anniversary date of the product's entry on the market occurs in 
the latter half of the fiscal year (70 FR 47362).
    With regard to the newness criterion for Voraxaze[supreg], we 
considered the beginning of the newness period to commence when 
Voraxaze[supreg] was first made available on the U.S. market on April 
30, 2012. Because the 3-year anniversary date for Voraxaze[supreg] 
occurred in the latter half of FY 2015 (April 30, 2015), in the FY 2015 
IPPS/LTCH PPS final rule, we continued new technology add-on payments 
for this technology for FY 2015 (79 FR 49918). However, for FY 2016, 
the 3-year anniversary date of the product's entry on the U.S. market 
(April 30, 2015) occurred prior to the beginning of FY 2016. Therefore, 
we proposed to discontinue new technology add-on payments for 
Voraxaze[supreg] for FY 2016. We invited public comments on this 
proposal.
    Comment: One commenter supported CMS' proposal to discontinue new 
technology add-on payments for Voraxaze[supreg] for FY 2016.
    Response: We appreciate the commenter's support.
    After consideration of the public comments we received, we are 
discontinuing new technology add-on payments for Voraxaze[supreg] for 
FY 2016. The 3-year anniversary date of the

[[Page 49436]]

product's entry onto the U.S. market occurred prior to the beginning of 
FY 2016 and, therefore, the technology will no longer be eligible for 
new technology add-on payments because the technology will no longer 
meet the ``newness'' criterion.
b. Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm (AAA) 
Endovascular Graft
    Cook[supreg] Medical submitted an application for new technology 
add-on payments for the Zenith[supreg] Fenestrated Abdominal Aortic 
Aneurysm (AAA) Endovascular Graft (Zenith[supreg] F. Graft) for FY 
2013. The applicant stated that the current treatment for patients who 
have had an AAA is an endovascular graft. The applicant explained that 
the Zenith[supreg] F. Graft is an implantable device designed to treat 
patients who have an AAA and who are anatomically unsuitable for 
treatment with currently approved AAA endovascular grafts because of 
the length of the infrarenal aortic neck. The applicant noted that, 
currently, an AAA is treated through an open surgical repair or medical 
management for those patients not eligible for currently approved AAA 
endovascular grafts.
    With respect to newness, the applicant stated that FDA approval for 
the use of the Zenith[supreg] F. Graft was granted on April 4, 2012. In 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53360 through 53365), we 
stated that because the Zenith[supreg] F. Graft was approved by the FDA 
on April 4, 2012, we believed that the Zenith[supreg] F. Graft met the 
newness criterion as of that date.
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology add-on payments for the 
Zenith[supreg] F. Graft and consideration of the public comments we 
received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we 
approved the Zenith[supreg] F. Graft for new technology add-on payments 
for FY 2013. Cases involving the Zenith[supreg] F. Graft that are 
eligible for new technology add-on payments currently are identified by 
ICD-9-CM procedure code 39.78 (Endovascular implantation of branching 
or fenestrated graft(s) in aorta). In the application, the applicant 
provided a breakdown of the costs of the Zenith[supreg] F. Graft. The 
total cost of the Zenith[supreg] F. Graft utilizing bare metal (renal) 
alignment stents was $17,264. Of the $17,264 in costs for the 
Zenith[supreg] F. Graft, $921 is for components that are used in a 
standard Zenith AAA Endovascular Graft procedure. Because the costs for 
these components are already reflected within the MS-DRGs (and are no 
longer ``new''), in the FY 2013 IPPS/LTCH PPS final rule, we stated 
that we did not believe it is appropriate to include these costs in our 
calculation of the maximum cost to determine the maximum add-on payment 
for the Zenith[supreg] F. Graft. Therefore, the total maximum cost for 
the Zenith[supreg] F. Graft is $16,343 ($17,264-$921). Under Sec.  
412.88(a)(2), we limit new technology add-on payments to the lesser of 
50 percent of the average cost of the device or 50 percent of the costs 
in excess of the MS-DRG payment for the case. As a result, the maximum 
add-on payment for a case involving the Zenith[supreg] F. Graft is 
$8,171.50.
    With regard to the newness criterion for the Zenith[supreg] F. 
Graft, we considered the beginning of the newness period to commence 
when the Zenith[supreg] F. Graft was approved by the FDA on April 4, 
2012. Because the 3-year anniversary date of the entry of the 
Zenith[supreg] F. Graft on the U.S. market occurred in the second half 
of FY 2015 (April 4, 2015), in the FY 2015 IPPS/LTCH PPS final rule, we 
continued new technology add-on payments for this technology for FY 
2015 (79 FR 49922). However, for FY 2016, the 3-year anniversary date 
of the product's entry on the U.S. market (April 4, 2015) occurred 
prior to the beginning of FY 2016. Therefore, we proposed to 
discontinue new technology add-on payments for the Zenith[supreg] F. 
Graft for FY 2016. We invited public comments on this proposal.
    We did not receive any public comments on our proposal. Therefore, 
as we proposed, we are discontinuing new technology add-on payments for 
the Zenith[supreg] F. Graft technology for FY 2016. The 3-year 
anniversary of the product's entry onto the U.S. market occurred prior 
to the beginning of FY 2016 and, therefore, the technology is not 
eligible for new technology add-on payments for FY 2016 because the 
technology will no longer meet ``newness'' criterion.
c. KcentraTM
    CSL Behring submitted an application for new technology add-on 
payments for KcentraTM for FY 2014. KcentraTM is 
a replacement therapy for fresh frozen plasma (FFP) for patients with 
an acquired coagulation factor deficiency due to warfarin and who are 
experiencing a severe bleed. KcentraTM contains the Vitamin 
K dependent coagulation factors II, VII, IX and X, together known as 
the prothrombin complex, and antithrombotic proteins C and S. Factor IX 
is the lead factor for the potency of the preparation. The product is a 
heat-treated, non-activated, virus filtered and lyophilized plasma 
protein concentrate made from pooled human plasma. KcentraTM 
is available as a lyophilized powder that needs to be reconstituted 
with sterile water prior to administration via intravenous infusion. 
The product is dosed based on Factor IX units. Concurrent Vitamin K 
treatment is recommended to maintain blood clotting factor levels once 
the effects of KcentraTM have diminished.
    KcentraTM was approved by the FDA on April 29, 2013. In 
the FY 2014 IPPS/LTCH PPS final rule, we finalized new ICD-9-CM 
procedure code 00.96 (Infusion of 4-Factor Prothrombrin Complex 
Concentrate) which uniquely identifies KcentraTM.
    In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27538), we noted 
that we were concerned that KcentraTM may be substantially 
similar to FFP and/or Vitamin K therapy. In the FY 2014 IPPS/LTCH PPS 
final rule, in response to comments submitted by the manufacturer, we 
stated that we agree that KcentraTM may be used in a patient 
population that is experiencing an acquired coagulation factor 
deficiency due to Warfarin and who are experiencing a severe bleed 
currently but are ineligible for FFP, particularly for use by IgA 
deficient patients and other patient populations that have no other 
treatment option to resolve severe bleeding in the context of an 
acquired Vitamin K deficiency. In addition, FFP is limited because it 
requires special storage conditions while KcentraTM is 
stable for up to 36 months at room temperature thus allowing hospitals 
that otherwise would not have access to FFP (for example, small rural 
hospitals as discussed by the applicant in its comments) to keep a 
supply of KcentraTM and treat patients who would possibly 
have no access to FFP. We noted that FFP is considered perishable and 
can be scarce by nature (due to production and other market 
limitations) thus making some hospitals unable to store FFP, which 
limits access to certain patient populations in certain locations. 
Therefore, we stated that we believe that KcentraTM provides 
a therapeutic option for a new patient population and is not 
substantially similar to FFP. Also, we gave credence to the information 
presented by the manufacturer that KcentraTM provides a 
simple and rapid repletion relative to FFP and reduces the risk of a 
transfusion reaction relative to FFP because it does not contain ABO 
antibodies and does not require ABO typing. As a result, we concluded 
that KcentraTM is not substantially similar to FFP, and that 
it meets the newness criterion.

[[Page 49437]]

    After evaluation of the newness, cost, and substantial clinical 
improvement criteria for new technology add-on payments for 
KcentraTM and consideration of the public comments we 
received in response to the FY 2014 IPPS/LTCH PPS proposed rule, we 
approved KcentraTM for new technology add-on payments for FY 
2014 (78 FR 50575 through 50580). Cases involving KcentraTM 
that are eligible for new technology add-on payments currently are 
identified by ICD-9-CM procedure code 00.96. In the application, the 
applicant estimated that the average Medicare beneficiary would require 
an average dosage of 2500 International Units (IU). Vials contain 500 
IU at a cost of $635 per vial. Therefore, cases of KcentraTM 
would incur an average cost per case of $3,175 ($635 x 5). Under Sec.  
412.88(a)(2), we limit new technology add-on payments to the lesser of 
50 percent of the average cost of the technology or 50 percent of the 
costs in excess of the MS-DRG payment for the case. As a result, the 
maximum add-on payment for a case of KcentraTM was $1,587.50 
for FY 2014.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50579), we stated 
that new technology add-on payments for KcentraTM would not 
be available with respect to discharges for which the hospital received 
an add-on payment for a blood clotting factor administered to a 
Medicare beneficiary with hemophilia who is a hospital inpatient. Under 
section 1886(d)(1)(A)(iii) of the Act, the national adjusted DRG 
prospective payment rate is the amount of the payment with respect to 
the operating costs of inpatient hospital services (as defined in 
subsection (a)(4)) for discharges on or after April 1, 1988. Section 
1886(a)(4) of the Act excludes from the term ``operating costs of 
inpatient hospital services'' the costs with respect to administering 
blood clotting factors to individuals with hemophilia. The costs of 
administering a blood clotting factor to a Medicare beneficiary who has 
hemophilia and is a hospital inpatient are paid separately from the 
IPPS. (For information on how the blood clotting factor add-on payment 
is made, we refer readers to Section 20.7.3, Chapter 3, of the Medicare 
Claims Processing Manual, which can be downloaded from the CMS Web site 
at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf.) In addition, we stated that if 
KcentraTM is approved by the FDA as a blood clotting factor, 
we believed that it may be eligible for blood clotting factor add-on 
payments when administered to Medicare beneficiaries with hemophilia. 
We make an add-on payment for KcentraTM for such discharges 
in accordance with our policy for payment of a blood clotting factor, 
and the costs would be excluded from the operating costs of inpatient 
hospital services as set forth in section 1886(a)(4) of the Act.
    Section 1886(d)(5)(K)(i) of the Act requires the Secretary to 
establish a mechanism to recognize the costs of new medical services 
and technologies under the payment system established under this 
subsection beginning with discharges on or after October 1, 2001. We 
believe that it is reasonable to interpret this requirement to mean 
that the payment mechanism established by the Secretary recognizes only 
costs for those items that would otherwise be paid based on the 
prospective payment system (that is, ``the payment system established 
under this subsection''). As noted above, under section 
1886(d)(1)(A)(iii) of the Act, the national adjusted DRG prospective 
payment rate is the amount of payment for the operating costs of 
inpatient hospital services, as defined in section 1886(a)(4) of the 
Act, for discharges on or after April 1, 1988. We understand this to 
mean that a new medical service or technology must be an operating cost 
of inpatient hospital services paid based on the prospective payment 
system, and not excluded from such costs, in order to be eligible for 
the new technology add-on payment. We pointed out that new technology 
add-on payments are based on the operating costs per case relative to 
the prospective payment rate as described in Sec.  412.88. Therefore, 
we believe that new technology add-on payments are appropriate only 
when the new technology is an operating cost of inpatient hospital 
services and are not appropriate when the new technology is excluded 
from such costs.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50579), we stated 
that we believe that hospitals may only receive new technology add-on 
payments for discharges where KcentraTM is an operating cost 
of inpatient hospital services. In other words, a hospital would not be 
eligible to receive the new technology add-on payment when it is 
administering KcentraTM in treating a Medicare beneficiary 
who has hemophilia. In those instances, KcentraTM is 
specifically excluded from the operating costs of inpatient hospital 
services in accordance with section 1886(a)(4) of the Act and paid 
separately from the IPPS. However, when a hospital administers 
KcentraTM to a Medicare beneficiary who does not have 
hemophilia, the hospital would be eligible for a new technology add-on 
payment because KcentraTM would not be excluded from the 
operating costs of inpatient hospital services. Therefore, discharges 
where the hospital receives a blood clotting factor add-on payment are 
not eligible for a new technology add-on payment for the blood clotting 
factor. We refer readers to Section 20.7.3, Chapter 3, of the Medicare 
Claims Processing Manual for a complete discussion on when a blood 
clotting factor add-on payment is made. The manual can be downloaded 
from the CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf.
    With regard to the newness criterion for KcentraTM, we 
considered the beginning of the newness period to commence when 
KcentraTM was approved by the FDA on April 29, 2013. Because 
the 3-year anniversary date of the entry of KcentraTM on the 
U.S. market will occur in the second half of FY 2016 (April 29, 2016), 
we proposed to continue new technology add-on payments for this 
technology for FY 2016.
    Because we are adopting the ICD-10 coding system effective October 
1, 2015, for FY 2016, we proposed to identify and make new technology 
add-on payments for cases involving KcentraTM with ICD 10 
PCS procedure code 30283B1 (Transfusion of nonautologous 4-factor 
prothrombin complex concentrate into vein, percutaneous approach). We 
stated that the maximum new technology add-on payment for a case 
involving the KcentraTM technology would remain at $1,587.50 
for FY 2016.
    We invited public comments on these proposals.
    Comment: One commenter supported CMS' proposal to continue new 
technology add-on payments for KcentraTM for FY 2016.
    Response: We appreciate the commenter's support.
    We did not receive any public comments on the coding and payment 
for KcentraTM for FY 2016.
    After consideration of the public comments we received, we are 
finalizing our proposal to continue new technology add-on payments for 
the KcentraTM technology for FY 2016. Because we are 
adopting the ICD-10 coding system effective October 1, 2015, for FY 
2016, as we proposed, we will identify and make new technology add-on 
payments for cases involving KcentraTM with the presence of 
ICD-10-PCS procedure code 30283B1 (Transfusion of nonautologous 4-
factor prothrombin complex concentrate into vein, percutaneous 
approach). New technology add-on payments for

[[Page 49438]]

KcentraTM will not be available with respect to discharges 
for which the hospital received an add-on payment for a blood clotting 
factor administered to a Medicare beneficiary with hemophilia who is a 
hospital inpatient. For information on how the blood clotting factor 
add-on payment is made (including a list of ICD-10 diagnosis codes that 
would negate the eligibility of a case for new technology add-on 
payments, if reported in combination with the ICD-10 procedure code 
used to identify cases involving the KcentraTM technology), 
we refer readers to Section 20.7.3, Chapter 3, of the Medicare Claims 
Processing Manual, which is available via the Internet on the CMS Web 
site at: http://cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf. The maximum new technology add-on payment for 
a case involving the KcentraTM technology will remain at 
$1,587.50 for FY 2016.
d. Argus[supreg] II Retinal Prosthesis System
    Second Sight Medical Products, Inc. submitted an application for 
new technology add-on payments for the Argus[supreg] II Retinal 
Prosthesis System (Argus[supreg] II System) for FY 2014. The 
Argus[supreg] II System is an active implantable medical device that is 
intended to provide electrical stimulation of the retina to induce 
visual perception in patients who are profoundly blind due to retinitis 
pigmentosa (RP). These patients have bare or no light perception in 
both eyes. The system employs electrical signals to bypass dead photo-
receptor cells and stimulate the overlying neurons according to a real-
time video signal that is wirelessly transmitted from an externally 
worn video camera. The Argus[supreg] II implant is intended to be 
implanted in a single eye, typically the worse-seeing eye. Currently, 
bilateral implants are not intended for this technology. According to 
the applicant, the surgical implant procedure takes approximately 4 
hours and is performed under general anesthesia.
    The Argus[supreg] II System consists of three primary components: 
(1) An implant which is an epiretinal prosthesis that is fully 
implanted on and in the eye (that is, there are no percutaneous leads); 
(2) external components worn by the user; and (3) a ``fitting'' system 
for the clinician that is periodically used to perform diagnostic tests 
with the system and to custom-program the external unit for use by the 
patient. We describe these components more fully below.
     Implant: The retinal prosthesis implant is responsible for 
receiving information from the external components of the system and 
electrically stimulating the retina to induce visual perception. The 
retinal implant consists of: (a) A receiving coil for receiving 
information and power from the external components of the Argus[supreg] 
II System; (b) electronics to drive stimulation of the electrodes; and 
(c) an electrode array. The receiving coil and electronics are secured 
to the outside of the eye using a standard scleral band and sutures, 
while the electrode array is secured to the surface of the retina 
inside the eye by a retinal tack. A cable, which passes through the eye 
wall, connects the electronics to the electrode array. A pericardial 
graft is placed over the extra-ocular portion on the outside of the 
eye.
     External Components: The implant receives power and data 
commands wirelessly from an external unit of components, which include 
the Argus II Glasses and Video Processing Unit (VPU). A small 
lightweight video camera and transmitting coil are mounted on the 
glasses. The telemetry coils and radio-frequency system are mounted on 
the temple arm of the glasses for transmitting data from the VPU to the 
implant. The glasses are connected to the VPU by a cable. This VPU is 
worn by the patient, typically on a belt or a strap, and is used to 
process the images from the video camera and convert the images into 
electrical stimulation commands, which are transmitted wirelessly to 
the implant.
     ``Fitting System'': To be able to use the Argus[supreg] II 
System, a patient's VPU needs to be custom-programmed. This process, 
which the applicant called ``fitting'', occurs in the hospital/clinic 
shortly after the implant surgery and then periodically thereafter as 
needed. The clinician/physician also uses the ``Fitting System'' to run 
diagnostic tests (for example, to obtain electrode and impedance 
waveform measurements or to check the radio-frequency link between the 
implant and external unit). This ``Fitting System'' can also be 
connected to a ``Psychophysical Test System'' to evaluate patients' 
performance with the Argus[supreg] II System on an ongoing basis.
    These three components work together to stimulate the retina and 
allow a patient to perceive phosphenes (spots of light), which they 
then need to learn to interpret. While using the Argus[supreg] II 
System, the video camera on the patient-worn glasses captures a video 
image. The video camera signal is sent to the VPU, which processes the 
video camera image and transforms it into electrical stimulation 
patterns. The electrical stimulation data are then sent to a 
transmitter coil mounted on the glasses. The transmitter coil sends 
both data and power via radio-frequency (RF) telemetry to the implanted 
retinal prosthesis. The implant receives the RF commands and delivers 
stimulation to the retina via an array of electrodes that is secured to 
the retina with a retinal tack.
    In patients with RP, the photoreceptor cells in the retina, which 
normally transduce incoming light into an electro-chemical signal, have 
lost most of their function. The stimulation pulses delivered to the 
retina via the electrode array of the Argus[supreg] II System are 
intended to mimic the function of these degenerated photoreceptors 
cells. These pulses induce cellular responses in the remaining, viable 
retinal nerve cells that travel through the optic nerve to the visual 
cortex where they are perceived as phosphenes (spots of light). 
Patients learn to interpret the visual patterns produced by these 
phosphenes.
    With respect to the newness criterion, according to the applicant, 
the FDA designated the Argus[supreg] II System a Humanitarian Use 
Device in May 2009 (HUD designation #09-0216). The applicant submitted 
a Humanitarian Device Exemption (HDE) application (#H110002) to the FDA 
in May 2011 to obtain market approval for the Argus[supreg] II System. 
The HDE was referred to the Ophthalmic Devices Panel of the FDA's 
Medical Devices Advisory Committee for review and recommendation. At 
the Panel's meeting held on September 28, 2012, the Panel voted 19 to 0 
that the probable benefits of the Argus[supreg] II System outweigh the 
risks of the system for the proposed indication for use. The applicant 
received the HDE approval from the FDA on February 14, 2013. However, 
in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49924 through 49925), we 
discussed comments we had received informing CMS that the Argus[supreg] 
II System was not available on the U.S. market until December 20, 2013. 
The applicant explained that, as part of the lengthy approval process, 
it was required to submit a request to the Federal Communications 
Commission (FCC) for a waiver of section 15.209(a) of the FCC rules 
that would allow the applicant to apply for FCC authorization to 
utilize this specific RF band. The FCC approved the applicant's waiver 
request on November 30, 2011. After receiving the FCC waiver of the 
section 15.209(a) rules, the applicant requested and obtained a 
required Grant of Equipment Authorization to utilize the specific RF 
band, which the FCC issued on December 20, 2013. Therefore, the 
applicant stated that the date the Argus[supreg] II System first became 
available for commercial sale in the United States

[[Page 49439]]

was December 20, 2013. We agreed with the applicant that, due to the 
delay, the date of newness for the Argus[supreg] II System was December 
20, 2013, instead of February 14, 2013.
    Currently there are no other approved treatments for patients 
diagnosed with severe to profound RP. The Argus[supreg] II System has 
an IDE number of G050001 and is a Class III device. In the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50580 through 50583), we finalized new 
ICD-9-CM procedure code 14.81 (Implantation of epiretinal visual 
prosthesis), which uniquely identifies the Argus[supreg] II System. The 
other two codes finalized by CMS are for removal, revision, or 
replacement of the device.
    After evaluation of the new technology add-on payment application 
and consideration of public comments received, we concluded that the 
Argus[supreg] II System met all of the new technology add-on payment 
policy criteria. Therefore, we approved the Argus[supreg] II System for 
new technology add-on payments in FY 2014 (78 FR 50580 through 50583). 
Cases involving the Argus[supreg] II System that are eligible for new 
technology add-on payments currently are identified by ICD-9-CM 
procedure code 14.81. We note that section 1886(d)(5)(K)(i) of the Act 
requires that the Secretary establish a mechanism to recognize the 
costs of new medical services or technologies under the payment system 
established under that subsection, which establishes the system for 
paying for the operating costs of inpatient hospital services. The 
system of payment for capital costs is established under section 
1886(g) of the Act, which makes no mention of any add-on payments for a 
new medical service or technology. Therefore, it is not appropriate to 
include capital costs in the add-on payments for a new medical service 
or technology. In the application, the applicant provided a breakdown 
of the costs of the Argus[supreg] II System. The total operating cost 
of the Argus[supreg] II System is $144,057.50. Under Sec.  
412.88(a)(2), we limit new technology add-on payments to the lesser of 
50 percent of the average cost of the device or 50 percent of the costs 
in excess of the MS-DRG payment for the case. As a result, the maximum 
add-on payment for a case involving the Argus[supreg] II System for FY 
2014 was $72,028.75.
    With regard to the newness criterion for the Argus[supreg] II 
System, we considered the beginning of the newness period to commence 
when the Argus[supreg] II System became available on the U.S. market on 
December 20, 2013. Because the 3-year anniversary date of the entry of 
the Argus[supreg] II System on the U.S. market will occur in the first 
half of FY 2017 (December 23, 2016), we proposed to continue new 
technology add-on payments for this technology for FY 2016.
    Because we are adopting the ICD-10 coding system beginning October 
1, 2015, we proposed to identify and make new technology add-on 
payments for cases involving the Argus[supreg] II System when one of 
the following ICD-10-PCS procedure codes is reported: 08H005Z 
(Insertion of epiretinal visual prosthesis into right eye, open 
approach); or 08H105Z (Insertion of epiretinal visual prosthesis into 
left eye, open approach). We stated that the maximum new technology 
add-on payment for a case involving the Argus[supreg] II System would 
remain at $72,028.75 for FY 2016.
    We invited public comments on our proposals.
    We did not receive any public comments on our proposal to continue 
new technology add-on payments for the Argus[supreg] II System for FY 
2016 or on the coding and payment of this technology. Therefore, we are 
finalizing our proposal to continue new technology add-on payments for 
the Argus[supreg] II System for FY 2016. Because we are adopting the 
ICD-10 coding system beginning October 1, 2015, we will identify and 
make new technology add-on payments for cases involving the 
Argus[supreg] II System when ICD-10-PCS procedure code 08H005Z or 
08H105Z is reported. The maximum new technology add-on payment for a 
case involving the Argus[supreg] II System remains at $72,028.75 for FY 
2016.
e. Zilver[supreg] PTX[supreg] Drug Eluting Peripheral Stent
    Cook[supreg] Medical submitted an application for new technology 
add-on payments for the Zilver[supreg] PTX[supreg] Drug Eluting 
Peripheral Stent (Zilver[supreg] PTX[supreg]) for FY 2014. The 
Zilver[supreg] PTX[supreg] is intended for use in the treatment of 
peripheral artery disease (PAD) of the above-the-knee femoropopliteal 
arteries (superficial femoral arteries). According to the applicant, 
the stent is percutaneously inserted into the artery(s), usually by 
accessing the common femoral artery in the groin. The applicant stated 
that an introducer catheter is inserted over the wire guide and into 
the target vessel where the lesion will first be treated with an 
angioplasty balloon to prepare the vessel for stenting. The applicant 
indicated that the stent is self-expanding, made of nitinol (nickel 
titanium), and is coated with the drug Paclitaxel. Paclitaxel is a drug 
approved for use as an anticancer agent and for use with coronary 
stents to reduce the risk of renarrowing of the coronary arteries after 
stenting procedures.
    The applicant received FDA approval on November 15, 2012, for the 
Zilver[supreg] PTX[supreg]. The applicant maintains that the 
Zilver[supreg] PTX[supreg] is the first drug-eluting stent used for 
superficial femoral arteries. The technology is currently described by 
ICD-9-CM procedure code 00.60 (Insertion of drug-eluting stent(s) of 
the superficial femoral artery).
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50583 through 
50585), after evaluation of the new technology add-on payment 
application and consideration of the public comments received, we 
approved the Zilver[supreg] PTX[supreg] for new technology add-on 
payments in FY 2014. Cases involving the Zilver[supreg] PTX[supreg] 
that are eligible for new technology add-on payments are identified by 
ICD-9-CM procedure code 00.60. As explained in the FY 2014 IPPS/LTCH 
PPS final rule, to determine the amount of Zilver[supreg] PTX[supreg] 
stents per case, instead of using the amount of stents used per case 
based on the ICD-9-CM codes, the applicant used an average of 1.9 
stents per case based on the Zilver[supreg] PTX[supreg] Global Registry 
Clinical Study. The applicant stated in its application that the 
anticipated cost per stent is approximately $1,795. Therefore, cases of 
the Zilver[supreg] PTX[supreg] would incur an average cost per case of 
$3,410.50 ($1,795 x 1.9). Under Sec.  412.88(a)(2), we limit new 
technology add-on payments to the lesser of 50 percent of the average 
cost of the device or 50 percent of the costs in excess of the MS-DRG 
payment for the case. As a result, the maximum add-on payment for a 
case of the Zilver[supreg] PTX[supreg] was $1,705.25 for FY 2014.
    With regard to the newness criterion for the Zilver[supreg] 
PTX[supreg], we considered the beginning of the newness period to 
commence when the Zilver[supreg] PTX[supreg] was approved by the FDA on 
November 15, 2012. Because the 3-year anniversary date of the entry of 
the Zilver[supreg] PTX[supreg] on the U.S. market occurred after FY 
2015 (November 15, 2015), in the FY 2015 IPPS/LTCH PPS final rule, we 
continued new technology add-on payments for this technology for FY 
2015 (79 FR 49925). However, for FY 2016, the 3-year anniversary date 
of the product's entry on the U.S. market (November 15, 2015) occurs in 
the first half of FY 2016. Therefore, we proposed to discontinue new 
technology add-on payments for the Zilver[supreg] PTX[supreg] for FY 
2016. We invited public comments on this proposal.
    Comment: One commenter requested that CMS extend the new technology 
add-on payment for the Zilver[supreg] PTX[supreg] for FY 2016.

[[Page 49440]]

    Response: As stated previously, the new technology add-on payment 
regulations provide that a medical service or technology may be 
considered new within 2 or 3 years after the point at which data begin 
to become available reflecting the ICD-9-CM code assigned to the new 
service or technology (Sec.  412.87(b)(2)). Our practice has been to 
begin and end new technology add-on payments on the basis of a fiscal 
year, and we have generally followed a guideline that uses a 6-month 
window before and after the start of the fiscal year to determine 
whether to extend the new technology add-on payment for an additional 
fiscal year. In general, we extend add-on payments for an additional 
year only if the 3-year anniversary date of the product's entry on the 
market occurs in the latter half of the fiscal year (70 FR 47362). 
Consistent with this practice, because the 3-year anniversary date of 
the product's entry onto the U.S. market will occur during the first 
half of FY 2016, we are not extending new technology add-on payments 
for FY 2016.
    After consideration of the public comment we received, we are 
finalizing our proposal to discontinue new technology add-on payments 
for the Zilver[supreg] PTX[supreg] for FY 2016 because the technology 
will no longer be considered new.
f. CardioMEMSTM HF (Heart Failure) Monitoring System
    CardioMEMS, Inc. submitted an application for new technology add-on 
payment for FY 2015 for the CardioMEMSTM HF (Heart Failure) 
Monitoring System, which is an implantable hemodynamic monitoring 
system comprised of an implantable sensor/monitor placed in the distal 
pulmonary artery. Pulmonary artery hemodynamic monitoring is used in 
the management of heart failure. The CardioMEMSTM HF 
Monitoring System measures multiple pulmonary artery pressure 
parameters for an ambulatory patient to measure and transmit data via a 
wireless sensor to a secure Web site.
    The CardioMEMSTM HF Monitoring System utilizes 
radiofrequency (RF) energy to power the sensor and to measure pulmonary 
artery (PA) pressure and consists of three components: An Implantable 
Sensor with Delivery Catheter, an External Electronics Unit, and a 
Pulmonary Artery Pressure Database. The system provides the physician 
with the patient's PA pressure waveform (including systolic, diastolic, 
and mean pressures) as well as heart rate. The sensor is permanently 
implanted in the distal pulmonary artery using transcatheter techniques 
in the catheterization laboratory where it is calibrated using a Swan-
Ganz catheter. PA pressures are transmitted by the patient at home in a 
supine position on a padded antenna, pushing one button which records 
an 18-second continuous waveform. The data also can be recorded from 
the hospital, physician's office or clinic.
    The hemodynamic data, including a detailed waveform, are 
transmitted to a secure Web site that serves as the Pulmonary Artery 
Pressure Database, so that information regarding PA pressure is 
available to the physician or nurse at any time via the Internet. 
Interpretation of trend data allows the clinician to make adjustments 
to therapy and can be used along with heart failure signs and symptoms 
to adjust medications.
    The applicant believed that a large majority of patients receiving 
the sensor would be admitted as an inpatient to a hospital with a 
diagnosis of acute or chronic heart failure, which is typically 
described by ICD-9-CM diagnosis code 428.43 (Acute on chronic combined 
systolic and diastolic heart failure) and the sensor would be implanted 
during the inpatient stay. The applicant stated that for safety 
considerations, a small portion of these patients may be discharged and 
the sensor would be implanted at a future date in the hospital 
outpatient setting. In addition, there would likely be a group of 
patients diagnosed with chronic heart failure who are not currently 
hospitalized, but who have been hospitalized in the past few months for 
which the treating physician believes that regular pulmonary artery 
pressure readings are necessary to optimize patient management. 
Depending on the patient's status, the applicant stated that these 
patients may have the sensor implanted in the hospital inpatient or 
outpatient setting.
    The applicant received FDA approval on May 28, 2014. The 
CardioMEMSTM HF Monitoring System is currently described by 
ICD-9-CM procedure code 38.26 (Insertion of implantable pressure sensor 
without lead for intracardiac or great vessel hemodynamic monitoring).
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology payments for the 
CardioMEMSTM HF Monitoring System and consideration of the 
public comments we received in response to the FY 2015 IPPS/LTCH PPS 
proposed rule, we approved the CardioMEMSTM HF Monitoring 
System for new technology add-on payments for FY 2015 (79 FR 49940). 
Cases involving the CardioMEMSTM HF Monitoring System that 
are eligible for new technology add-on payments are identified by ICD-
9-CM procedure code 38.26 (Insertion of implantable wireless pressure 
sensor for intracardiac or great vessel hemodynamic monitoring), which 
was effective October 1, 2011. With the new technology add-on payment 
application, the applicant stated that the total operating cost of the 
CardioMEMSTM HF Monitoring System is $17,750. Under Sec.  
412.88(a)(2), we limit new technology add-on payments to the lesser of 
50 percent of the average cost of the device or 50 percent of the costs 
in excess of the MS-DRG payment for the case. As a result, the maximum 
new technology add-on payment for a case involving the 
CardioMEMSTM HF Monitoring System is $8,875.
    With regard to the newness criterion for the 
CardioMEMSTM HF Monitoring System, we considered the 
beginning of the newness period to commence when the 
CardioMEMSTM HF Monitoring System was approved by the FDA on 
May 28, 2014. Because the 3-year anniversary date of the entry of the 
CardioMEMSTM HF Monitoring System on the U.S. market will 
occur in FY 2017 (May 28, 2017), we proposed to continue new technology 
add-on payments for this technology for FY 2016.
    Because we are adopting the ICD-10 coding system beginning October 
1, 2015, for FY 2016, we proposed to identify and make new technology 
add-on payments for cases involving the CardioMEMSTM HF 
Monitoring System using either ICD-10-PCS procedure code 02HQ30Z 
(Insertion of pressure sensor monitoring device into right pulmonary 
artery, percutaneous approach) or ICD-10-PCS procedure code 02HR30Z 
(Insertion of pressure sensor monitoring device into left pulmonary 
artery, percutaneous approach). We stated that the maximum payment for 
a case involving the CardioMEMSTM HF Monitoring System would 
remain at $8,875 for FY 2016.
    We invited public comments on our proposals.
    Comment: Commenters supported CMS' proposal to continue new 
technology add-on payments for the CardioMEMSTM HF 
Monitoring System for FY 2016. Commenters also supported CMS'proposal 
to use ICD-10-PCS procedure codes 02HQ30Z and 02HR30Z when making new 
technology add-on payments for cases involving the 
CardioMEMSTM HF Monitoring System.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to continue new technology add-on payments for 
the

[[Page 49441]]

CardioMEMSTM HF Monitoring System for FY 2016. Because we 
are adopting the ICD-10 coding system beginning October 1, 2015, for FY 
2016, we will identify and make new technology add-on payments for 
cases involving the CardioMEMSTM HF Monitoring System using 
either ICD-10-PCS procedure code 02HQ30Z (Insertion of pressure sensor 
monitoring device into right pulmonary artery, percutaneous approach) 
or ICD-10-PCS procedure code 02HR30Z (Insertion of pressure sensor 
monitoring device into left pulmonary artery, percutaneous approach). 
We note that as discussed in section II.G.3. of the preamble of this 
final rule, CMS determined that there are additional ICD-10-PCS codes 
describing the insertion of a pressure sensor monitoring that also are 
appropriate translations for ICD 9 CM procedure code 38.26. These other 
ICD-10-PCS codes describe the insertion of a pressure sensor monitoring 
device utilizing an open approach or a percutaneous endoscopic approach 
(for the right or left pulmonary artery). However, for purposes of new 
technology add-on payments for cases involving the 
CardioMEMSTM HF Monitoring System, as stated above, we will 
identify cases using either ICD-10-PCS procedure code 02HQ30Z 
(Insertion of pressure sensor monitoring device into right pulmonary 
artery, percutaneous approach) or ICD-10-PCS procedure code 02HR30Z 
(Insertion of pressure sensor monitoring device into left pulmonary 
artery, percutaneous approach). The maximum payment for a case 
involving the CardioMEMSTM HF Monitoring System will remain 
at $8,875 for FY 2016.
g. MitraClip[supreg] System
    Abbott Vascular submitted an application for new technology add-on 
payments for the MitraClip[supreg] System for FY 2015. The 
MitraClip[supreg] System is a transcatheter mitral valve repair system 
that includes a MitraClip[supreg] device implant, a Steerable Guide 
Catheter, and a Clip Delivery System. It is designed to perform 
reconstruction of the insufficient mitral valve for high-risk patients 
who are not candidates for conventional open mitral valve repair 
surgery.
    Mitral regurgitation (MR), also referred to as mitral insufficiency 
or mitral incompetence, occurs when the mitral valve fails to close 
completely causing the blood to leak or flow backwards (regurgitate) 
into the left ventricle. If the amount of blood that leaks backwards 
into the left ventricle is minimal, then intervention is usually not 
necessary. However, if the amount of blood that is regurgitated becomes 
significant, this can cause the left ventricle to work harder to meet 
the body's need for oxygenated blood. Severity levels of MR can range 
from grade 1+ through grade 4+. If left untreated, severe MR can lead 
to heart failure and death. The American College of Cardiology (ACC) 
and the American Heart Association (AHA) issued practice guidelines in 
2006 that recommended intervention for moderate/severe or severe MR 
(grade 3+ to 4+). The applicant stated that the MitraClip[supreg] 
System is ``indicated for percutaneous reduction of significant mitral 
regurgitation . . . in patients who have been determined to be at 
prohibitive risk for mitral value surgery by a heart team, which 
includes a cardiac surgeon experienced in mitral valve surgery and a 
cardiologist experienced in mitral valve disease and in whom existing 
comorbidities would not preclude the expected benefit from correction 
of the mitral regurgitation.''
    The MitraClip[supreg] System mitral valve repair procedure is based 
on the double-orifice surgical repair technique that has been used as a 
surgical technique in open chest, arrested-heart surgery for the 
treatment of MR since the early 1990s. According to the applicant, in 
utilizing ``the double-orifice technique, a portion of the anterior 
leaflet is sutured to the corresponding portion of the posterior 
leaflet using standard techniques and forceps and suture, creating a 
point of permanent cooptation (``approximation'') of the two leaflets. 
When the suture is placed in the middle of the valve, the valve will 
have a functional double orifice during diastole.''
    With regard to the newness criterion, the MitraClip[supreg] System 
received a premarket approval from the FDA on October 24, 2013. The 
MitraClip[supreg] System is indicated ``for the percutaneous reduction 
of significant symptomatic mitral regurgitation (MR >= 3+) due to 
primary abnormality of the mitral apparatus (degenerative MR) in 
patients who have been determined to be at prohibitive risk for mitral 
valve surgery by a heart team, which includes a cardiac surgeon 
experienced in mitral valve surgery and a cardiologist experienced in 
mitral valve disease, and in whom existing comorbidities would not 
preclude the expected benefit from reduction of the mitral 
regurgitation.'' The MitraClip[supreg] System became immediately 
available on the U.S. market following FDA approval. The 
MitraClip[supreg] System is a Class III device, and has an 
investigational device exemption (IDE) for the EVEREST study 
(Endovascular Valve Edge-to-Edge Repair Study)--IDE G030061, and for 
the COAPT study (Cardiovascular Outcomes Assessment of the MitraClip 
Percutaneous Therapy for Health Failure Patients with Functional Mitral 
Regurgitation)--IDE G120024. Effective October 1, 2010, ICD-9-CM 
procedure code 35.97 (Percutaneous mitral valve repair with implant) 
was created to identify and describe the MitraClip[supreg] System 
technology.
    On August 7, 2014, CMS issued a National Coverage Decision (NCD) 
concerning Transcatheter Mitral Valve Repair procedures. We refer 
readers to the CMS Web site at: http://www.cms.gov/medicare-coverage-database/details/nca-tracking-sheet.aspx?NCAId=273 for information 
related to this NCD.
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology payments for the 
MitraClip[supreg] System and consideration of the public comments we 
received in response to the FY 2015 IPPS/LTCH PPS proposed rule, we 
approved the MitraClip[supreg] System for new technology add-on 
payments for FY 2015 (79 FR 49946). As discussed in the FY 2015 IPPS/
LTCH PPS final rule, this approval is on the basis of using the 
MitraClip[supreg] consistent with the NCD. Cases involving the 
MitraClip[supreg] System that are eligible for the new technology add-
on payments are currently identified by ICD-9-CM procedure code 35.97. 
The average cost of the MitraClip[supreg] System is reported as 
$30,000. Under section 412.88(a)(2), we limit new technology add-on 
payments to the lesser of 50 percent of the average cost of the device 
or 50 percent of the costs in excess of the MS-DRG payment for the 
case. As a result, the maximum new technology add-on payment for a case 
involving the MitraClip[supreg] System is $15,000 for FY 2015.
    With regard to the newness criterion for the MitraClip[supreg] 
System, we considered the beginning of the newness period to commence 
when the MitraClip[supreg] System was approved by the FDA on October 
24, 2013. Because the 3-year anniversary date of the entry of the 
MitraClip[supreg] System on the U.S. market will occur in FY 2017 
(October 24, 2016), we proposed to continue new technology add-on 
payments for this technology for FY 2016.
    Because we are adopting the ICD-10 coding system beginning October 
1, 2015, we proposed to identify and make new technology add-on 
payments for cases involving the MitraClip[supreg] System using ICD-10-
PCS procedure code 02UG3JZ (Supplement mitral valve with synthetic 
substitute, percutaneous approach). We stated that the maximum

[[Page 49442]]

payment for a case involving the MitraClip[supreg] System would remain 
at $15,000 for FY 2016.
    We invited public comments on our proposals.
    Comment: Commenters supported CMS' proposal to continue new 
technology add-on payments for the MitraClip[supreg] System for FY 
2016. One commenter, the manufacturer, submitted a revised cost 
analysis. The commenter noted that the MitraClip[supreg] System maps to 
newly created MS-DRGs 273 and 274 (instead of MS-DRGs 250 and 251), the 
same MS-DRGs as the WATCHMAN[supreg] System (which is discussed in 
section II.I.5.f. of the preamble of this final rule). The commenter 
reported that it conducted an analysis using the supplemental 
thresholds that CMS discussed in the proposed rule for newly created 
MS-DRGs 273 and 274 and demonstrated that the MitraClip[supreg] System 
meets the cost criterion because the case-weighted average standardized 
charge per case exceeded the case-weighted threshold. Therefore, the 
commenter believed that the MitraClip[supreg] System continues to meet 
all three criteria for new technology add-on payments for FY 2016.
    Response: We appreciate the commenters' support. In the proposed 
rule, with regard to the cost criterion for the WATCHMAN[supreg] 
System, we discussed using supplemental thresholds for newly created 
MS-DRGs 273 and 274 and posted these supplemental thresholds on the CMS 
Web site. We note that we are maintaining our current policy, which is 
to use the thresholds issued with each final rule for the upcoming 
fiscal year (that is, for FY 2017, we will use the thresholds for the 
updated MS-DRG assignments as reflected in Table 10 issued with this FY 
2016 final rule) when making a determination to continue the add-on 
payment for those new technologies that were approved for the new 
technology add-on payment from the prior fiscal year.
    We did not receive any public comments on the coding and payment of 
the MitraClip[supreg] System for FY 2016.
    After consideration of the public comments we received, we are 
finalizing our proposal to continue new technology add-on payments for 
the MitraClip[supreg] System for FY 2016. Because we are adopting the 
ICD-10 coding system beginning October 1, 2015, we will identify and 
make new technology add-on payments for cases involving the 
MitraClip[supreg] System using ICD-10-PCS procedure code 02UG3JZ. The 
maximum payment for a case involving the MitraClip[supreg] System will 
remain at $15,000 for FY 2016.
h. Responsive Neurostimulator (RNS[supreg]) System
    NeuroPace, Inc. submitted an application for new technology add-on 
payments for FY 2015 for the use of the RNS[supreg] System. (We note 
that the applicant submitted an application for new technology add-on 
payments for FY 2014, but failed to receive FDA approval prior to the 
July 1 deadline.) Seizures occur when brain function is disrupted by 
abnormal electrical activity. Epilepsy is a brain disorder 
characterized by recurrent, unprovoked seizures. According to the 
applicant, the RNS[supreg] System is the first implantable medical 
device (developed by NeuroPace, Inc.) for treating persons diagnosed 
with epilepsy whose partial onset seizures have not been adequately 
controlled with antiepileptic medications. The applicant further stated 
that, the RNS[supreg] System is the first closed-loop, responsive 
system to treat partial onset seizures. Responsive electrical 
stimulation is delivered directly to the seizure focus in the brain 
when abnormal brain activity is detected. A cranially implanted 
programmable neurostimulator senses and records brain activity through 
one or two electrode-containing leads that are placed at the patient's 
seizure focus/foci. The neurostimulator detects electrographic patterns 
previously identified by the physician as abnormal, and then provides 
brief pulses of electrical stimulation through the leads to interrupt 
those patterns. Stimulation is delivered only when abnormal 
electrocorticographic activity is detected. The typical patient is 
treated with a total of 5 minutes of stimulation a day. The RNS[supreg] 
System incorporates remote monitoring, which allows patients to share 
information with their physicians remotely.
    With respect to the newness criterion, the applicant stated that 
some patients diagnosed with partial onset seizures that cannot be 
controlled with antiepileptic medications may be candidates for the 
vagus nerve stimulator (VNS) or for surgical removal of the seizure 
focus. According to the applicant, these treatments are not appropriate 
for, or helpful to, all patients. Therefore, the applicant believed 
that there is an unmet clinical need for additional therapies for 
partial onset seizures. The applicant further stated that the 
RNS[supreg] System addresses this unmet clinical need by providing a 
novel treatment option for treating persons diagnosed with medically 
intractable partial onset seizures. The applicant received FDA 
premarket approval on November 14, 2013.
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology payments for the RNS[supreg] 
System and consideration of the public comments we received in response 
to the FY 2015 IPPS/LTCH PPS proposed rule, we approved the RNS[supreg] 
System for new technology add-on payments for FY 2015 (79 FR 49950). 
Cases involving the RNS[supreg] System that are eligible for new 
technology add-on payments are currently identified using the following 
ICD-9-CM procedure codes: 01.20 (Cranial implantation or replacement of 
neurostimulator pulse generator) in combination with 02.93 
(Implantation or replacement of intracranial neurostimulator lead(s)). 
According to the applicant, cases using the RNS[supreg] System would 
incur an anticipated cost per case of $36,950. Under Sec.  412.88(a)(2) 
of the regulations, we limit new technology add-on payments to the 
lesser of 50 percent of the average costs of the device or 50 percent 
of the costs in excess of the MS-DRG payment rate for the case. As a 
result, the maximum new technology add-on payment for cases involving 
the RNS[supreg] System is $18,475.
    With regard to the newness criterion for the RNS[supreg] System, we 
considered the beginning of the newness period to commence when the 
RNS[supreg] System was approved by the FDA on November 14, 2013. 
Because the 3-year anniversary date of the entry of the RNS[supreg] 
System on the U.S. market will occur in FY 2017 (November 14, 2016), we 
proposed to continue new technology add-on payments for this technology 
for FY 2016.
    Because we are adopting the ICD-10 coding system beginning October 
1, 2015, we proposed to identify and make new technology add-on 
payments for cases involving the RNS[supreg] System using the following 
ICD-10-PCS procedure code combination: 0NH00NZ (Insertion of 
neurostimulator generator into skull, open approach) in combination 
with 00H00MZ (Insertion of neurostimulator lead into brain, open 
approach). We stated that the maximum payment for a case involving the 
RNS[supreg] System would remain at $18,475 for FY 2016.
    We invited public comments on our proposals.
    Comment: Commenters supported CMS' proposal to continue new 
technology add-on payments for the RNS[supreg] System for FY 2016. One 
commenter noted that since FY 2015, additional evidence has been 
published further demonstrating the safety, effectiveness, and 
durability of the RNS[supreg] System. The commenter cited in

[[Page 49443]]

particular a peer-reviewed article that was published in February 2015 
in Neurology, the journal of the American Academy of Neurology. The 
commenter stated that this article provides interim results of safety 
and effectiveness from the 7-year, prospective, long-term, follow-up 
trial for the RNS System.\8\
---------------------------------------------------------------------------

    \8\ Bergey et al., Long-term treatment with responsive brain 
stimulation in adults with refractory partial seizures. Neurology. 
2015 Feb 24;84(8):810-7.
---------------------------------------------------------------------------

    In addition, the commenter noted a recently published review and 
opinion in Nature Reviews Neurology entitled ``Epilepsy: Closing the 
loop for patients with epilepsy'' (by two epilepsy specialists, Kristl 
Vonck, MD and Paul Boon, MD) that discusses the positive long-term 
results of responsive neurostimulation and the promise this therapy 
brings to a complex patient population with limited treatment options.
    Response: We appreciate the commenters' support and the citations 
of the additional supporting information.
    We did not receive any public comments on the proposed coding and 
payment of the RNS[supreg] System for FY 2016.
    After consideration of the public comments we received, we are 
finalizing our proposal to continue new technology add-on payments for 
the RNS[supreg] System for FY 2016. Because we are adopting the ICD-10 
coding system beginning October 1, 2015, we will identify and make new 
technology add-on payments for cases involving the RNS[supreg] System 
using the following ICD-10-PCS procedure code combination: 0NH00NZ 
(Insertion of neurostimulator generator into skull, open approach) in 
combination with 00H00MZ (Insertion of neurostimulator lead into brain, 
open approach). The maximum payment for a case involving the 
RNS[supreg] System will remain at $18,475 for FY 2016.
5. FY 2016 Applications for New Technology Add-On Payments
    We received nine applications for new technology add-on payments 
for FY 2016. However, two applications, the Angel Medical 
Guardian[supreg] Ischemia Monitoring Device and Ceftazidime Avibactam 
(AVYCAZ), were withdrawn from consideration for new technology add-on 
payments for FY 2016 prior to the publication of this final rule. In 
addition, in accordance with the regulations under Sec.  412.87(c), 
applicants for new technology add-on payments must have FDA approval of 
the technology by July 1 of each year prior to the beginning of the 
fiscal year that the application is being considered. One applicant did 
not receive FDA approval for its technology, Idarucizumab, by July 1, 
2015, and, therefore, is ineligible for consideration for new 
technology add-on payments for FY 2016. We are not including the 
descriptions and discussions of these three applications that were 
included in the FY 2016 proposed rule in this final rule. We note that 
we did receive public comments on all three of these applications. 
However, because the applicant either withdrew its application or the 
technology is ineligible for new technology add-on payments for FY 2016 
because the technology did not receive FDA approval by July 1, 2015, we 
also are not summarizing or responding to these public comments in this 
final rule. A discussion of the six remaining applications is presented 
below.
a. Blinatumomab (BLINCYTOTM)
    Amgen, Inc. submitted an application for new technology add-on 
payments for Blinatumomab (BLINCYTOTM), a bi-specific T-cell 
engager (BiTE) used for the treatment of Philadelphia chromosome-
negative (Ph-) relapsed or refractory (R/R) B-cell precursor acute-
lymphoblastic leukemia (ALL), which is a rare aggressive cancer of the 
blood and bone marrow. Approximately 6,050 individuals are diagnosed 
with Ph- R/R B-cell precursor ALL in the United States each year, and 
approximately 2,400 individuals, representing 30 percent of all new 
cases, are adults. Ph- R/R B-cell precursor ALL occurs when there are 
malignant transformations of B-cell or T-cell progenitor cells, causing 
an accumulation of lymphoblasts in the blood, bone marrow, and 
occasionally throughout the body. As a bi-specific T-cell engager, the 
BLINCYTOTM technology attaches to a molecule on the surface 
of the tumorous cell, as well as to a molecule on the surface of normal 
T-cells, bringing the two into closer proximity and allowing the normal 
T-cell to destroy the tumorous cell. Specifically, the 
BLINCYTOTM technology attaches to a cell identified as CD19, 
which is present on all of the cells of the malignant transformations 
that cause Ph- R/R B-cell precursor ALL and helps attract the cell into 
close proximity of the T-cell CD3 with the intent of getting close 
enough to allow the T-cell to inject toxins that destroy the cancerous 
cell. According to the applicant, the BLINCYTOTM technology 
is the first, and the only, bi-specific CD19-directed CD3 T-cell 
engager single-agent immunotherapy approved by the FDA.
    BLINCYTOTM is administered as a continuous IV infusion 
delivered at a constant flow rate using an infusion pump. A single 
cycle of treatment consists of 28 days of continuous infusion, and each 
treatment cycle followed by 2 weeks without treatment prior to 
administering any further treatments. A course of treatment consists of 
two phases. Phase 1 consists of initial inductions or treatments 
intended to achieve remission followed by additional inductions and 
treatments to maintain consolidation; or treatments given after 
remission has been achieved to prolong the duration. During phase 1 of 
a single treatment course, up to two cycles of BLINCYTO[supreg] are 
administered, and up to three additional cycles are administered during 
consolidation. The recommended dosage of BLINCYTOTM 
administered during the first cycle of treatment is 9 mcg per day for 
the first 7 days of treatment. The dosage is then increased to 28 mcg 
per day for 3 weeks until completion. During phase 2 of the treatment 
course, all subsequent doses are administered as 28 mcg per day 
throughout the entire duration of the 28-day treatment period.
    With respect to the newness criterion, the BLINCYTOTM 
technology received FDA approval on December 3, 2014, for the treatment 
of patients diagnosed with Ph- R/R B-cell precursor ALL, and the 
product gained entry onto the U.S. market on December 17, 2014. As 
stated in section II.G.1.a. of the preamble of the FY 2016 IPPS/LTCH 
PPS proposed rule and this final rule, effective October 1, 2015 (FY 
2016), the ICD-10 coding system will be implemented. In the proposed 
rule, we noted that the applicant had applied for a new ICD-10-PCS 
procedure code at the March 18-19, 2015 ICD-10-CM/PCS Coordination and 
Maintenance Committee Meeting. In this final rule, we note that the new 
ICD-10-PCS procedure codes XW03351 (Introduction of Blinatumomab 
antineoplastic immunotherapy into peripheral vein, percutaneous 
approach, new technology group 1) and XW04351 (Introduction of 
Blinatumomab antineoplastic immunotherapy into central vein, 
percutaneous approach, new technology group1) were established as shown 
in Table 6B (New Procedure Codes) and will uniquely identify procedures 
involving the BLINCYTOTM technology. More information on 
this request and the approval can be found on the CMS Web site at: 
http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html and the FY 2016 New ICD-10-PCS Codes 
can be found at the CMS Web site at: http://www.cms.gov/

[[Page 49444]]

Medicare/Coding/ICD10/2016-ICD-10-PCS-and-GEMs.html.
    In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43813 
through 43814), we established criteria for evaluating whether a new 
technology is substantially similar to an existing technology, 
specifically: (1) Whether a product uses the same or a similar 
mechanism of action to achieve a therapeutic outcome; (2) whether a 
product is assigned to the same or a different MS-DRG; and (3) whether 
the new use of the technology involves the treatment of the same or 
similar type of disease and the same or similar patient population. If 
a technology meets all three of these criteria, it would be considered 
substantially similar to an existing technology and would not be 
considered ``new'' for purposes of new technology add-on payments. For 
a detailed discussion of the criteria for substantial similarity, we 
refer readers to the FY 2006 IPPS final rule (70 FR 47351 through 
47352), and the FY 2010 IPPS/LTCH PPS final rule (74 FR 43813 through 
43814).
    With regard to the first criterion, whether a product uses the same 
or a similar mechanism of action to achieve a therapeutic outcome, we 
stated in the proposed rule our concern that the mechanism of action of 
the BLINCYTOTM technology does not appear to differ from 
those of other bi-specific T-cell engagers, which also attract the 
cancerous cell within close proximity of a normal T-cell with the 
intent of allowing the cell to get close enough to inject toxins to 
destroy the cancerous cell. There are several other BiTEs currently 
under investigation, including MT110 that are used for the treatment of 
patients diagnosed with gastrointestinal and lung cancers and are 
directed towards the EpCAM antigen, as well as MCSP-specific and CD33-
specific BiTEs used for treating patients diagnosed with melanoma and 
acute myeloid leukemia, respectively. We believe that the feature that 
distinguishes the BLINCYTOTM technology from these other bi-
specific T-cell engagers is that it specifically targets the CD19 cell. 
However, in the proposed rule, we stated that we are concerned that the 
specificity of the mechanism of action may not be sufficient to 
distinguish the BLINCYTOTM technology from other bi-specific 
T-cell engagers and, therefore, the technology bears substantial 
similarity to these other BiTEs used as current treatment options for 
Medicare beneficiaries. Further, we stated that determining that the 
BLINCYTOTM technology meets the newness criterion based on 
the specificity of the mechanism of action would set a precedent that a 
drug employing the same mechanism of action could be considered ``new'' 
based on such specificity when evaluated under the substantial 
similarity criterion.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant maintained that ICD-9-
CM diagnosis codes 204.00 (Acute lymphoid leukemia, without mention of 
having achieved remission) and 204.02 (Acute lymphoid leukemia in 
relapse) are used to identify patients who may potentially be eligible 
for treatment using the BLINCYTOTM technology. Using these 
diagnosis codes, the applicant researched claims data from the FY 2013 
MedPAR file and found cases across a wide spectrum of MS-DRGs, not all 
of which are related to acute lymphoblastic leukemia. According to the 
applicant, 42.1 percent of all cases representing patients diagnosed 
with Ph- R/R B-cell precursor ALL were assigned to 238 MS-DRGs. 
Therefore, we believe that potential cases involving the 
BLINCYTOTM technology may be assigned to the same MS-DRG(s) 
as other cases involving bi-specific T-cell engagers used to treat 
patients with leukemia.
    With respect to the third criterion, whether the new use of the 
technology involves the treatment of the same or similar type of 
disease and the same or similar patient population, the applicant 
maintained in its application that the standard treatment for patients 
diagnosed with Ph- R/R B-cell precursor ALL currently requires the use 
of multiple, intensive chemotherapy treatment drugs in combination to 
induce remission in order to allow the patient the opportunity to 
proceed to allogenic hematopoietic stem cell transplant (alloHSCT), 
which is the next stage in the course of treatment and the only known 
curative option. The applicant asserted that the BLINCYTOTM 
technology is not substantially similar to other treatment options 
because it does not involve the treatment of the same, or similar, type 
of diseases or the same, or similar, patient population. The applicant 
stated that, although chemotherapy is a successful treatment option to 
induce remission in patients diagnosed with Ph- R/R B-cell precursor 
ALL, many of these patients relapse or stop responding to this standard 
treatment and, therefore, are unable to proceed to alloHSCT, the next 
stage of treatment. Moreover, chemotherapy toxicities can be 
cumulative. Therefore, the commenter stated, patients who have received 
intensive treatments may not be eligible for further intensive 
chemotherapy treatments and, therefore, are unable to proceed to 
alloHSCT. The applicant asserted that the BLINCYTOTM 
technology is an anti-cancer immunotherapy that has shown to be 
effective in the treatment of a patient population in which 
chemotherapy has not been successful. Moreover, the applicant asserted 
that, as an anti-cancer immunotherapy, the BLINCYTOTM 
technology does not demonstrate the cumulative side-effects typically 
associated with chemotherapy treatments and, therefore, is a treatment 
option available to patients who are not eligible for further 
chemotherapy treatments based on the risks associated with cumulative 
toxicities. However, in the proposed rule, we stated our concern that 
this specific patient population is not necessarily distinguishable 
from the overall patient population of individuals diagnosed with Ph- 
R/R B-cell precursor ALL, and we are unsure how to identify these 
patients using administrative claims data.
    In summary, we stated in the proposed rule that the 
BLINCYTOTM technology may be similar to other approved 
technologies currently available to treat the same patient population 
and medical disorders and, therefore, may not meet the newness 
criterion. In addition, we stated that the specific patient population 
targeted by the applicant may not be sufficiently distinguishable from 
the overall patient population that may be eligible for treatment using 
options that are currently available for these types of medical 
disorders. We invited public comments on if, and how, the 
BLINCYTOTM technology meets the newness criterion.
    Comment: The applicant submitted public comments that responded to 
CMS' concerns presented in the proposed rule. With regard to CMS' 
concern that the BLINCYTOTM technology's mechanism of action 
does not appear to differ from other bi-specific T-cell engagers, the 
applicant emphasized that there are no other FDA-approved bi-specific 
T-cell engager constructs currently marketed and readily available to 
Medicare beneficiaries. Therefore, the applicant stated that there are 
no previously available technologies to use as comparators for 
determining whether BLINCYTOTM bears a substantial 
similarity to other bi-specific T-cell engagers. Furthermore, the 
applicant believed that the BLINCYTOTM technology's 
mechanism of action is unique and distinguishable from all other FDA-
approved therapies because

[[Page 49445]]

it redirects the patient's immune system toward the cancerous cells, 
which leads to the specifically targeted destruction of these cells. 
The applicant noted that no other FDA-approved anti-cancer 
immunotherapy redirects the patient's immune system in such a manner 
and, therefore, the novelty of the BLINCYTOTM technology's 
bi-specific T-cell engager mechanism of action extends beyond the 
target antigen specificity. Therefore, the applicant disagreed with CMS 
that approving new technology add-on payments for this technology would 
set a precedent in which a drug employing the same mechanism of action 
could be considered new based on the specificity of its target antigen.
    With regard to CMS' concern that potentially eligible cases 
involving the BLINCYTOTM technology may be assigned to the 
same MS-DRG(s) as other cases involving target therapy used to treat 
patients diagnosed with leukemia, the applicant reiterated that there 
are currently no other FDA-approved bi-specific T-cell engager 
constructs available on the U.S. market to treat any patients, 
including Medicare beneficiaries, who have been diagnosed with Ph- R/R 
B-cell precursor ALL. As such, the applicant contended that potential 
cases eligible for the BLINCYTOTM would not be assigned to 
the same MS-DRG(s) as other cases involving other targeted therapies.
    With regard to CMS' concern that the specific population of 
patients identified by the applicant that may be eligible for treatment 
using the BLINCYTOTM technology (that is, patients who are 
ineligible for chemotherapy or for whom chemotherapy has not been 
successful) is not necessarily distinguishable from the overall patient 
population of individuals diagnosed with Ph- R/R B-cell precursor ALL, 
the applicant asserted that the approval of the new unique ICD-10-PCS 
procedure codes to be used to identify cases involving the 
BLINCYTOTM technology corroborates the recognizable 
distinction between the specific patient populations. The applicant 
believed that, if the BLINCYTOTM technology is approved for 
new technology add-on payments, CMS would be able to use claims data 
reporting these new ICD-10-PCS procedure codes to distinguish the 
population of patients treated with the BLINCYTOTM 
technology from the broader population of patients diagnosed with Ph- 
R/R B-cell precursor ALL by using these specific new codes on inpatient 
hospital claims when the codes become effective October 1, 2015.
    Response: We appreciate the details and input provided by the 
applicant in response to our concerns. We also acknowledge that new 
ICD-10-PCS procedure codes have been approved to uniquely identify 
procedures that involve the BLINCYTOTM technology, and that 
these procedure codes may ultimately be used to distinguish the 
specific patient population from the overall patient population of 
individuals diagnosed with Ph- R/R B-cell precursor ALL. After 
considering the additional information submitted by the applicant in 
response to our concerns, which supported the technology's uniqueness 
and documented the lack of an equivalent treatment option for patients 
diagnosed with Ph- R/R B-cell precursor ALL, who may be ineligible for 
current treatment options, we agree with the applicant that the 
BLINCYTOTM technology is not substantially similar to other 
technologies currently available that also are used in the treatment of 
patients diagnosed with the same or similar types of conditions. We 
believe that the BLINCYTOTM technology uses a different 
mechanism of action than other similar technologies, eligible cases 
involving treatment using the BLINCYTOTM technology would be 
grouped to a different MS-DRG than those cases treated with similar 
technologies, and the BLINCYTOTM technology would be used in 
the treatment of a different patient population than those currently 
treated with existing technologies. Therefore, we believe that the 
BLINCYTOTM technology meets the newness criterion.
    Comment: Several commenters, including medical specialty societies, 
believed that the BLINCYTOTM technology meets the newness 
criterion. The commenters agreed with the applicant's assertion that 
there are currently no other bi-specific T-cell engager constructs that 
are available on the U.S. market, and disagreed with CMS' comparisons 
between the applicant's technology and products currently approved or 
under investigation. One commenter stated that it is particularly 
notable that the BLINCYTOTM technology is the first FDA-
approved drug to be used in immunotherapy for the treatment of cancer. 
The commenter noted that, while other bi-specific T-cell engager 
constructs are in the development stages, these products have not 
reached the advanced stages of development, whereas the 
BLINCYTOTM technology is currently FDA-approved and the 
subject of phase III clinical trials for the treatment of patients 
diagnosed with Ph- R/R B-cell precursor ALL. Some commenters believed 
that the relevant comparison analysis conducted for new technology add-
on payment eligibility must be related to treatments that are currently 
available to Medicare beneficiaries. The commenters stated that it is 
inappropriate to rely upon comparison analysis that compares a 
candidate for new technology add-on payments, which requires the 
technology to have FDA approval as a condition, to technologies or 
treatments that may potentially become available in the future or that 
are currently under investigation, and sets an impossible standard to 
achieve that is also inconsistent with CMS' regulations.
    Response: We appreciate the commenters' input. We agree with the 
commenters that new technology add-on payments are intended to 
recognize the cost of new items that are not reflected in the Medicare 
claims data used to set payment rates for MS-DRGs. The costs of 
treatment options that are currently under development and not 
available on the U.S. market or to Medicare beneficiaries would not be 
reflected in the Medicare claims data used to set the payment rates for 
MS-DRGs. Therefore, these treatment options are not an appropriate 
comparator for technologies being considered for approval under the new 
technology add-on payment policy. After considering the additional 
information submitted by the applicant and the input from other 
commenters, we have determined that the BLINCYTOTM 
technology meets the newness criterion.
    As we discussed in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24432), with respect to the cost criterion, the applicant researched 
claims data in the FY 2013 MedPAR file, which contained inpatient 
hospital discharges from October 1, 2012, to September 30, 2013, and 
identified cases reporting ICD-9-CM diagnosis codes 204.00 (Acute 
lymphoid leukemia, without mention of having achieved remission) and 
204.02 (Acute lymphoid leukemia in relapse), which represent patients 
who may potentially be eligible for treatment using the 
BLINCYTOTM technology. The applicant found 2,649 cases 
across 246 MS-DRGs, including MS-DRGs 834 through 836 (Acute Leukemia 
without Major Operating Room Procedure, with MCC, with CC, and without 
CC/MCC, respectively) and MS-DRGs 837 through 839 (Chemotherapy with 
Acute Leukemia as Secondary Diagnosis, with MCC, with CC, and without 
CC/MCC, respectively), which represent approximately 48.1 percent of 
all cases with patients diagnosed with Ph- R/R B-

[[Page 49446]]

cell precursor ALL. The applicant also found that MS-DRG 809 (Major 
Hematological and Immunologic Diagnoses Except Sickle Cell Crisis and 
Coagulations Disorders with CC) and MS-DRG 871 (Septicema or Severe 
Sepsis without Mechanical Ventilation 96+ Hours with CC) contained 
cases that further represent 9.8 percent of all cases representing 
patients diagnosed with Ph- R/R B-cell precursor ALL. The cases 
assigned to the remaining 238 MS-DRGs represent a combined 42.1 percent 
of all cases representing patients diagnosed with Ph- R/R B-cell 
precursor ALL, with no single MS-DRG containing cases representing more 
than 2.0 percent of all cases representing patients diagnosed with Ph- 
R/R B-cell precursor ALL. The applicant also noted that when 
identifying cases that may be eligible for the BLINCYTOTM 
technology, it excluded any claims for discharges paid by Medicare 
Advantage plans, as well as any claims submitted by Medicare PPS-exempt 
cancer hospitals.
    Because the applicant was unable to provide a single estimate of 
the charges that would be avoided by using the BLINCYTOTM 
technology (that is, additional charges incurred during treatment using 
other technologies), the applicant conducted its own cost analysis 
using two scenarios for each group of MS-DRGs. The first scenario 
assumed that 50 percent of the charges for drugs would be eliminated by 
using the BLINCYTOTM technology, and the second scenario 
assumed that 75 percent of the charges for drugs would be eliminated. 
The applicant further conducted sensitivity analyses for each of the 
top eight MS-DRGs containing cases eligible for the 
BLINCYTOTM technology, as well as a sensitivity analysis for 
all of the other MS-DRGs outside of the top eight to which eligible 
cases mapped. The applicant then examined the average case-weighted 
standardized charge per case and the average case-weighted threshold 
amount for all 2,649 cases identified during FY 2013 across all 246 MS-
DRGs, and for 1,533 cases during FY 2013 across the top 8 MS-DRGs to 
demonstrate that the technology meets the cost criterion.
    Under the analysis' first scenario, 50 percent of the charges for 
drugs incurred by using other technologies were removed in order to 
exclude the charges associated with the use of these technologies. The 
applicant determined an average case-weighted threshold amount of 
$60,278 for the 2,649 Ph- R/R B-cell precursor ALL cases in the 246 MS-
DRGs identified using the thresholds in Table 10 in the FY 2015 IPPS/
LTCH PPS final rule. The applicant also determined an average case-
weighted standardized charge per case of $245,006, or $184,728 above 
the average case-weighted threshold amount. For the subset of 1,533 
cases that mapped to the top 8 MS-DRGs, the applicant determined an 
average case-weighted threshold amount of $65,478 using the threshold 
in Table 10 in the FY 2015 IPPS/LTCH PPS final rule. The applicant also 
determined an average case-weighted standardized charge per case of 
$249,354, or $183,876 above the average case-weighted threshold amount. 
Based on the applicant's analyses, we believe that the 
BLINCYTOTM technology meets the cost criterion under the 
first scenario.
    Under the second scenario, the applicant removed 75 percent of 
charges for drugs incurred by using other technologies in order to 
exclude the charges associated with the use of these technologies. The 
applicant determined an average case-weighted threshold amount of 
$60,278 for the 246 MS-DRGs identified using the thresholds from Table 
10 in the FY 2015 IPPS/LTCH PPS final rule. The applicant determined an 
average case-weighted standardized charge per case of $239,321, or 
$179,043 above the average case-weighted threshold amount. For the 
subset of 1,533 cases that mapped to the top 8 MS-DRGs, the applicant 
determined an average case-weighted threshold amount of $65,478 using 
the thresholds from Table 10 in the FY 2015 IPPS/LTCH PPS final rule. 
The applicant determined an average case-weighted standardized charge 
per case of $242,423, or $176,945 above the average case-weighted 
threshold amount. Based on the applicant's analyses, we believe that 
the BLINCYTOTM meets the cost criterion under the second 
scenario.
    In conducting the above analyses, the applicant summarized the 
charges from the claims it identified and standardized the charges 
using an unspecified data source. The applicant then inflated all 
charges from FY 2013 to FY 2015 using the 10.4427 percent inflation 
factor used by CMS to update the FY 2015 outlier threshold. In 
determining the costs for the technology per case, the applicant also 
assumed that the BLINCYTOTM technology would be administered 
for 28 days during each inpatient stay. The applicant also assumed a 
hospital markup of 2.0 percent, and applied this amount to its 
estimated charges per case.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24432 through 
24433), we presented three concerns regarding the applicant's 
methodology and assumptions used in its cost analyses. We stated that 
the applicant did not specify whether it used the FY 2015 IPPS final 
rule impact file or another data source to standardize the charges per 
case for this technology. We also stated our concern that the applicant 
did not provide a basis for the hospital markup assumed when conducting 
its cost analyses. Unless the applicant provided this information, we 
stated that we are unable to determine whether the cost of the 
technology per case has been calculated appropriately. Moreover, we 
stated our concern that including charges representative of a full 28-
day treatment cycle is not appropriate for the purpose of calculating 
the charges associated with the BLINCYTOTM technology in 
order to determine whether the technology meets the cost criterion. 
According to the applicant, clinical trial data demonstrate that there 
are large subsets of patients who require inpatient care for the full 
28-day treatment cycle because of the extreme clinical conditions 
relating to patients diagnosed with Ph- R/R B-cell precursor ALL. 
However, the applicant also conceded that only 25 percent of patients 
enrolled in the U.S. clinical trial were hospitalized for the full 28-
day treatment cycle, and only 38 percent of these patients were over 
the age of 65. This caused us concern regarding whether the methodology 
used by the applicant in its cost analysis is appropriate.
    We invited public comments on if, and how, the 
BLINCYTOTM technology meets the cost criterion, specifically 
in regard to our concerns related to the applicant's methodology.
    Comment: The applicant submitted further information in response to 
CMS' concerns. The applicant indicated that it used the FY 2015 IPPS 
final rule impact file and other instructions included in Technical 
Appendix B of the FY 2016 new technology add-on payment application to 
standardize the charges per case for potentially eligible cases for the 
BLINCYTOTM technology representing patients diagnosed with 
Ph- R/R B-cell precursor ALL under all of the scenarios. The applicant 
also provided more information regarding the basis of its markup values 
used when conducting sensitivity analyses to demonstrate that the 
BLINCYTOTM technology meets the cost criterion. 
Specifically, the applicant stated that it used a markup of 100 
percent, which is a cost-to-charge ratio (CCR) of 0.5, and further 
noted that the charges for the BLINCYTOTM technology would 
be included in the pharmacy charge category on an inpatient hospital's 
claim. The applicant identified the national average cost-to-charge 
ratio of

[[Page 49447]]

0.192 for the pharmacy charge category that was calculated in the FY 
2015 IPPS/LTCH PPS final rule. The applicant stated that this CCR 
indicated that charges in this category were 420 percent higher than 
the costs. However, the applicant did not believe that a 420-percent 
markup was appropriate for the purposes of new technology add-on 
payment MS-DRG case-weighted threshold assessment for the cases 
eligible for the BLINCYTOTM technology. Therefore, the 
applicant indicated that it reverted to the use of a more conservative 
markup of 100 percent in its analyses for eligibility for new 
technology add-on payments to determine the average case-weighted 
standardized charges per case. The applicant noted that, if it were to 
have used the national average markup for the pharmacy charge center of 
420 percent, the charges associated with the BLINCYTOTM 
technology would be significantly higher than that which is indicated 
in its analyses, further exceeding the MS-DRG case-weighted threshold 
amount and demonstrating that the BLINCYTOTM technology 
meets the cost criterion.
    Furthermore, the applicant maintained that including charges 
representative of a full 28-day treatment cycle is appropriate for the 
purpose of calculating the charges associated with the 
BLINCYTOTM technology. However, the applicant indicated that 
it conducted additional sensitivity analyses across both of the 
original scenarios used in the application in which it assumed no 
hospital markup on the charges associated with the 
BLINCYTOTM technology to demonstrate the standardized 
charges per case under different scenarios for the variable number of 
inpatient days; a scenario for standardized charges per case using the 
full 28 inpatient days, standardized charges per case using the mean 
total inpatient days for cycle 1 (21.2 days), and standardized charges 
per case using the mean total inpatient days per cycle across all 
cycles (16.2 days). Based on the results of these sensitivity analyses, 
the applicant continued to believe that the BLINCYTOTM 
technology meets the cost criterion, regardless of the number of 
assumed inpatient days and the associated charge markup. The applicant 
determined that, prior to the inclusion of any charges associated with 
the BLINCYTOTM technology, the case-weighted average 
standardized charge per case under all scenarios exceeds the average 
case-weighted threshold amounts for the respective MS-DRGs, further 
demonstrating that the target cases potentially eligible for the 
BLINCYTOTM technology have significantly higher costs to 
provide the standard of care.
    Response: We appreciate the applicant's submittal of the additional 
information and input. After reviewing the sensitivity analyses 
included in the original application and subsequent analyses included 
in the applicant's public comment, we have determined that the 
BLINCYTOTM technology meets the cost criterion.
    As discussed in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24433 and 24434), with respect to the substantial clinical improvement 
criterion, the applicant asserted that the BLINCYTOTM 
technology represents a substantial clinical improvement for the 
treatment of patients diagnosed with Ph- R/R B-cell precursor ALL 
because it offers a treatment option for patients who may be 
unresponsive to currently available options for treatment, decreases 
the rate of subsequent therapeutic interventions for patients who might 
not have otherwise achieved remission, and reduces mortality. The 
applicant provided data analysis results from four sources to 
demonstrate that the technology represents a substantial clinical 
improvement. These sources include a historical literature search, a 
model-based meta-analysis (Study 118427), a historical comparator data 
(Study 20120310), and a pivotal clinical trial (Study MT 103-211). We 
summarize the results from each of these sources below.
     The historical literature search revealed that superior 
regimens among currently used chemotherapeutic options result in a 
complete remission rate ranging from 18.0 percent to 38.6 percent, a 
median overall survival rate for patients experiencing early first 
relapse (<12 months) at 4.7 months, and a median overall survival rate 
for patients experiencing second or later relapse at 3 months. However, 
there are several limitations to using recent literature as a 
historical comparison for studies relating to patients diagnosed with 
Ph- R/R B-cell precursor ALL, including differences in patient 
populations or study design characteristics across published studies, 
which make it difficult to formulate absolute comparisons with regard 
to data obtained from the BLINCYTOTM pivotal clinical trial. 
Therefore, the applicant conducted a model-based meta analysis (Studies 
118427 and 119384), and a historical comparator study (Study 20120310) 
to account for these differences.
     In the model-based meta analysis (MBMA), the endpoints of 
complete remission (CR), duration of complete remission (DCR), and 
overall survival (OS) rate models were used to predict the efficacy of 
the BLINCYTOTM technology in cases representing patients 
diagnosed with Ph- R/R B-cell precursor ALL relative to patients 
treated using existing therapies. Simulations based on the MBMA for 
adult patients diagnosed with Ph- R/R B-cell precursor ALL projected a 
poor outcome with existing salvage therapies, and a significant 
increase in the proportion of CR, DCR, and OS rates in a population 
with the same summary prognostic factors as those enrolled in the 
BLINCYTOTM study MT103-211. For adult patients diagnosed 
with Ph- R/R B-cell precursor ALL who were treated with existing 
salvage therapies and having the same summary prognostic factors as 
those enrolled in the BLINCYTOTM study MT 103-211, the 
projected proportion of CR was 0.121 (95 percent CI: 0.041 to 0.341), 
the median DCR rate was 4.9 months (95 percent CI: 2.5 to 9.2 months), 
and the median OS rate was 3.9 months (95 percent CI: 3.0 to 4.7 
months). For adult patients diagnosed with Ph- R/R B-cell precursor ALL 
having the same summary prognostic factors as those enrolled in the 
BLINCYTOTM study MT 103-211, treatment using the 
BLINCYTOTM technology when compared with existing salvage 
therapies is expected to have an odds ratio for proportion of CR of 
3.50 (95 percent CI: 1.63 to 8.40), a hazard ratio for DCR of 0.53 (95 
percent CI: 0.30 to 0.89), and a hazard ratio for OS of 0.60 (95 
percent CI: 0.47 to 0.76). The applicant maintained that these results 
suggest that the BLINCYTOTM technology is associated with a 
reduced mortality rate and improved clinical outcomes when compared to 
standard chemotherapy treatment options.
     A historical comparator study was also conducted to obtain 
patient-level data for standard of care treatment options for patients 
experiencing early first relapse, refractory relapse after HSCT, and 
second or greater relapse in the same patient population as targeted in 
the BLINCYTOTM pivotal clinical trial. Study 20120310 was a 
retrospective pooled analysis of historical data available from 1990 to 
2014 on hematological remission and survival rates among patients 
diagnosed with Ph- R/R B-cell precursor ALL who were treated with 
standard of care therapies. The primary study endpoint was CR following 
relapse or salvage treatment; and secondary endpoints included 
estimates of OS rates, RFS rates, and the proportion of patients

[[Page 49448]]

receiving alloHSCT. The weighted median OS rate for 1,112 patients 
based on available data was 3.3 months (95 percent CI: 2.8 to 3.6 
months) and was calculated from the start of the last salvage treatment 
or the first relapse (if start of the last salvage date was 
unavailable) until the time of death. The weighted OS rate at 6 and 12 
months was 30 percent (95 percent CI: 27 percent to 34 percent) and 15 
percent (95 percent CI: 13 percent to 18 percent), respectively. Among 
the patients who achieved CR based on available data (108 patients), 
the weighted median RFS rate was 5.0 months (95 percent CI: 1.2 to 6.6 
months). Among the 808 patients who received alloHSCT after salvage 
therapy based on available data, 18 percent (95 percent CI: 15 percent 
to 21 percent) received alloHSCT following the last line of salvage 
therapy, and among patients who achieved CR, 7 percent (95 percent CI: 
5 percent to 9 percent) received alloHSCT. The applicant maintained 
that these results highlight the poor health care outcomes for patients 
treated with standard chemotherapy and that BLINCYTOTM 
represents a significant improvement.
     BLINCYTOTM study MT 103-211 is a pivotal 
clinical study providing efficacy data for the BLINCYTOTM 
technology used for the treatment of adult patients diagnosed with Ph- 
R/R B-cell precursor ALL. It is a phase 2, single-arm study that 
included a particularly difficult patient population to treat 
consisting of patients diagnosed with--Ph- R/R B-cell precursor ALL who 
experienced either: (1) R/R after remission during 12 months or less of 
the first salvage treatment; (2) R/R after the first salvage treatment; 
or (3) R/R within 12 months after receiving alloHSCT. The primary 
endpoint was the rate of CR plus CRh within the first 2 cycles of 
treatment using the BLINCYTOTM technology. The key secondary 
endpoints include best overall response within 2 cycles of treatment 
using the BLINCYTOTM technology, RFS, time of hematological 
relapse, OS rates, and the proportion of patients eligible for alloHSCT 
who underwent the procedure after receiving treatment using the 
BLINCYTOTM technology. An analysis of data from the pivotal 
trial showed that 40 percent of patients treated with the 
BLINCYTOTM technology who achieved CR or CRh were able to 
proceed to alloHSCT. A secondary analysis from the pivotal study found 
that in patients who achieved CR or CRh and had a minimal residual 
disease assessment during the first 2 cycles, the MRD response rate 
(little or no evidence of disease even at the molecular level) was 82.2 
percent. The applicant asserted that this finding is significant 
because MRD is often a harbinger of relapse and a poor prognostic 
factor for patients diagnosed with Ph- R/R B-cell precursor ALL.
    We stated in the proposed rule our concern that the data provided 
from the clinical studies are not sufficient to demonstrate that the 
BLINCYTOTM technology meets the substantial clinical 
improvement criterion. For example, the BLINCYTOTM study MT 
103-211 was not randomized or blinded, and was comprised of a small 
sample group of 189 patients with a median age of 39 years. We further 
stated our concern that the sample group studied during the clinical 
trial is not appropriate to determine if the technology represents a 
substantial clinical improvement in treatment options available for the 
Medicare patient population. Moreover, we stated our concern that 
meaningful conclusions cannot be drawn from the results of this study 
because of the lack of a control group.
    With regard to the applicant's assertion that the 
BLINCYTOTM technology offers a treatment option for patients 
who may be unresponsive to currently available treatment modalities, 
the applicant specifically focused on how the BLINCYTOTM 
technology represents a treatment option for a patient population in 
which chemotherapy has proven to be unsuccessful, or for whom intensive 
chemotherapy treatment is not possible because of the risks associated 
with exposure to cumulative toxicities. The applicant believed that the 
MBMA, the historical comparator study, and the BLINCYTOTM 
study MT 103-211, which is a pivotal clinical trial sufficiently 
isolate this patient population in order to measure specific health 
care outcomes. We agreed with this assertion. However, we stated our 
concerns with the isolated patient population are that it is comprised 
of and represents a small sample group of patients whose age 
demographic is much younger than the age demographic of eligible 
Medicare beneficiaries.
    The applicant also asserted that the BLINCYTOTM 
technology decreases the rate of subsequent therapeutic interventions 
for patients who might not have otherwise achieved remission. In other 
words, because treatment with the BLINCYTOTM technology 
appears to increase the possibility of some patients achieving 
remission, the applicant maintained that these patients would receive 
fewer therapeutic interventions and become eligible to receive 
alloHSCT. We stated that we believe that it is difficult to determine 
what services and therapeutic interventions these patients would have 
required if they had not achieved remission, and we are not convinced 
that treatment using the BLINCYTOTM technology leads to a 
decrease in additional therapeutic interventions. In the proposed rule, 
we also noted that patients who successfully achieve remission proceed 
to alloHSCT and, therefore, receive a different set of subsequent 
therapeutic interventions.
    With regard to the applicant's assertion that the 
BLINCYTOTM technology reduces mortality rates, we noted that 
the applicant did not directly capture mortality rates as an endpoint 
in the BLINCYTOTM pivotal study (MT 103-211), although 
mortality was analyzed during the other three studies that support the 
new technology add-on payment application. We noted that the data and 
the MBMA's results included with the technology's application used an 
OS odds ratio as a measure of mortality, and were developed from 18 
studies published between January 1995 and December 2012. We stated our 
concern that relying on the results of data using a measure of 
mortality that is contingent upon studies completed in the 1990s 
presents a limitation in regard to the methodology used in the 
applicant's analysis. Advances in overall oncology care over the past 2 
decades may invalidate the patient population represented in these 
studies as a comparison group. Therefore, we stated that we find it 
difficult to attribute the reduced mortality rate and improved clinical 
outcomes revealed by these studies to the efficacy of the 
BLINCYTOTM technology.
    We invited public comments on if, and how, the 
BLINCYTOTM technology meets the substantial clinical 
improvement criterion, specifically in regard to our specified 
concerns.
    Comment: The applicant submitted public comment in response to CMS' 
concerns presented in the proposed rule which asserted that the sample 
size and lack of a control arm in the BLINCYTOTM study MT 
103-211is due to the rarity and fatality of Ph- R/R B-cell precursor 
ALL, which made it difficult to find patients to participate in the 
trials. Nevertheless, the applicant stated that the 
BLINCYTOTM study MT 103-211 is the largest Ph- R/R B-cell 
precursor ALL clinical trial reported to date, and was conducted within 
the limits of its capabilities because larger studies can only be 
conducted by national or international cooperative study groups. The 
applicant also

[[Page 49449]]

maintained that the sample size is representative of the Medicare 
patient population who have been diagnosed with Ph- R/R B-cell 
precursor ALL in relapse in spite of the median age of 39 years, and 
patients who were Medicare beneficiaries due to disability. Moreover, 
the applicant noted that MedPAR data demonstrate that 60 percent of the 
479 inpatient stays for patients diagnosed with Ph- R/R B-cell 
precursor ALL in relapse in FY 2014 were Medicare patients under the 
age of 65. In addition, the applicant pointed out that single-arm 
trials are common in Phase II testing, especially when there is a low-
volume patient population with patients who have very poor prognosis, 
such as the patient population represented in the BLINCYTOTM 
study MT 103-211.
    According to the applicant, the design of the pooled analysis of 
historic data provides a viable measure to determine that the 
BLINCYTOTM technology represents a substantial clinical 
improvement as compared to characteristically matched patients in a 
control arm that were treated with other currently available options 
that may not be appropriate or for which a patient's status prohibits 
eligibility. The applicant also conducted propensity score analyses to 
further investigate and support historical data that was used as a 
comparator and found that the majority of patients in Study 20120310 
were diagnosed and treated in the year 2000 or later. Moreover, the 
applicant believed that the results of the majority of propensity score 
analyses demonstrated an improvement in overall survival (OS) compared 
to standard of care chemotherapy. Further, the applicant defended the 
weighted value of outcome of OS rates in the BLINCYTOTM 
study MT103-211 as a commonly used endpoint in oncology trials, and a 
more clinically meaningful endpoint than mortality rates given the 
rapidly progressive and fatal nature of Ph- R/R B-cell precursor ALL 
diagnoses. The applicant asserted that CMS should not use, as a metric 
to determine if the BLINCYTOTM represents a significant 
clinical improvement, that additional therapeutic interventions 
associated with alloHSCT are available, given that alloHSCT is the only 
way to provide patients with a potential cure for diagnoses of Ph- R/R 
B-cell precursor ALL.
    Response: We appreciate the applicant's submittal of the additional 
information and the explanation of the study design and endpoints in 
light of the small and rare population of patients diagnosed with Ph- 
R/R B-cell precursor ALL. We agree with the applicant that, in view of 
the MedPAR data and the difficulty in finding enough patients to 
include in a trial and a comparator arm, the sample group studied 
during the BLINCYTOTM MT 103-211 pivotal clinical trial 
sufficiently isolates the patient population that the 
BLINCYTOTM technology is intended to treat. We also agree 
with the applicant that, given the challenges of conducting a trial 
with a control arm and the use of historical comparator data, the 
BLINCYTOTM study MT 103-211 is a reasonable study to show 
substantial clinical improvement at this junction. However, if approved 
for new technology add-on payments, we would continue to monitor 
ongoing Phase III studies to determine if the substantial clinical 
improvement demonstrated in the BLINCYTOTM study MT 103-211 
continues to exist.
    Comment: Several commenters believed that the BLINCYTOTM 
technology demonstrates significant clinical improvement over existing 
therapies, and stated that patients who have not responded positively 
to other treatments have been able to benefit from treatment using the 
BLINCYTOTM technology and its use creates a bridge to 
alloHSCT, possibly recognized as a transplant procedure that proves to 
be a potentially curative treatment. While corroborating the 
applicant's statements regarding the design of the 
BLINCYTOTM MT103-211 pivotal trial, one commenter pointed 
out that a response rate of 43 percent complete remission or complete 
remission with partial hematologic recovery (CR/CRh) as achieved in the 
BLINCYTOTM study MT103-211 is impressive using a population 
of patients diagnosed with relapsed Ph- R/R B-cell precursor ALL. Other 
commenters acknowledged that, while the BLINCYTOTM has its 
own set of unique toxicities, such as cytokine release syndrome and 
neurotoxicity, these conditions are severe in only a small minority of 
patients. Another commenter stated that its experience with most 
patients has proven that the use of the BLINCYTOTM 
technology is well tolerated, and its effects positively contrast to 
the severe side effects associated with multi-agent chemotherapy 
salvage regiments that these patients would otherwise experience if 
access to treatment with the BLINCYTOTM technology were not 
available. The commenter further noted that, if patients treated using 
the BLINCYTOTM technology respond positively and it is well-
tolerated, the patient has the option of becoming a candidate for 
alloHSCT. As a result, the commenter pointed out that positive response 
to treatment using the BLINCYTOTM lessens the need for 
patient's excessive exposure to toxic multi-agent chemotherapy, which 
has a lower response rate and the potential to cause complications that 
can become a preventative for these patients from proceeding to 
alloHSCT.
    Response: We appreciate the applicant's additional information and 
the commenters' input. As noted by one commenter, we recognize that a 
43 percent complete or partial remission rate is impressive using a 
small sample size of a population of patients diagnosed with Ph- R/R B-
cell precursor ALL. We also acknowledge that the treatment of patients 
using currently available combination chemotherapy, or the standard 
treatment for this disease, has an equivalent or lower rate of complete 
or partial remission, as well as excessively exposes patients to 
toxicities that may often be severe. Therefore, we believe that the 
BLINCYTOTM technology offers a treatment option for Medicare 
beneficiaries that represents a substantial clinical improvement over 
existing treatment options for patients who are unresponsive to 
currently available treatment options and allows many patients the 
opportunity to access alternative less invasive options, and also 
provides a bridge to alloHSCT, the only potentially curative option for 
patients who have been diagnosed with Ph- R/R B-cell precursor ALL. We 
agree with the commenters that the BLINCYTOTM technology 
represents a substantial clinical improvement over existing 
technologies in a patient population diagnosed with Ph- R/R B-cell 
precursor ALL, or whose only other treatment option for bridging to 
alloHSCT has potentially worse outcomes and excessive exposure to 
toxicities.
    After consideration of the public comments we received, we have 
determined that the BLINCYTOTM technology meets all of the 
criteria for approval of new technology add-on payments. Therefore, we 
are approving new technology add-on payments for the 
BLINCYTOTM technology for FY 2016. Cases involving the 
BLINCYTOTM technology that are eligible for new technology 
add-on payments will be identified by ICD-10-PCS procedure codes 
XW03351 or XW04351.
    Comment: Although the applicant considered the cost and expected 
use based on a variable number of days for treatment in its costs 
analyses, the applicant recommended that CMS consider and use the cost 
of the full 28-day inpatient treatment cycle as the

[[Page 49450]]

expected length of treatment when determining the maximum new 
technology add-on payment for cases involving the BLINCYTOTM 
rather than the average cost of lesser number of days used as other 
variables. The applicant noted that a single treatment cycle using the 
BLINCYTOTM consists of 28 days of continuous infusion, and 
each cycle of treatment is separated by a 2-week treatment-free 
interval. The applicant recommended that the initial dose of 
BLINCYTOTM in the first cycle consist of 9 mcg/day for week 
1 (first 7 days) of treatment and the dose is increased to 28 mcg/day 
starting at week 2 through week 4 of the first cycle. The applicant 
further stated that all subsequent cycles are recommended to be dosed 
at 28 mcg/day throughout the entire 28-day treatment period. As further 
explained by the applicant, for each cycle of therapy, a patient will 
receive one vial (35 mcg) of BLINCYTOTM per day over the 
entire 28-day treatment period.
    According to the applicant, if the maximum new technology add-on 
payment for cases involving the BLINCYTOTM is capped at a 
level less than 50 percent of the estimated costs of the full 28-day 
inpatient treatment cycle, the actual add-on payment would be well 
below the cost of care for some patients. The applicant believed that 
if CMS set the maximum add-on payment amount based on the full 28-day 
treatment cycle, it would avoid the risk of underpaying or overpaying 
for cases involving the BLINCYTOTM or cases not performed in 
the inpatient setting and paid for under the IPPS that have fewer 
inpatient days. The applicant explained that during the treatment cycle 
using the BLINCYTOTM, infusion bags are changed every 24 to 
48 hours and hospitals would only be charged for the number of bags of 
BLINCYTOTM that are used during the inpatient stay under the 
IPPS and when the product is provided while the patient is admitted. 
Therefore, for those patients who have an inpatient length of stay that 
is shorter than the 28-day treatment cycle, the applicant stated that 
the add-on payment would be based only on the costs associated with the 
number of days that the patient received treatment using the 
BLINCYTOTM technology in the inpatient setting. The 
applicant stated that CMS would not be paying the maximum add-on 
payment amount in those cases and pointed out that CMS would only pay 
the maximum add-on payment amount for cases that require the patient to 
remain in the inpatient setting in order to receive treatment using the 
BLINCYTOTM technology for the entire 28-day treatment cycle.
    The applicant stated that it recognized that CMS may be concerned 
that it may not be able to differentiate which charges on claims should 
trigger eligibility for the new technology add-on payment. In addition, 
the applicant referenced section 1886(d)(5)(K)(ii)(III) of the Act, 
which refers to an additional payment in an amount that adequately 
reflects the estimated average cost of such service or technology, and 
CMS's policy of limiting payment to 50 percent of the cost of the 
technology, as codified under Sec.  412.88(a)(2)(i) of our regulations. 
However, the applicant believed that limiting new technology add-on 
payments for cases involving the BLINCYTOTM technology if 
the maximum payment amount is based on an expected average number of 
days of care may inappropriately limit the total payment for the case, 
which the applicant asserted is inconsistent with the statute. The 
applicant further stated that if the new technology maximum add-on 
payment is capped at a level less than 50 percent of the estimated 
costs of case based on the full 28-day cycle, it may negatively impact 
access to care for those patients who require a longer inpatient 
admission. The applicant explained that, in the case of the 
BLINCYTOTM technology, the cost of the technology is likely 
to be a significant driver in the overall cost of the admission and it 
is less likely that other charges unrelated to the use of the 
BLINCYTOTM technology would be the primary driver for an 
increased new technology add-on payment amount. The applicant indicated 
that using a methodology that relies on the average cost of a case that 
is based on a number of treatment days that is less than the 28-day 
treatment cycle to establish the maximum add-on payment amount would 
disadvantage any hospital that treats Medicare beneficiaries who remain 
admitted to the hospital for longer than the mean total inpatient days 
per cycle observed in clinical trials. Therefore, the applicant 
encouraged CMS to set the maximum new technology add-on payment amount 
based on the full 28-day course of therapy.
    Response: We disagree with the applicant that it would be most 
appropriate to determine the maximum new technology add-on payment 
amount for a case based on the recommended estimated 28-day treatment 
cycle. As the applicant acknowledged, in cases where there are 
different dosages administered on different days and different device 
sizes being used, it would be difficult for us to differentiate which 
charges on claims would trigger the case's eligibility for the new 
technology add-on payment. It is historical practice for CMS to make 
the new technology add-on payment based on the average cost of the 
technology and not the maximum. For example, in the FY 2013 IPPS/LTCH 
PPS final rule (77 FR 53358), we approved new technology add-on 
payments for DIFICIDTM based on the average dosage of 6.2 
days rather than the maximum 10 day dosage. In addition, as discussed 
below, based on the clinical trial data, the weighted average of cycle 
1 and 2 treatment length is 17 days, as none of the five cycles 
typically reach 28 days. Just as some cases' length of stay will be 
above the weighted mean and a hospital's costs may exceed the payment 
for these cases, other cases' length of stay may be below the weighted 
mean and hospitals costs would be lower than what the hospital is paid. 
Therefore, because we are not able to differentiate which charges on 
claims would trigger the case's eligibility for the new technology add-
on payment if we based the maximum new technology add-on payment amount 
for a case on a 28-day treatment cycle, we believe that it is 
appropriate to use the average cost and the weighted mean of the first 
two cycles to establish the maximum new technology add-on payment for 
the BLINCYTOTM technology. However, the applicant is welcome 
to submit additional data for FY 2017 that demonstrates changes to the 
weighted mean of the first two cycles.
    In order to establish the maximum new technology add-on payment 
amount for a case involving the BLINCYTOTM technology for FY 
2016, we used the weighted average of the cycle 1 and cycle 2 observed 
treatment length. Specifically, in the Phase II trial, the most recent 
data available, 92 patients received cycle 1 for an average length of 
21.2 days, and 52 patients received cycle 2 for an average length of 
10.2 days. The weighted average of cycle 1 and 2 treatment length is 17 
days. We note that a small number of patients also received 3 to 5 
treatment cycles. However, based on the data provided, these cases do 
not appear to be typical at this point and we excluded them from this 
calculation. We note that, if we include all treatment cycles in this 
calculation, the weighted average number of days of treatment is much 
lower, 10 days. Using the clinical data provided by the applicant, we 
believe that setting the maximum new technology add-on payment amount 
for a case involving the BLINCYTOTM

[[Page 49451]]

technology for FY 2016 based on a 17-day length of treatment cycle is 
representative of historical and current practice. For FY 2107, if new 
data on length of treatment are available, we would consider any such 
data in evaluating the maximum new technology add-on payment amount.
    In the application, the applicant estimated that the average 
Medicare beneficiary would require a dosage of 9mcg/day for the first 7 
days under the first treatment cycle, followed by a dosage of 28mcg/day 
for the duration of the treatment cycle, as well as all days included 
in subsequent cycles. All vials contain 35mcg at a cost of $3,178.57 
per vial. The applicant noted that all vials are single-use. Therefore, 
we have determined that cases involving the use of the 
BLINCYTOTM technology would incur an average cost per case 
of $54,035.69 (1 vial/day x 17 days x $3,178.57/vial). Under 42 CFR 
412.88(a)(2), we limit new technology add-on payments to the lesser of 
50 percent of the average cost of the technology or 50 percent of the 
costs in excess of the MS-DRG payment for the case. As a result, the 
maximum new technology add-on payment amount for a case involving the 
use of the BLINCYTOTM is $27,017.85 for FY 2016.
b. DIAMONDBACK 360 Coronary Orbital Atherectomy System
    Cardiovascular Systems, Inc. submitted an application for new 
technology add-on payments for the DIAMONDBACK 360[supreg] Coronary 
Orbital Atherectomy System (OAS) (DIAMONDBACK[supreg] Coronary OAS) for 
FY 2016. The DIAMONDBACK[supreg] Coronary OAS is a percutaneous orbital 
atherectomy system used to facilitate stent delivery in patients who 
have been diagnosed with coronary artery disease and severely calcified 
coronary artery lesions. The system uses an electrically driven, 
diamond-coated crown to reduce calcified lesions in coronary blood 
vessels. The components of the DIAMONDBACK[supreg] Coronary OAS are: 
(1) The DIAMONBACK 360[supreg] Coronary Orbital Atherectomy Device 
(OAD); (2) the VIPERWIRE Advance Coronary Guide Wire; (3) the 
VIPERSLIDE Lubricant; and (4) the Orbital Atherectomy System Pump. The 
DIAMONBACK 360[supreg] OAD is designed to track exclusively over the 
VIPERWIRE, which, in turn, uses the VIPERSLIDE Lubricant to reduce the 
friction between the drive shaft of the DIAMONBACK 360[supreg] OAD and 
the VIPERWIRE. The Orbital Atherectomy System Pump provides the saline 
pumping mechanism and power to the DIAMONBACK 360[supreg] OAD. All 
DIAMONDBACK[supreg] Coronary OAS devices are single use and provide 
sterile application, except for the pump.
    With respect to the newness criterion, the DIAMONDBACK[supreg] 
Coronary OAS received FDA pre-market approval as a Class III device on 
October 21, 2013. As stated in section II.G.1.a. of the preamble of the 
proposed rule and this final rule, effective October 1, 2015 (FY 2016), 
the ICD-10 coding system will be implemented. In the proposed rule, we 
indicated that the applicant had applied for a new ICD-10-PCS procedure 
code for consideration at the March 18-19, 2015 ICD-10-CM/PCS 
Coordination and Maintenance Committee Meeting. In this final rule, we 
note that the following new ICD-10-PCS procedure codes have been 
established to uniquely identify the procedures involving the 
DIAMONDBACK[supreg] Coronary OAS, effective October 1, 2015: X2C1361 
(Extirpation of matter from coronary artery, one site using orbital 
atherectomy technology, percutaneous approach, new technology group 1); 
X2C1361 (Extirpation of matter from coronary artery, two sites using 
orbital atherectomy technology, percutaneous approach, new technology 
group 1); X2C2361 (Extirpation of matter from coronary artery, three 
sites using orbital atherectomy technology, percutaneous approach, new 
technology group 1); and X2C3361 (Extirpation of matter from coronary 
artery, four or more sites using orbital atherectomy technology, 
percutaneous approach, new technology group 1). More information on 
this request and our approval can be found on the CMS Web site at: 
http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html and the FY 2016 New ICD-10-PCS codes 
can be found at the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/2016-ICD-10-PCS-and-GEMs.html.
    According to the applicant, the DIAMONDBACK[supreg] Coronary OAS is 
the only atherectomy device that uses centrifugal force and orbital 
motion and, therefore, is not represented by the rotational, 
directional, or laser atherectomy device categories (as exemplified by 
Boston Scientific's Rotablator system, the SilverHawk/Covidient 
devices, and the Spectranetics ELCA Coronary Laser, respectively). In 
addition, the applicant asserted that the DIAMONDBACK[supreg] Coronary 
OAS is the first and only device approved for use in the United States 
as a treatment for patients who have been diagnosed with severely 
calcified coronary artery lesions to facilitate stent delivery and 
optimal deployment. Therefore, the applicant believed that the 
DIAMONDBACK[supreg] Coronary OAS meets the newness criterion.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24439), we 
presented our concern that, in addition to patients who have been 
diagnosed with severely calcified coronary artery lesions, the 
applicant also indicated that the DIAMONDBACK[supreg] Coronary OAS may 
be used in the treatment of patients who do not have severely calcified 
coronary artery lesions (for example, patients for whom the degree of 
calcification may not be severe) and that this technology may be 
substantially similar to the rotational, directional, and laser 
atherectomy devices that are already on the U.S. market for the 
treatment of such patients. In the FY 2010 IPPS/RY 2010 LTCH PPS final 
rule (74 FR 43813 through 43814), we established criteria for 
evaluating whether a new technology is substantially similar to an 
existing technology, specifically: (1) Whether a product uses the same 
or a similar mechanism of action to achieve a therapeutic outcome; (2) 
whether a product is assigned to the same or a different MS-DRG; and 
(3) whether the new use of the technology involves the treatment of the 
same or similar type of disease and the same or similar patient 
population. If a technology meets all three of these criteria, it would 
be considered substantially similar to an existing technology and would 
not be considered ``new'' for purposes of new technology add-on 
payments.
    With respect to the first criterion, whether a product uses the 
same or a similar mechanism of action to achieve a therapeutic outcome, 
the applicant maintained that the technology uses a differential 
sanding mechanism of action to remove plaque while potentially 
minimizing damage to the medial layer of the vessel. According to the 
applicant, this mechanism of action is the only one among atherectomy 
devices to use centrifugal force and orbital motion and, therefore, is 
not represented by the rotational, directional, or laser atherectomy 
device categories. We stated in the proposed rule that the applicant 
did not include with its application data to show the effectiveness of 
the orbital mechanism of the DIAMONDBACK[supreg] Coronary OAS compared 
to the effectiveness of the rotational, directional, and laser 
mechanisms of similar devices used in treating patients with calcified 
coronary artery lesions. Therefore, we stated that we could not 
determine if the device's mechanism of action is unique among 
atherectomy devices as the applicant claimed.

[[Page 49452]]

    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant determined that 
coronary atherectomy cases for which the DIAMONDBACK[supreg] Coronary 
OAS technology would be appropriate are assigned to MS-DRG 246 
(Percutaneous Cardiovascular Procedure with Drug-Eluting Stent with MCC 
or 4+ Vessels/Stents); MS-DRG 247 (Percutaneous Cardiovascular 
Procedure with Drug-Eluting Stent without MCC); MS-DRG 248 
(Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent with 
MCC or 4+ Vessels/Stents); MS-DRG 249 (Percutaneous Cardiovascular 
Procedure with Non-Drug-Eluting Stent without MCC); MS-DRG 250 
(Percutaneous Cardiovascular Procedure without Coronary Artery Stent 
with MCC), and MS-DRG 251 (Percutaneous Cardiovascular Procedure 
without Coronary Artery Stent without MCC). In the proposed rule, we 
stated our concern that potential cases involving the 
DIAMONDBACK[supreg] Coronary OAS would be assigned to the same MS-DRGs 
as other cases that use atherectomy devices currently available on the 
U.S. market.
    With respect to the third criterion, whether the new use of the 
technology involves the treatment of the same or similar type of 
disease and the same or similar patient population, the applicant 
maintained in its application that the DIAMONDBACK[supreg] Coronary OAS 
is the first and only device approved for use in the United States as a 
treatment for severely calcified coronary lesions. According to the 
applicant, advances in current stent technology have allowed most 
patients with coronary lesions to be treated effectively with 
relatively favorable long-term outcomes. However, there remain subsets 
of the patient population that are still challenging to treat, 
including patients with severe coronary calcification. According to the 
applicant, the DIAMONDBACK[supreg] Coronary OAS is the only atherectomy 
device currently available to treat this patient population because it 
is the first and only device approved for use in the United States for 
severely calcified coronary lesions. However, in the proposed rule, we 
stated our concern that other devices currently available on the U.S. 
market may not necessarily be contraindicated for use in treating 
patients with severe coronary calcification. Specifically, we were not 
sure if patients with less than severe coronary calcification could be 
appropriately treated using the DIAMONDBACK[supreg] Coronary OAS or 
other atherectomy devices currently available on the U.S. market in 
order to determine if the DIAMONDBACK[supreg] Coronary OAS treats a 
different patient population as the applicant claimed.
    We invited public comments on if, and how, the DIAMONDBACK[supreg] 
Coronary OAS meets the newness criterion.
    Comment: In a public comment, the applicant asserted that the 
DIAMONDBACK[supreg] Coronary OAS is not substantially similar to the 
rotational, laser, or other atherectomy devices currently on the U.S. 
market. Further, with respect to our concern about the device's 
mechanism of action, the applicant stated that the lack of data 
comparing the performance of the DIAMONDBACK[supreg] Coronary OAS to 
other atherectomy devices is primarily a result of the FDA's decision 
to not allow a controlled trial to be conducted that compared the 
efficacy and effects of FDA-approved technologies or devices and the 
efficacy and effects of another treatment that is not FDA-approved. 
Therefore, the applicant stated, a controlled trial was not conducted 
because currently there are no other technologies specifically approved 
for the treatment of severely calcified coronary lesions in the United 
States.
    The applicant also believed the CMS has set a precedent, in the 
past, by approving devices for new technology add-on payments that 
treated conditions that were assigned to the same MS-DRGs as other 
devices, which were reported using the same ICD-9-CM procedure codes. 
The applicant noted as an example the recent approval of the 
Zilver[supreg] PTX Drug-Eluting Peripheral Stent, a drug-eluting stent 
used for the treatment of patients diagnosed with superficial femoral 
arteries, procedures that are assigned to MS-DRGs 252, 253, and 254, 
all of which contain other drug-eluting stents (78 FR 50583). As a 
result, the applicant believed that CMS' concern and position in regard 
to contraindication would have precluded the Zilver[supreg] PTX 
technology from being approved for new technology add-on payments 
because there were other stents available on the U.S. market that also 
were not contraindicated to treat patients diagnosed with superficial 
femoral arteries, as well as other devices approved and available to 
treat patients diagnosed with superficial femoral arteries. The 
applicant noted that the current application for new technology add-on 
payments is for use of the DIAMONDBACK[supreg] Coronary OAS in the 
treatment of patients diagnosed with severely calcified lesions, which 
the applicant believed would be appropriately identified using the new 
ICD-10 codes it requested. Therefore, the applicant believed that 
isolating this patient population by using the ICD-10 codes to identify 
procedures involving the DIAMONDBACK[supreg] Coronary OAS also may 
prevent diffusion of the use of the device into inappropriate patient 
populations.
    Response: We appreciate the applicant's additional input. However, 
we remain concerned that the DIAMONDBACK[supreg] Coronary OAS is 
substantially similar to other atherectomy devices that are currently 
available on the U.S. market. Specifically, we are concerned that the 
orbital mechanism of action performs the same basic motion and has the 
same function as the current standard of care, rotational atherectomy 
devices. Although the applicant stated that FDA did not grant approval 
to conduct a trial comparing approved versus non-approved technologies, 
we note that the FDA does not prohibit manufacturers from performing 
other trials outside of the trials included under its approval process. 
Moreover, we are concerned that the patient population of cases that 
may be eligible for treatment using the DIAMONDBACK[supreg] Coronary 
OAS also currently has access to other atherectomy devices and similar 
technologies that are also used in the treatment of similar conditions. 
We acknowledge that the Zilver[supreg] PTX technology was approved for 
new technology add-on payments and that procedures involving this 
technology are assigned to MS-DRGs that contain other procedures 
involving stents. Also, we acknowledge that the Zilver[supreg] PTX was 
approved for new technology add-on payments when it had been assigned 
to the same MS-DRGs as other stents, and that the Zilver[supreg] PTX 
potentially could have been used to treat a similar or same patient 
population as other technologies used in procedures involving stents. 
However, the Zilver[supreg] PTX was also the first drug-eluting stent 
technology at the time we approved the application for new technology 
add-on payments and, therefore, its new mechanism of action set the 
basis and precedent for new technology add-on payment approval of 
similar technologies. Absent this, we would have had the same concerns 
about contraindication for the Zilver[supreg] PTX technology as we 
currently have for the DIAMONDBACK[supreg] Coronary OAS. After 
consideration of the public comments we received, we remain concerned 
if the DIAMONDBACK[supreg] Coronary OAS meets the newness criteria.
    With respect to the cost criterion, the applicant determined that 
cases representing patients who have been treated with transluminal 
coronary

[[Page 49453]]

atherectomy for which the DIAMONDBACK[supreg] Coronary OAS technology 
is appropriate map to MS-DRGs 246 through 251 as noted earlier in this 
section. The applicant searched the claims data in the FY 2013 MedPAR 
file for cases assigned to these six MS-DRGs (which contained claims 
for inpatient hospital discharges from October 1, 2012 to September 30, 
2013) and identified 5,443 claims for cases reporting ICD-9-CM 
procedure code 17.55. The applicant indicated that it further examined 
the claims data for the cases that also reported ICD-9-CM diagnosis 
code 414.4, and identified 250 claims for cases with a diagnosis of 
calcified coronary lesion. The applicant stated that it applied the 
standard trims used by CMS when selecting cases for IPPS rate 
calibration. Therefore, it included cases from IPPS hospitals, 
including hospitals located in Maryland, and excluded cases paid by 
Medicare Advantage plans, statistical outlier cases, and cases from 
hospitals that did not submit charges in a sufficiently broad range of 
revenue centers.
    The applicant reported that it conducted 16 sensitivity analyses 
based on four areas of uncertainty: whether to include all coronary 
atherectomy cases in the analysis or only those cases that reported 
calcified coronary artery lesions; whether to consider a lower value or 
higher value as the acquisition cost of a typical atherectomy catheter; 
whether to use the full cost of the DIAMONDBACK[supreg] Coronary OAS 
catheter and materials or only the cost of the catheter alone; and 
whether to include or exclude a factor to inflate costs to FY 2015 
costs. Based on the result of the sensitivity analyses with all 16 
combinations of the values that the applicant performed, the applicant 
reported that it determined that the average case-weighted standardized 
charge per case for the DIAMONDBACK[supreg] Coronary OAS would exceed 
the average case-weighted threshold amounts for MS-DRGs 246 through 251 
in Table 10 of the FY 2015 IPPS/LTCH PPS final rule. According to the 
applicant, the average case-weighted standardized charge per case using 
the DIAMONDBACK[supreg] Coronary OAS device exceeds the average case-
weighted threshold amounts for MS-DRGs 246 through 251 in Table 10 by 
approximately $6,000 to $15,000, depending on the results determined by 
using the combination of values of the four areas of uncertainty. As 
described below, the applicant believed that using the scenario that 
produced the lowest difference between the average case-weighted 
standardized charge per case determined by the applicant's analyses and 
the average case-weighted threshold amounts for MS-DRGs 246 through 251 
from Table 10 in the FY 2015 IPPS/LTCH PPS final rule still exceeded 
the Table 10 threshold amounts by $5,803.
    Using the scenario that produced the lowest difference between the 
average case-weighted standardized charge per case determined by the 
applicant and the average case-weighted threshold amount in the FY 2015 
IPPS/LTCH PPS final rule Table 10, the applicant included all cases 
reporting coronary atherectomy (specifically, the 5,443 cases reported 
with ICD-9-CM procedure code 17.55) in this analysis. The applicant 
removed the costs of the other specific technologies used during these 
procedures; that is, the applicant removed the higher of the two 
standard catheter costs, and added the full cost of the 
DIAMONDBACK[supreg] Coronary OAS catheter alone. To estimate the cost 
for the new technology, the applicant divided the projected cost per 
patient by the national average CCR for supplies (0.292) included in 
the FY 2015 IPPS/LTCH PPS final rule. This resulted in an average case-
weighted average standardized charge per case of $86,080. The applicant 
stated that it did not apply an inflation factor to convert the FY 2013 
costs to FY 2015 costs for this analysis. However, in other analyses, 
the applicant used the 2-year inflation factor of 10.44 percent taken 
from the FY 2015 IPPS/LTCH PPS final rule (79 FR 50379), which was the 
final inflation factor used in the CMS outlier threshold calculation 
for the applicable fiscal year. The applicant then determined that its 
average case-weighted standardized charge per case exceeded the average 
case-weighted threshold amounts for MS-DRGs 246 through 251 in Table 10 
of the FY 2015 IPPS/LTCH PPS final rule by $5,803. The applicant 
maintained that all of the results of the analyses using this 
methodology that were included in its application likewise exceeded the 
Table 10 threshold amounts for these MS-DRGs and, therefore, 
demonstrated that the DIAMONDBACK[supreg] Coronary OAS meets the cost 
criterion.
    Using the scenario that produced the lowest difference between its 
average case-weighted standardized charge per case and the average 
case-weighted threshold amounts for MS-DRGs 246 through 251 from the FY 
2015 Table 10 for the analysis of the subgroup of cases representing 
patients who have severely calcified coronary artery lesions, the 
applicant reported that it included all of the cases that report 
coronary atherectomy that also reported diagnosis of calcified coronary 
lesions (250 cases reporting ICD-9-CM procedure code 414.4). As in the 
previous scenario, the applicant removed costs of the other specific 
technologies used during these other procedures; that is, the applicant 
removed the higher of the two standard catheter costs, and added the 
full cost of the DIAMONDBACK[supreg] Coronary OAS catheter alone. To 
estimate the costs for the new technology, the applicant divided the 
projected cost per patient by the national average CCR for supplies 
(0.292) in the FY 2015 IPPS/LTCH PPS final rule. This resulted in an 
average case-weighted standardized charge per case of $86,779. The 
applicant did not apply an inflation factor to convert the FY 2013 
costs to FY 2015 costs for this analysis. The applicant then determined 
that the average case-weighted standardized charge per case exceeded 
the FY 2015 Table 10 threshold amount of $80,807 by $5,972. The 
applicant maintained that all of the results of the analyses using this 
methodology that were included in its application likewise exceeded the 
Table 10 threshold amounts for these MS-DRGs and, therefore, 
demonstrated that the DIAMONDBACK[supreg] Coronary OAS meets the cost 
criterion.
    In the proposed rule, we questioned some of the assumptions 
underlying the four areas of uncertainty that were the basis for the 
applicant's sensitivity analyses. We stated that we would like to know 
the basis of the higher value that the applicant considered to be a 
possible acquisition cost of a typical atherectomy catheter. We also 
stated our concern that the applicant did not provide a basis for 
determining the two values it used to remove the costs associated with 
the other specific technologies that may have been used during the 
cases included in the analysis. We invited public comments on if, and 
how, the DIAMONDBACK[supreg] Coronary OAS meets the cost criterion.
    Comment: The applicant (the manufacturer) addressed CMS' concerns 
that were presented in the proposed rule by conducting another cost 
analysis. The applicant reported that it determined the cost of the 
existing technology by utilizing data from the Millennium Research 
Group, which publishes an annual report in the coronary market. The 
applicant referenced the average sales price in 2015 for rotational 
atherectomy, which is the standard device currently used in coronary 
atherectomy procedures. The applicant stated that the additional 
analysis included the cost for associated supplies and the average 
sales price of the rotational atherectomy catheter. The applicant 
maintained that, in both cost

[[Page 49454]]

analyses, the DIAMONDBACK[supreg] Coronary OAS exceeded the cost 
threshold and, therefore, meets the cost criterion.
    Response: We appreciate the applicant's response and subsequent 
analyses, which we believe respond to the concerns we raised in the 
proposed rule.
    After consideration of the applicant's response, we have determined 
that the DIAMONDBACK[supreg] Coronary OAS meets the cost criterion.
    As discussed in the proposed rule, in regard to substantial 
clinical improvement, the applicant maintained that the 
DIAMONDBACK[supreg] Coronary OAS offers a treatment option for a 
patient population that has been diagnosed with severely calcified 
coronary arteries that are ineligible for currently available 
treatments and results in improved clinical outcomes for patients who 
have been diagnosed with complex coronary artery disease related to 
severely calcified coronary arteries. The applicant also stated that 
the DIAMONDBACK[supreg] Coronary OAS device significantly improves 
clinical outcomes for this patient population when compared to 
currently available treatment options, including reduced mortality, a 
reduced rate of device-related complications, a decreased rate of 
subsequent diagnostic or therapeutic interventions (for example, due to 
reduced rate of recurrence of the disease process), a decreased number 
of future hospitalizations or physician visits, more rapid beneficial 
resolution of the disease process treatment because of the use of the 
device, decreased pain, bleeding, or other quantifiable symptoms, and 
reduced recovery time.
    The applicant included data from its ORBIT II study to demonstrate 
that the technology represents substantial clinical improvement over 
currently available treatment options, including improvement in 
mortality rates, major adverse cardiac event (MACE) rates, 
revascularization rates, and cost savings. According to the applicant, 
its ORBIT II study was a pivotal clinical study to evaluate the safety 
and effectiveness of the DIAMONDBACK[supreg] Coronary OAS in treating a 
subset of patients who have severely calcified coronary artery lesions. 
The applicant explained that the ORBIT II study was a prospective, 
multicenter, non-blinded clinical trial that enrolled 443 consecutive 
patients who have been diagnosed with severely calcified coronary 
lesions at 49 U.S. sites from May 25, 2010 to November 26, 2012, in 
which the DIAMONDBACK[supreg] Coronary OAS was used to prepare patients 
who had severely calcified coronary lesions for stent placement. 
According to the applicant, the DIAMONDBACK[supreg] Coronary OAS 
produced clinical outcomes that exceeded its ORBIT II study's two 
primary safety and efficacy endpoints within a patient population. The 
primary safety endpoint was 89.6 percent freedom from 30-day MACE, 
compared with the performance goal of 83 percent. The primary efficacy 
endpoint (residual stenosis <50 percent post-stent without in-hospital 
MACE) was 88.9 percent, compared with the performance goal of 82 
percent. The applicant stated that, during the trial, stent delivery 
after use of the DIAMONDBACK[supreg] Coronary OAS occurred successfully 
in 97.7 percent of cases with <50 percent residual stenosis in 98.6 
percent of the patients in the study. The applicant further stated that 
low rates of in-hospital Q-wave MI, cardiac death, and target vessel 
revascularization also were reported. The applicant believed that the 
results of its ORBIT II study met both the primary safety and efficacy 
endpoints by significant margins and not only helped to facilitate 
stent delivery, but also improved both acute care and 30-day clinical 
outcomes compared to historical controls.
    The applicant also compared the results of its ORBIT II study with 
historical study data that measured the performance of other coronary 
atherectomy devices used in the treatment of patients who have moderate 
to severely calcified coronary lesions. According to the applicant, the 
death and revascularization rates reported in the ORBIT II study were 
much lower than those rates reported in the literature for patients who 
had severely calcified coronary lesions. For example, inpatient cardiac 
death rates were reported on one reported study in the literature 
(Mosseri, et al.) as 1.6 percent and in another reported study (Abdel-
Wahab, et al.) as 1.7 percent, while another study report (Clavijo, et 
al.) reported death at 30 days as 2.6 percent and 1.5 percent for RA + 
DES and DES, respectively.9 10 11 The applicant maintained 
that, compared to these historical study data, the data results of the 
ORBIT II study demonstrated much lower cardiac death rates of 0.2 
percent in-hospital and 0.2 percent at 30 days. The applicant further 
reported that the results of its ORBIT II study showed lower mortality 
rates at 9 months and 1 year (3 percent and 4.4 percent, respectively) 
compared to previously reported rates (5.0 percent and 5.85 percent at 
9 months and 6.3 percent at 1 year). The study report by Mosseri, et 
al. also reported a 1.6 percent in-hospital target lesion 
revascularization rate (TLR) in a patient population with more 
superficial calcification,\12\ whereas the study report by Clavijo, et 
al. reported a 1.3 percent 30-day TLR rate for the RA + DES group.\13\ 
In contrast, the applicant reported that the results of the ORBIT II 
study showed a lower TLR rate of 0.7 percent (both in-hospital and 30-
day), even though more patients who had severely calcified coronary 
lesions were included in the study, and the patients were older and had 
more comorbidities. The applicant stated that, at 1-year, the results 
of the ORBIT II study showed a higher freedom from TVR/TLR rate (94.1 
percent) compared to previously reported rates (81.7 percent to 91.3 
percent), even though patients who had more severely calcified coronary 
lesions were included in the ORBIT II study. According to the 
applicant, the MACE rate of 16.4 percent indicated in the results of 
the ORBIT II study was lower than the rate of the ROTAXUS (24.4 
percent) and ACUITY/HORIZONS (19.9 percent) trials despite the use of a 
less stringent standard of severe calcification in the latter 
studies.14 15 Further, the

[[Page 49455]]

applicant reported that patients in the ORBIT II study experienced a 
lower rate of device-related complications (such as dissection, abrupt 
closure, and perforation) compared to rates in the historical studies. 
Overall, the applicant asserted that a comparison of data from the 
ORBIT II study and the data from historical studies demonstrates that 
patients in the ORBIT II study had more severe calcium coronary lesions 
and potentially were more difficult to treat, although they experienced 
better outcomes.
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    \9\ Mosseri M, Satler LF, Pichard AD, Waksman R. Impact of 
vessel calcification on outcomes after coronary stenting. Cardiovasc 
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    \10\ Abdel-Wahab M, Richardt G, Joachim Buttner H, et al. High-
speed rotational atherectomy before paclitaxel-eluting stent 
implantation in complex calcified coronary lesions: The randomized 
ROTAXUS (Rotational Atherectomy Prior to Taxus Stent Treatment for 
Complex Native Coronary Artery Disease) trial. JACC Cardiovasc 
Interv. 2013;6(1):10-19.
    \11\ Clavijo LC, Steinberg DH, Torguson R, et al. Sirolimus-
eluting stents and calcified coronary lesions: clinical outcomes of 
patients treated with and without rotational atherectomy. Catheter 
Cardiovasc Interv Off J Soc Card Angiogr Interv. 2006;68(6):873-878.
    \12\ Mosseri M, Satler LF, Pichard AD, Waksman R. Impact of 
vessel calcification on outcomes after coronary stenting. Cardiovasc 
Revascularization Med Mol Interv. 2005;6(4):147-153.
    \13\ Clavijo LC, Steinberg DH, Torguson R, et al. Sirolimus-
eluting stents and calcified coronary lesions: clinical outcomes of 
patients treated with and without rotational atherectomy. Catheter 
Cardiovasc Interv Off J Soc Card Angiogr Interv. 2006;68(6):873-878.
    \14\ Genereux P, Madhavan MV, Mintz GS, et al. Ischemic outcomes 
after coronary intervention of calcified vessels in acute coronary 
syndromes. Pooled analysis from the HORIZONS-AMI (Harmonizing 
Outcomes With Revascularization and Stents in Acute Myocardial 
Infarction) and ACUITY (Acute Catheterization and Urgent 
Intervention Triage Strategy) TRIALS. J Am Coll Cardiol. 
2014;63(18):1845-1854.
    \15\ Abdel-Wahab M, Richardt G, Joachim Buttner H, et al. High-
speed rotational atherectomy before paclitaxel-eluting stent 
implantation in complex calcified coronary lesions: The randomized 
ROTAXUS (Rotational Atherectomy Prior to Taxus Stent Treatment for 
Complex Native Coronary Artery Disease) trial. JACC Cardiovasc 
Interv. 2013;6(1):10-19.
---------------------------------------------------------------------------

    In the proposed rule, we stated our concern that the ORBIT II study 
conducted by the applicant lacked a control arm. The applicant asserted 
in its original application that, although other FDA-approved coronary 
atherectomy products are available, none of them are indicated for the 
treatment of patients who have severely calcified coronary arteries 
and, therefore, could not be used as a control. The applicant believed 
that it accounted for this study limitation by comparing the results of 
the ORBIT II study to historical control subjects documented in 
published reports. However, we stated that we continue to be concerned 
that meaningful conclusions cannot be drawn from a study that did not 
include a comparator group. Moreover, we questioned the reliability of 
comparing data from the ORBIT II study to historical study data because 
different definitions of severe calcification used in each study can 
make absolute comparisons difficult and/or invalid.
    We invited public comments on if, and how, DIAMONDBACK[supreg] 
Coronary OAS meets the substantial clinical improvement criterion.
    Comment: Several commenters believed that the DIAMONDBACK[supreg] 
Coronary OAS meets the substantial clinical improvement criterion and, 
therefore, recommended that CMS approve the application for new 
technology add-on payments for FY 2016. In particular, the applicant 
stated in its public comment that the single-arm ORBIT II trial and 
historical comparator data are sufficient to demonstrate substantial 
clinical improvement because the results show that the 
DIAMONDBACK[supreg] Coronary OAS performed better than other 
atherectomy devices on key safety and efficacy endpoints despite a more 
rigorous definition of severe calcification in the ORBIT II trial. The 
applicant also emphasized that the ORBIT II trial is one of the few 
FDA-approved single-arm coronary PCI trials in the last two decades, 
and that the lack of a comparator group does not negate the logic and 
scientific validity of the trial. Other commenters believed that there 
is adequate clinical and economic evidence to justify an approval of 
new technology add-on payments for the DIAMONDBACK[supreg] Coronary OAS 
due to the high-risk and resource intensive treatment that is typical 
for a patient diagnosed with severely calcified coronary lesions.
    Response: We appreciate the commenters' input. However, we do not 
believe the safety and efficacy endpoints used in the ORBIT II trial 
represent a substantial clinical improvement over existing atherectomy 
devices available and accessible to the Medicare population. While we 
recognize that the DIAMONDBACK[supreg] Coronary OAS has met the FDA's 
standards for safety and effectiveness, the new technology add-on 
payment policy requires that the technology demonstrate a substantial 
clinical improvement, which is not inherent in FDA's regulatory 
process. Moreover, while we agree with the commenters that patients 
with severely calcified coronary lesions require more resource 
intensive treatment and are at higher risk of responding poorly to 
currently available treatments, we also are not convinced that this 
patient population is not currently being treated with the use of a 
rotational, directional, or laser atherectomy device that achieves the 
same or similar therapeutic outcomes as the DIAMONDBACK[supreg] 
Coronary OAS. Because the applicant did not include data to compare the 
performance of currently available atherectomy devices used in treating 
patients diagnosed with severely calcified coronary lesions, we remain 
unable to make a determination as to whether use of the 
DIAMONDBACK[supreg] Coronary OAS results in a substantial clinical 
improvement over existing and currently available treatment options for 
the Medicare population.
    After consideration of the public comments we received, we have 
determined that the DIAMONDBACK[supreg] Coronary OAS does not meet the 
criteria for approval of a new technology add-on payment. We remain 
concerned as to whether the DIAMONDBACK[supreg] Coronary OAS meets the 
newness criteria. Furthermore, we do not believe that the device 
represents a substantial clinical improvement over existing and 
currently available treatment options. Therefore, we are not approving 
new technology add-on payments for this technology for FY 2016.
c. CRESEMBA[supreg] (Isavuconazonium)
    Astellas Pharma US, Inc. (Astellas) submitted an application for 
new technology add-on payments for CRESEMBA[supreg] (isavuconazonium) 
for FY 2016. CRESEMBA[supreg] is an intravenous and oral broad-spectrum 
antifungal used for the treatment of adults who have severe invasive 
and life-threatening fungal infections, including invasive 
aspergillosis and mucormycosis (zygomycosis).
    CRESEMBA[supreg] received FDA approval on March 6, 2015. The FDA 
indication for the use of this product is for the treatment of adults 
who have been diagnosed with invasive aspergillosis and mucormycosis. 
Isavuconazonium has two formulations: an intravenous (IV) solution and 
an oral capsule. The IV formulation of CRESEMBA[supreg] is administered 
at 200 mg while the oral formulation is administered at 100 mg. Dosing 
is not weight-based. According to the applicant, treatment of patients 
who have been diagnosed with these types of infection starts with up to 
3 days of IV therapy in the inpatient hospital setting followed by 
daily oral therapy administered for the remainder of the inpatient stay 
and also the duration of treatment period, which is approximately 13.4 
days.
    As stated in section II.G.1.a. of the preamble of the proposed rule 
and this final rule, effective October 1, 2015 (FY 2016), the ICD-10 
coding system will be implemented. In the proposed rule, we noted that 
the applicant had applied for a new ICD-10-PCS procedure code for 
consideration at the March 18-19, 2015 ICD10-CM/PCS Coordination and 
Maintenance Committee Meeting. In this final rule, we note that the 
following two new ICD-10-PCS procedure codes have been established to 
uniquely identify procedures involving CRESEMBA[supreg]: XW03341 
(Introduction of isavuconazole anti-infective into peripheral vein, 
percutaneous approach, new technology group 1); and XW04331 
(Introduction of isavuconazole anti-infective into central vein, 
percutaneous approach, new technology group 1). More information on 
this request and the approval can be found on the CMS Web site at: 
http://www.cms.gov/Medicare/Coding/ICD10/2016-ICD-10-PCS-and-GEMs.html.
    The applicant maintained that CRESEMBA[supreg] meets the newness 
criterion based on the March 6, 2015 FDA approval of the technology.
    CRESEMBA[supreg] is part of the category of drugs known as azole 
antifungal drugs that inhibit the enzyme lanosterol 14 [alpha]-
demethylase. Inhibiting this enzyme disrupts the process of converting 
lanosterol to ergosterol and, therefore, depletes the level of 
ergosterol in the fungal membrane and inhibits fungal growth. Azole 
antifungal drugs are used to treat patients with fungal infections such 
as aspergillosis, and other azole

[[Page 49456]]

antifungal drugs also used for the treatment of these patients include 
voriconazole, posaconazole, and itroconazole. The CDC Web site at 
http://www.cdc.gov/fungal/diseases/aspergillosis/treatment.html states 
that voriconazole is used for the treatment of patients with invasive 
aspergillosis, but amphotericin B (Amp B) as well as other antifungal 
drugs can be used if patients cannot take voriconazole or the infection 
is not responsive to voriconazole. Amphotericin B is the 
first[hyphen]line of therapy and the only FDA[hyphen]approved treatment 
of patients diagnosed with mucormycosis. Amphotericin B binds with 
ergosterol, a component of fungal cell membranes, and forms a 
transmembrane channel that leads to membrane leakage, which is the 
primary effect leading to fungal cell death. The third class of 
antifungal drugs is echinocandins; examples in this group are 
caspofungin, micafungin, and anidulafungin. Echinocandins 
noncompetitively inhibit beta-1, 3-D-glucan synthase enzyme complex in 
susceptible fungi to disturb fungal cell glucan synthesis. Beta-glucan 
destruction prevents resistance against osmotic forces, which leads to 
cell lysis (http://www.cdc.gov).
    According to the applicant, echinocandins are effective against 
aspergillosis. Voriconazole is the recommended treatment for patients 
diagnosed with invasive aspergillosis. However, amphotericin B and 
other antifungal drugs may also be used if voriconazole cannot be 
administered because a patient is suffering from porphyria (a rare 
inherited blood disorder) or has had an allergic reaction to the drug 
or the infection is not responding to treatment using voriconazole. In 
addition, according to the applicant, the efficacy of azole antifungal 
drugs, such as posaconazole, in treating mucurmycosis is uncertain but 
has been described in certain situations.
    The applicant stated that it is challenging to clinically 
distinguish the type of antifungal infection a patient may be 
experiencing. Therefore, the typical treatment of patients exhibiting 
symptoms of an invasive fungal infection includes both amphotericin B 
and voriconazole. According to the applicant, for the Medicare 
population, both drugs are usually administered in combination because 
it is difficult and time-consuming to delineate the specific type of 
fungal infections. The applicant noted that these patients are often 
severely ill and immediate treatment of these symptoms is essential to 
the effective management of their condition.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24442), we stated 
we were concerned that CRESEMBA[supreg] may not meet the newness 
criterion because it may be substantially similar to other currently 
approved antifungal drugs. We refer readers to the FY 2010 LTCH PPS 
final rule (74 FR 43813 through 43814) for a discussion of our 
established criteria for evaluating whether a new technology is 
substantial similar to an existing technology, specifically: (1) 
Whether a product uses the same or a similar mechanism of action to 
achieve a therapeutic outcome; (2) whether a product is assigned to the 
same or a different MS-DRG; and (3) whether the new use of the 
technology involves the treatment of the same or similar type of 
disease and the same or similar patient population. If a technology 
meets all three of these criteria, it would be considered substantially 
similar to an existing technology and would not be considered ``new'' 
for purposes of new technology add-on payments.
    In evaluating this technology for substantial similarity, in the 
proposed rule, we stated that we believe that CRESEMBA[supreg] has a 
similar mechanism of action as the other groups of antifungal drugs 
available for the treatment of patients diagnosed with serious fungal 
infections, such as invasive aspergillosis and mucormycosis. As 
previously noted, voraconazole and itroconazole also are commonly used 
azole antifungals used to treat patients diagnosed with aspergillosis. 
The applicant maintained that the availability of the drug in an oral 
formulation constitutes a different mechanism of action from the 
current azoles. In the proposed rule, we stated that we disagreed with 
the applicant's assertion because we believe a different method of 
administration does not necessarily equate to a different mechanism of 
action. Although the applicant maintained that this technology is not 
substantially similar because it is administered orally, the applicant 
did not describe why it believed a different method of administration 
constitutes a different mechanism of action. Because CRESEMBA[supreg] 
is part of the category of drugs currently available known as azole 
antifungal drugs that inhibit the enzyme lanosterol 14 [alpha]-
demethylase, it appears that the mechanism of action is not different, 
but that merely the method of administration differs.
    With respect to the second criterion for determining substantial 
similarity, we stated in the proposed rule that we believe that the use 
of CRESEMBA[supreg] is inclusive of the current treatment options 
available to Medicare beneficiaries and is also currently described 
(although not specifically) by established procedure codes that 
identify similar technologies, specifically other antifungal drugs that 
also are used in the treatment of patients diagnosed with similar 
fungal infections. The use of antifungal drugs is considered a 
nonoperating room procedure, which does not impact the MS-DRG 
assignment of a patient case. Therefore, the use of CRESEMBA[supreg] 
would not impact the MS-DRG assignment of a particular case. 
Furthermore, the FDA approval for the technology is indicated for use 
in the treatment of the same or similar type of disease and the same or 
similar patient population. According to the applicant, 
CRESEMBA[supreg] is used in conjugation with other treatments, and this 
is reflected in its analysis for the new technology cost criterion. In 
the proposed rule, we stated our concern that this technology is 
administered with the other currently available treatments and, 
therefore, cannot be considered an alternative treatment option. 
Therefore, we stated that we believe that CRESEMBA[supreg] may be 
considered substantially similar to other available treatments and 
could not be considered to be ``new'' for purposes of new technology 
add-on payments.
    We invited public comments on if, and how, CRESEMBA[supreg] meets 
the newness criterion and our concerns regarding how it is similar to 
other treatments for serious fungal infections.
    Comment: One commenter (the applicant and manufacturer of 
CRESEMBA[supreg]) submitted comments to further support its assertion 
and address our concerns that CRESEMBA[supreg] meets the newness 
criterion. The applicant stated that although the active moiety 
contained in CRESEMBA[supreg] has a similar mechanism of action as the 
other groups of antifungal drugs available for the treatment of 
patients diagnosed with serious fungal infections, such as invasive 
aspergillosis and mucuromycosis, CRESEMBA[supreg] contains a water 
soluble prodrug specifically developed to facilitate the systemic 
delivery of the active moiety. The applicant pointed out that the 
technology allows intravenous administration without the need for 
nephrotoxic excipients, such as cyclodextrins, that are present in 
other antifungals, which are restricted from use in the treatment of 
patients diagnosed with renal impairment.\16\ The applicant further 
noted that CRESEMBA[supreg] administered

[[Page 49457]]

intravenously can be used in patients diagnosed with renal impairment, 
and dose adjustments are not necessary or recommended for the treatment 
of elderly patients or patients diagnosed with renal impairments.
---------------------------------------------------------------------------

    \16\ Ader et al, 2009; Girmenia, 2009.
---------------------------------------------------------------------------

    The applicant further stated that other existing treatments for 
invasive mold infections have limitations due either to the potential 
for toxicity, or restrictions on its use in the treatment of certain 
at-risk patient populations. The commenter noted that, although the 
liposomal preparation of amphotericin B has reduced the potential for 
nephrotoxicity, it does not eliminate it completely. According to the 
applicant, amphotericin B is nephrotoxic when administered with 
calcineurin inhibitors and also requires intravenous administration, 
which may complicate long-term administration. The applicant reiterated 
that cyclodextrins used in the intravenous preparation of posaconazole, 
itraconazole and voriconazole exhibit additional nephrotoxicity and, 
therefore, its uses in the treatment of patients diagnosed with renal 
impairment are restricted.\17\ Therefore, the applicant believed that 
there is an urgent need for potent and safe antifungal agents that can 
be administered both orally and intravenously without increased 
potential for nephrotoxicity.
---------------------------------------------------------------------------

    \17\ Ibid.
---------------------------------------------------------------------------

    The applicant also clarified that CRESEMBA[supreg] does not need to 
be administered in conjugation with other currently available 
treatments. The applicant stated that the results of its phase III 
studies demonstrated the efficacy of the CRESEMBA[supreg] technology as 
a singular treatment for invasive mold infections. In addition, the 
applicant stated that it recognized that CRESEMBA[supreg] has some 
attributes that are similar to other azoles antifungals. However, it 
believed that CRESEMBA[supreg] offers a needed alternative therapy for 
the treatment of patients diagnosed with invasive aspergillosis (IA) 
and mucuromycosis (IM), given that currently approved therapies for the 
treatment of IA and IM are limited by: (1) Pharmacokinetic challenges 
and toxicity, as noted with voriconazole; and (2) sub[hyphen]optimal 
efficacy in high[hyphen]risk patients, as noted with amphotericin B. 
The applicant stated that these two characteristics make these 
therapies often unusable in the treatment of patients most likely to 
later suffer from a diagnosis of IA and IM (for example, 
immunocompromised patients), and mortality rates remain high for both 
diseases. The applicant further stated that patients diagnosed with 
progressive IA or who are intolerant of voriconazole have few viable 
options, and there are currently no other approved primary treatments 
for patients diagnosed with IM except amphotericin B. The applicant 
believed that CRESEMBA[supreg] is an alternative treatment option 
because patients who cannot tolerate other existing therapies can be 
treated with CRESEMBA[supreg]; otherwise, no other treatment option 
would be available.
    The applicant asserted that data from studies of both the oral and 
IV formulations have shown that CRESEMBA[supreg] has a more predictable 
pharmacokinetic/pharmacodynamic profile compared to voriconazole. The 
applicant further indicated that CRESEMBA[supreg] has moderate 
pharmacokinetic variability, which limits the risk of 
sub[hyphen]therapeutic or supra[hyphen]therapeutic exposure, while the 
variability of voriconazole pharmacokinetics is high. According to the 
applicant, the pharmacokinetics of CRESEMBA[supreg] include: Linear and 
dose[hyphen]proportional effects following both oral and IV 
administration; a long half[hyphen]life enabling once daily maintenance 
dosing; oral bioavailability of 98 percent; the absence of food 
orgastric pH effects; and the option to be administered via both routes 
of administration under fed or fasting conditions irrespective of the 
use of drugs that increase gastric pH. Therefore, the applicant 
believed that a more manageable drug[hyphen]drug interaction profile 
was observed with respect to the CRESEMBA[supreg] technology compared 
to other mold[hyphen]active azoles antifungals.
    Response: We appreciate the applicant's additional input and 
information in support of the application. We recognize that the 
CRESEMBA[supreg] prodrug was specifically developed to facilitate the 
systemic delivery of the active moiety and reduces the risk of 
nephrotoxicity relative to other azole antifungals. However, despite 
the lack of presence of nephrotoxic cyclodextrins, we continue to 
believe that the CRESEMBA[supreg] uses the same mechanism of action as 
other azole antifungals because they both inhibit the enzyme lanosterol 
14 a-demethylase.
    In addition, we continue to believe that the CRESEMBA[supreg] 
technology is substantially similar to the current treatment options 
available to Medicare beneficiaries that are also currently described 
(although not specifically) by established procedure codes that 
identify the use of these similar technologies, specifically other 
antifungal drugs that also are used in the treatment of patients 
diagnosed with similar fungal infections. As the applicant stated, 
while the use of amphotericin B may not be an ideal treatment option 
for some patients because it has many adverse side effects, we disagree 
with the applicant that CRESEMBA[supreg] offers an alternative 
treatment option instead of amphotericin B for patients who cannot 
tolerate other existing therapies and would otherwise have no other 
treatment option because amphotericin B and other antifungal drugs can 
also be effective and used as an option to treat patients diagnosed 
with IM. Therefore, we believe that, although CRESEMBA[supreg] can be 
effectively administered without other antifungal drugs, the technology 
would be used to treat the same or similar type of disease and the same 
or similar patient population as other antifungal drugs.
    After consideration of the public comment we received, we believe 
that the CRESEMBA[supreg] technology is substantially similar to other 
azole antifungal drugs because it meets all three of the criteria 
identified above and, therefore, does not meet the newness criterion.
    As we discussed in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24442 and 24443), to demonstrate that the technology meets the cost 
criterion, the applicant performed two analyses. The applicant searched 
claims in the FY 2013 MedPAR file (across all MS-DRGs) for any case 
reporting a principal or secondary diagnosis of aspergillosis (ICD-9-CM 
diagnosis code 117.3), zygomycosis [phycomycosis or mucormycosis] (ICD-
9-CM diagnosis code 117.7), or pneumonia in aspergillosis (ICD-9-CM 
diagnosis code 484.6). The applicant excluded any case that was treated 
at a hospital that is not paid under the IPPS, as well as any case 
where Medicare fee-for-service was not the primary payer. The applicant 
calculated the standardized charge for each eligible case and then 
inflated the standardized charge by 10.4427 percent using the same 
inflation factor used by CMS to update the FY 2015 outlier threshold 
(79 FR 50379). The applicant assumed that the average length of stay 
for all eligible cases was 13.4 days based on its analysis. To 
determine the charges for the drug, the applicant assumed 13.4 days of 
therapy. According to the applicant, dosages of isavuconazole for a 
patient vary based on the day of therapy, but do not vary based on the 
patient's weight. For the first and second day of therapy, the patient 
would be administered a loading dose of 200 milligrams (mg) every 8 
hours. For each subsequent day of therapy, the patient would be

[[Page 49458]]

administered a maintenance dose of 200 mg per day.
    For the first analysis, which was based on 100 percent of all MS-
DRGs, the applicant identified a total of 5,984 cases with at least one 
of the three ICD-9-CM codes (aspergillosis (ICD-9-CM diagnosis code 
117.3), zygomycosis [phycomycosis or mucormycosis] (ICD-9-CM diagnosis 
code 117.7), or pneumonia in aspergillosis (ICD-9-CM diagnosis code 
484.6)) across a total of 333 MS-DRGs. The applicant's rationale for 
using all the MS-DRGs was that it believed any patient diagnosed with 
either invasive aspergillosis or invasive mucormycosis (zygomycosis) 
could be eligible for treatment using isavuconazonium, regardless of 
the MS-DRG assignment. The applicant identified the average case-
weighted threshold amounts for these 333 MS-DRGs as $72,186 using Table 
10 from the FY 2015 IPPS/LTCH PPS final rule. The applicant did not 
remove charges for the other specific technologies from the average 
case-weighted standardized charge per case. The applicant's rationale 
for not removing these charges was that the patients would be 
administrated isavuconazonium in combination with the other currently 
approved antifungal drugs as an effective treatment plan. The applicant 
computed a final inflated average case-weighted standardized charge per 
case of $151,450. Because this average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount 
from the FY 2015 Table 10, the applicant maintained that 
CRESEMBA[supreg] meets the cost criterion using this first analysis.
    For its second analysis, the applicant analyzed 39 MS-DRGs that 
accounted for the top 75 cases of patients eligible for treatment using 
isavuconazonium; this was a subset of 4,510 cases. Using a methodology 
similar to the one used in its first analysis, the applicant computed 
the final inflated average case-weighted standardized charge per case 
of $159,622. The applicant identified an average case-weighted 
threshold amount for the 39 MS-DRGs of $74,366 using Table 10 from the 
FY2015 IPPS/LTCH PPS final rule. Because the final inflated average 
case-weighted standardized charge per case exceeded the average case-
weighted threshold amount in the FY 2015 Table 10, the applicant 
maintained that CRESEMBA[supreg] meets the cost criterion using this 
second analysis.
    In the proposed rule, we stated we were concerned that the 
applicant did not remove any charges for the other antifungal drugs 
used during treatments (that is, the other component of the 
combination) because the applicant maintained that it would most likely 
be necessary for patients who are treated using CRESEMBA[supreg] to 
also continue treatment using the other antifungal drugs or medications 
in order to achieve successful treatment due to the severity of their 
symptoms. We believe that the applicant should have removed the charges 
for the other antifungal drugs used for treatments. We also noted that 
the applicant did not provide information to substantiate its assertion 
that the charges for these cases would not be reduced because of the 
severity of illness among the patients. The applicant inferred that 
patients treated using CRESEMBA[supreg] would be dependent upon the 
simultaneous and combined use of the other existing therapies to 
achieve successful treatment. Therefore, we stated our concern about 
the possibility of drug toxicity, poly pharmacy, and drug-to-drug 
interactions, especially among the Medicare population.
    We invited public comment on whether CRESEMBA[supreg] meets the 
cost criterion, specifically with regard to our concerns regarding the 
applicant's analyses and methodology.
    Comment: To address CMS' concerns stated in the proposed rule, the 
applicant submitted additional information that included the results 
from conducted sensitivity analyses to determine whether the cost of 
the cases included in its cost analysis presented in the proposed rule 
would have continued to exceed the cost threshold for the respective 
MS-DRGs after removing the submitted charges for other drugs. Using a 
methodology similar to the methodology used in the previous cost 
analyses as presented in the proposed rule, the applicant conducted 
three subsequent analyses that removed 18.3 percent, 41.0 percent, and 
100 percent of charges associated with other drugs. The applicant 
reported that the average case-weighted threshold amount for the 
respective MS-DRGs remained at $72,186. Under each analysis, the 
average case-weighted standardized charges per cases were $145,260, 
$137,641, and $117,838 respectively. Because the average case-weighted 
standardized charge per case for each scenario exceeded the average 
case-weighted threshold amount for the respective MS-DRGs ($72,186), 
the applicant maintained that the CRESEMBA[supreg] meets the cost 
criterion based on the results of its new analysis.
    Response: We appreciate the applicant's additional input and 
information. After consideration of the subsequent analysis presented 
by the applicant and its results, we believe that the CRESEMBA[supreg] 
meets the cost criterion.
    As we discussed in the proposed rule, with regard to substantial 
clinical improvement, the applicant stated that CRESEMBA[supreg] 
represents a substantial clinical improvement over existing therapies 
for patients diagnosed with invasive aspergillosis and mucormycosis 
based on its potentially improved efficacy profile, potentially 
improved safety profile, more favorable pharmacokinetic profile, and 
improved method of administration. The applicant discussed the unmet 
medical need for alternative treatment options for patients diagnosed 
with invasive aspergillosis and mucormycosis. Current treatments have 
limitations related to safety, side effects, and 
efficacy.18 19 The applicant provided information regarding 
its SECURE study, where the primary endpoint of all-cause mortality 
through day 42 showed that CRESEMBA[supreg] demonstrated noninferiority 
to voriconazole. The primary endpoint of all[hyphen]cause mortality 
through day 42 in the intent[hyphen]to[hyphen]treat population (ITT, 
N=516) was 18.6 percent in the isavuconazonium treatment group and 20.2 
percent in the voriconazole group. However, according to the applicant, 
the overall safety profile for CRESEMBA[supreg] demonstrated similar 
rates of mortality and nonfatal adverse events as the comparator, 
voriconazole. The applicant also shared information from other clinical 
trials. One of these clinical trials that studied the treatment of 
patients diagnosed with invasive aspergillosis showed treatment-
emergent adverse reactions occurred in 96 percent and 99 percent of 
patients receiving the CRESEMBA[supreg] and voriconazole. In the 
proposed rule, we stated that the adverse reactions associated with the 
use of CRESEMBA[supreg] and voriconazole appear to be similar.
---------------------------------------------------------------------------

    \18\ Lin SJ, Schranz J, Teutsch SM.: Aspergillosis 
case[hyphen]fatality rate: systematic review of the literature. 
ClinInfect Dis. 2001;32:358[hyphen]66.
    \19\ Greenberg RN, Scott LJ, Vaughn HH, Ribes JA.: Zygomycosis 
(mucormycosis): emerging clinical importance and new treatments. 
Curr Opin Infect Dis. 2004;17:517-25.
---------------------------------------------------------------------------

    Comment: In response to our concerns, the applicant noted that 
patients being treated with CRESEMBA[supreg] had a reduced number of 
treatment-related discontinuations over existing therapies. The 
applicant stated that the treatment[hyphen]emergent adverse events 
(TEAEs) were reported in 96.1 percent of patients who received 
treatment using the CRESEMBA[supreg] technology and 98.5 percent of 
patients who received treatment using voriconazole. The applicant 
further stated that the five most common events

[[Page 49459]]

that occurred in >=5 percent of the patients in either group were 
nausea, vomiting, diarrhea, pyrexia, and hypokalemia, and the most 
frequent adverse events by system organ class were gastrointestinal 
disorders (67.7 percent for patients treated using CRESEMBA,[supreg] 
69.5 percent for patients treated using voriconazole), and infections/
infestations (59.1 percent for patients treated using CRESEMBA,[supreg] 
61.0 percent for patients treated using voriconazole). The applicant 
also noted that the results indicated the following TEAEs were 
significantly less common with the group of patients treated using 
CRESEMBA[supreg] compared to the group of patients treated using 
voriconazole: Skin and subcutaneous tissue disorders (33.5 percent for 
the group of patients treated with CRESEMBA,[supreg] 42.5 percent for 
the group of patients treated using voriconazole; p = 0.037), eye 
disorders (15.2 percent for the group of patients treated using 
CRESEMBA,[supreg] 26.6 percent for the group of the patients treated 
using voriconazole; p = 0.002), and hepatobiliary disorders 
(CRESEMBA[supreg] 8.9 percent, voriconazole 16.2 percent; p = 0.016). 
The applicant believed that the differences between the efficacy and 
effectiveness of the CRESEMBA[supreg] compared to voriconazole as a 
result of the overall analysis of TEAEs and serious TEAEs were 
consistent with those of the subgroup analysis by age categories, 
gender, race, ethnicity, geographical region, receipt of allogeneic 
transplantation, active malignancy status, and neutropenia at baseline. 
The applicant stated that no clinically relevant trends were observed 
with other safety parameters, including laboratory parameters and ECG 
during the 84[hyphen]day treatment period.
    Response: We appreciate the additional information presented by the 
applicant in response to our concerns. While we recognize that 
CRESEMBA[supreg] meets FDA standards for safety and effectiveness, 
demonstration of a substantial clinical improvement over existing 
technologies available to Medicare beneficiaries is not necessarily 
inherent in the FDA's regulatory requirement for the technology. We 
believe that the data presented by the applicant to support a 
substantial clinical improvement based on the demonstration of reduced 
TEAEs did not show results demonstrating significant differences 
regarding the analysis' comparables. While we acknowledge that, in the 
setting of similar overall safety profiles, the discontinuation rates 
are reduced with the use of the CRESEMBA[supreg] technology when 
compared to use of voriconzole, we are unsure if the noted differences 
in the overall safety profiles demonstrate statistical significance.
    In the proposed rule, we also stated that we were concerned that 
the applicant did not conduct the clinical trials evaluating head-to-
head comparisons to alternative therapies such as amphotericin B. 
Currently, amphotericin B is the only FDA[hyphen]approved drug for the 
treatment of mucormycosis, which also can be used to treat 
aspergillosis. The applicant's description of the technology was based 
on peer reviewed literature, which may be considered historical data.
    Comment: The applicant also presented with its comments findings 
from the Fungiscope Registry database to demonstrate the results of 
head-to-head comparisons between the efficacy of effectiveness of the 
CRESEMBA[supreg] and other alternative therapies such as amphotericin 
B. The applicant stated that, in a matched[hyphen]case control 
analysis, crude mortality through day 42 in patients who received 
treatment using CRESEMBA[supreg] as primary therapy was 33.3 percent 
relative to 39.4 percent in patients who received 
amphotericin[hyphen]based treatment as primary therapy from matched 
controls, while the overall mortality rate (37.8 percent) for patients 
treated using CRESEMBA[supreg] was similar to the mortality rate for 
patients treated with amphotericin B as reported in the literature 
(37.8 percent).
    Response: We appreciate the information included in the applicant's 
comment in response to our concern. However, we believe that the crude 
mortality rates for both controls were similar, and the noted 
differences do not appear to be statistically significant.
    With regard to improved efficacy, the applicant made several 
assertions in its application that we discussed in the proposed rule 
(80 FR 24443 through 24444). The applicant maintained that the use of 
CRESEMBA[supreg] can potentially decrease the rate of subsequent 
diagnostic or therapeutic interventions. According to the applicant, 
the technology lacks the adverse side effects of nephrotoxicity 
associated with amphotericin B.\20\ However, in the proposed rule we 
stated that the results of the study reported by the applicant did not 
reflect this.
---------------------------------------------------------------------------

    \20\ Walsh TJ, Anaissie EJ, Denning DW, Herbrecht R, 
Kontoyiannis DP, Marr KA, et al.: Treatment of aspergillosis: 
Clinical practice guidelines of the Infectious Diseases Society of 
America. Clin Infect Dis. 2008;46:327-60.
---------------------------------------------------------------------------

    Specifically, the applicant believed that CRESEMBA[supreg] has 
positive activity against a broad range of fungi, including those 
resistant to other agents, thereby potentially decreasing subsequent 
therapeutic interventions.\21\ However, the applicant stated that the 
referenced literature indicates that further in-vivo studies are 
required in order to confirm the efficacy for treatment of severe 
infections caused by these fungi in immunocompromised patients. 
According to the applicant, CRESEMBA[supreg] is used to treat 
immunocompromised patients who are severely ill. The applicant also 
stated that CRESEMBA[supreg] can be used to treat patients diagnosed 
with invasive fungal infections before the pathogen has been 
identified, thereby potentially decreasing subsequent diagnostic and 
therapeutic interventions.\22\ The applicant maintained that the use of 
CRESEMBA[supreg] decreases the number of future hospitalizations or 
physician visits. We stated in the proposed rule (80 FR 24444) our 
concern that the applicant did not provide data to support this 
determination. One of the applicant's studies, SECURE, which was a 
global, Phase 3, multicenter, randomized, double-blind, parallel group, 
noninferiority trial that evaluated CRESEMBA[supreg] versus 
voriconazole for the primary treatment of patients with invasive fungal 
disease (IFDs) caused by aspergillus spp. and other filamentous fungi 
was discussed by the applicant in its application. The results of the 
study were presented in a paper stating that the length of stay for 
patients hospitalized with renal impairment was statistically 
significantly shorter in the treatment of patients in the 
CRESEMBA[supreg] arm (9 days) compared with patients treated with 
voriconazole in the control arm. According to the applicant, patients 
treated with CRESEMBA[supreg] showed shorter hospital length of stay 
compared to those treated with voriconazole in the overall study 
population. Subgroup analyses of patients who were aged 65 years and 
older and patients with a BMI equal to or greater than 30 kg/
m2 also had shorter, but not statistically significant, 
differences in length of stay when treated with isavuconazonale 
compared to voriconazole. The paper on the study revealed concerns 
about the small sample size in the subgroup (n=516) and that the 
differences were not statistically significant.\23\
---------------------------------------------------------------------------

    \21\ Gonz[aacute]lez GM.: Med Mycol. 2009 Feb;47(1):71-6. 
doi:10.1080/13693780802562969. Epub 2008 Dec 18. PMID: 19101837 
[PubMed--indexed for MEDLINE].
    \22\ Kontoyiannis DP, Lewis RE.: How I treat mucormycosis. 
Blood. 2011;118:1216-24.
    \23\ Khandelwal N, Franks B, Shi F, Spalding J, Azie N. Health 
Economic Outcome Analysis of Patients Randomized in the SECURE Phase 
3 Trial Comparing Isavuconazole to Voriconazole for Primary 
Treatment of Invasive fungal Disease Caused by Aspsergillus Species 
or Other Filamentous Fungi.

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

[[Page 49460]]

    With regard to improved safety and a more favorable pharmacokinetic 
profile, the applicant made several assertions which we discussed in 
the proposed rule (80 FR 24444). The applicant asserted that 
CRESEMBA[supreg] has the potential for simpler and more predictable 
dosing based on improved pharmacokinetics compared with other azole 
antifungal drugs, but the applicant did not provide data to 
substantiate this assertion.
    Comment: The applicant provided the following information in its 
comment with regard to CRESEMBA's pharmacokinetic profile and 
predictable dosing. According to the applicant, based on data from the 
development of CRESEMBA[supreg] and the prescribing information, 
CRESEMBA[supreg] does not require therapeutic drug monitoring (TDM) 
compared to voricanozole, which requires TDM due to liver disease, age 
and genetic polymorphisim of the cytochrome CYP2C19. The applicant 
noted that, for CRESEMBA[supreg], no dose adjustment is required for 
the following: Age, gender, and race; mild, moderate, and severe renal 
impairment including patients with ESRD; mild to moderate hepatic 
impairment patients. The applicant included additional information from 
the Secure Phase III trial and other clinical studies 24 25 
to substantiate that CRESEMBA[supreg] has the potential for simpler and 
more predictable dosing based on improved pharmacokinetics compared 
with other azole antifungal drugs.
---------------------------------------------------------------------------

    \24\ CRESEMBA[supreg] [package insert]. Northbrook, IL: 
Astellas, Inc.
    \25\ Desai A, Kovanda L, Kowalski D, Lu Q, Townsend R. 
Isavuconazole (ISA) Population Pharmacokinetic Modeling from Phase 1 
and Phase 3 Clinical Trials and Target Attainment Analysis. 
Proceedings of the 54th Interscience Conference on Antimicrobial 
Agents and Chemotherapy Washington, DC [Poster#A-697]. 2014.
---------------------------------------------------------------------------

    Response: We appreciate the additional information provided by the 
applicant. We note that, with regard to the pharmacokinetic profile, 
based on the information provided by the applicant, CRESEMBA[supreg] 
appears to have a favorable profile, but the data relating to a 
comparison of rates for TEAEs between CRESEMBA[supreg] and voriconazole 
show that the rates are the same. In addition, while the applicant 
stated that CRESEMBA[supreg] does not require therapeutic drug 
monitoring (TDM) as compared to voricanozole, which does require TDM, 
we note that the FDA has indicated in the product labeling that serious 
hepatic reactions have been reported regarding the effects of the use 
of the CRESEMBA[supreg] and the FDA has recommended that treatment 
include the evaluation of liver related laboratory tests at the start 
and during the course of treatment using the CRESEMBA[supreg] therapy 
(similar to FDA indications for voricanozole).
    As we discussed in the proposed rule, the applicant also asserted 
that CRESEMBA[supreg] has a lower drug-drug interaction potential than 
voriconazole or itraconazole, but did not provide data to substantiate 
this assertion. Furthermore, the applicant maintained that 
CRESEMBA[supreg] can be safely used in treating patients with renal 
impairment, whereas currently available treatments can harm the 
kidneys.\26\ In the paper accompanying the application, the applicant 
discussed aspergillosis and the various treatment options available and 
the advantages of voriconazole over deoxycholate amphotericin B (D-AMB) 
as primary treatment for patients with invasive aspergillosis. In the 
proposed rule, we stated we were concerned that these results were not 
communicated in the resulting data provided by the applicant that were 
obtained from the trials (80 FR 24444).
---------------------------------------------------------------------------

    \26\ Walsh TJ, Anaissie EJ, Denning DW, Herbrecht R, 
Kontoyiannis DP, Marr KA, et al. Treatment of aspergillosis: 
Clinical practice guidelines of the Infectious Diseases Society of 
America. Clin Infect Dis. 2008;46:327-60.
---------------------------------------------------------------------------

    Comment: The applicant stated in its comment that based on the 
Phase 3 trials, 79 of 403 patients had an estimated glomerular 
filtration rate (GFR) less than 60 mL/min/1.73 m2. The 
applicant also provided data from a phase one study, which evaluated 
the pharmacokinetics in patients diagnosed with mild, moderate, and 
severe renal dysfunction relative to the pharmacokinetics in healthy 
patients with normal renal function.\27\ The applicant noted that 
CRESEMBA[supreg] area under the curve 72 (AUC72) in ESRD patients is 
similar to the AUC72 in healthy controls due to the hemoconcentration 
because CRESEMBA[supreg] is highly protein bound (>99 percent) and not 
dialyzable.
---------------------------------------------------------------------------

    \27\ Astellas. CRESEMBA[supreg]. Clinical Study Report No. 9766-
CL-0018. Data on File.
---------------------------------------------------------------------------

    The applicant presented the results from an analysis of a pooled 
subgroup from its previously stated studies (SECURE and VITAL), which 
evaluated the effectiveness of CRESEMBA[supreg] in patients diagnosed 
with and without renal impairment, as defined as eGFR < 60 mL/min/1.73 
m2. The end points measured were all cause mortality at day 
42 and day 84 and DRC assessed overall response at end of treatment 
(EOT). At the end of day 42, the mortality rates for the patients 
diagnosed with renal impairment versus patient who do not suffer from 
renal impaired was 12.9 percent versus 18.8 percent. At the end of day 
84, the mortality rates for the patients diagnosed with renal 
impairment versus patients who do not suffer renal impairment was 25.8 
percent versus 28.6 percent. All-cause mortality on Day 42 and Day 84, 
and DRC-assessed overall response at EOT were comparable between 
patient groups (32 percent versus 36 percent). The applicant stated 
that the results of this pooled analysis demonstrated that 
CRESEMBA[supreg] was efficacious in patients diagnosed with renal 
impairment enrolled in the SECURE and VITAL trials and supports the 
Phase 1 trial findings that dose adjustments are not required for 
patients diagnosed with renal impairment treated using the 
CRESEMBA[supreg].
    Response: We appreciate the additional information provided in the 
applicant's comment in response to our concerns, and we have considered 
these findings in our final review.
    In the proposed rule, we also stated that we were concerned that 
the applicant did not provide a rationale for its assertion that the 
use of CRESEMBA[supreg] represents a substantial clinical improvement 
for Medicare beneficiaries because of ``simpler and more predictable 
dosing'' nor did the applicant provide additional information and data 
regarding drug-to-drug interactions and nephrotoxicity (80 FR 24444).
    In addition, the applicant maintained that the technology has an 
improved method of administration compared to current treatment 
alternatives. Specifically, the applicant asserted that the 
availability of this technology as an oral formulation is an 
improvement compared to other existing treatments, which are solely 
administered intravenously. In the proposed rule, we stated that we 
were concerned about the applicant's assertion because other currently 
approved and available antifungal drugs, such as voriconazole (tablets, 
oral suspension, or intravenous administration), itraconazole 
(capsules, oral solution, or parenteral solution), and posaconazole 
(oral suspension or parenteral solution), also can be administered 
orally as well as parenteral for patients diagnosed with these types of 
fungal infections. In addition, we are aware that intravenous 
administration of antifungal drugs may be necessary because patients 
diagnosed with invasive aspergillosis and mucuromycosis and treated as 
inpatients are often severely ill and may

[[Page 49461]]

not be able to tolerate any food or medications orally.
    Comment: The applicant responded to CMS' concerns expressed in the 
proposed rule by presenting information that highlighted the following 
results based on data from the clinical studies: Both the oral and IV 
formulations have shown that CRESEMBA[supreg] has a more predictable 
pharmacokinetic/pharmacodynamic profile when compared to voriconazole; 
CRESEMBA[supreg] has moderate pharmacokinetic variability, limiting the 
risk of sub-therapeutic or supra-therapeutic exposure, while the 
variability of voriconazole pharmacokinetics is high; IV 
CRESEMBA[supreg] can be used in patients diagnosed with renal 
impairment as the IV formulation of CRESEMBA[supreg] does not include 
cyclodextrins.
    The applicant further stated that the Pharmacokinetics (PK) study 
in patients diagnosed with renal impairment demonstrated exposures that 
support the label that no dose adjustments are recommended in patients 
who are elderly or renally impaired and no dose adjustment is needed in 
patients diagnosed with mild, moderate, or severe renal impairment, 
including those patients with ESRD. The applicant noted that outcomes 
in the renal impaired patients were comparable to the non-renal 
impaired.
    According to the applicant, a more manageable drug-drug interaction 
profile was observed with CRESEMBA[supreg] than with other mold-active 
azoles. The applicant explained the following with regard to 
CRESEMBA[supreg]: It is a sensitive substrate of CYP3A (5-fold increase 
in isavuconazole AUC with concomitant ketoconazole) and a mild-to-
moderate inhibitor of CYP3A4 (2-fold increase in midazolam AUC), while 
voriconazole is a strong inhibitor of CYP3A4 (10-fold increase in 
midazolam AUC); it is a mild inducer of CYP2B6 (42 percent decrease in 
bupropion); it does not inhibit or induce CYP1A2, CYP2C9, or CYP2C19 
and does not inhibit CYP2A6 or CYP2D6; it is a mild inhibitor of P-gp, 
OCT1/OCT2 and MATE1; it has no inhibitory effects on sensitive 
substrates of BCRP, OAT1/OAT2, OATP1B1/OATP1B3, or MATE2-K, but does 
have mild indirect inhibitory effects on substrates of UGT.
    The applicant also stated that CRESEMBA[supreg] demonstrated 
efficacy in the studies of patients diagnosed with IA and IM. The 
applicant asserted that CRESEMBA[supreg] demonstrated the following: 
Noninferior efficacy compared to voriconazole for the primary endpoint 
of all-cause mortality through day 42 in IA; comparable results for 
all-cause mortality were observed across sensitivity analyses, 
populations, time points and subgroups, further supporting the 
effectiveness of CRESEMBA[supreg]; and activity against several species 
of Mucorales, which are known to mimic Aspergillus infection and have 
been reported as a cause of breakthrough infection.
    The applicant noted that CRESEMBA[supreg] had a similar treatment 
effect to that of amphotericin B compared to untreated controls from 
the literature for all-cause mortality. The applicant cited a matched-
case analysis from a contemporary registry in which similar mortality 
rates were noted in patients treated with CRESEMBA[supreg] and matched 
control patients treated with amphotericin-based formulations. The 
applicant also noted that CRESEMBA[supreg] activity is supported by 
data from validated animal models of mucormycosis.
    According to the applicant, CRESEMBA[supreg] demonstrated the 
following: A favorable safety profile compared to voriconazole; and 
fewer CRESEMBA[supreg] TEAEs compared to voriconazole such as skin, eye 
and hepatic adverse events. Finally, the applicant stated that 
CRESEMBA[supreg] is orally bioavailable and has no signal of 
nephrotoxic effects as associated with amphotericin B.
    Response: We appreciate the applicant's additional information 
submitted in response to our concerns regarding a lack of data for: (1) 
Head-to-head comparative studies between CRESEMBA[supreg] and 
alternative therapies in the treatment of aspergillosis and invasive 
mucormycosis (IM); (2) safety in treating patients with renal 
impairment; and (3) predictable dosing based on improved 
pharmacokinetics compared with other azole drugs for anti-fungal 
therapy. We note that in the matched-case control analysis, Study 0103 
(Fungiscope Registry) specifically compared CRESEMBA[supreg] with 
amphotericin B in the treatment of IM, and that this study showed for 
IM patients treated with CRESEMBA[supreg] the mortality rate was 33.3 
percent (7/21) and for IM patients treated with Amphotericin B the 
mortality rate was 39.4 percent (3/33). With regard to safety in 
treating patients with renal impairment, we agree with the applicant 
that relative to amphotericin B, CRESEMBA[supreg] can be a useful 
alternative for treating patients diagnosed with mucuromycosis with 
regard to the nephrotoxic side effects associated with amphotericin B. 
While the applicant believed that CRESEMBA[supreg] has the potential 
for simpler and more predictable dosing based on improved 
pharmacokinetics compared with other azole drugs, we are concerned that 
the differences in rates for TEAEs between CRESEMBA[supreg] and 
voriconazole are not statistically significant and, therefore, the 
favorable pharmacokinetics profile of CRESEMBA[supreg] may not 
represent a substantial clinical improvement over currently available 
treatments using other azole antifungal drugs.
    While amphotericin B has severe side effects, CRESEMBA[supreg] is 
associated with serious hepatic reactions, which requires the 
evaluation of liver related laboratory tests at the start and during 
the course of treatment using the CRESEMBA[supreg] therapy. In 
addition, in the Fungiscope Registry referenced by the applicant, we 
note that the crude mortality rates for CRESEMBA[supreg] and 
amphotericin B were similar.
    While we acknowledge that CRESEMBA[supreg] reduces some side 
effects associated with the treatment of invasive antifungal 
infections, we believe that its outcomes are markedly similar to those 
accomplished using other azole antifungal drugs currently available to 
Medicare beneficiaries and proven to be effective in the treatment of 
these types of diagnoses. Therefore, we do not believe that the 
CRESEMBA[supreg] represents a substantial clinical improvement over 
existing technologies.
    Comment: One commenter did not believe that the CRESEMBA[supreg] 
technology represents substantial clinical improvement over existing 
technologies.
    Response: We agree with the commenter that the technology does not 
represent a substantial clinical improvement over existing 
technologies.
    After consideration of the public comments we received, for the 
reasons discussed earlier, we believe that the CRESEMBA[supreg] 
technology is substantially similar to other antifungal drugs used in 
the effective treatment of patients diagnosed with similar types of 
conditions that are currently available to Medicare beneficiaries and, 
therefore, does not meet the newness criterion. Moreover, we do not 
believe that the technology represents a substantial clinical 
improvement over existing technologies. Therefore, we are not approving 
the CRESEMBA[supreg] for new technology add-on payments for FY 2016.
d. LUTONIX[supreg] Drug-Coated Balloon (DCB) Percutaneous Transluminal 
Angioplasty (PTA) Catheter and IN.PACTTM 
AdmiralTM Paclitaxel Coated Percutaneous Transluminal 
Angioplasty (PTA) Balloon Catheter
    Two manufacturers, CR Bard Inc. and Medtronic, submitted 
applications for new technology add-on payments for FY

[[Page 49462]]

2016 for LUTONIX[supreg] Drug-Coated Balloon (DCB) Percutaneous 
Transluminal Angioplasty (PTA) Catheter (LUTONIX[supreg]) and 
IN.PACTTM AdmiralTM Paclitaxel Coated 
Percutaneous Transluminal Angioplasty (PTA) Balloon Catheter 
(IN.PACTTM AdmiralTM), respectively. Both of 
these technologies are drug-coated balloon angioplasty treatments for 
patients diagnosed with peripheral artery disease (PAD). Typical 
treatments for patients with PAD include angioplasty, stenting, 
atherectomy and vascular bypass surgery. PAD most commonly occurs in 
the femoropopliteal segment of the peripheral arteries, is associated 
with significant levels of morbidity and impairment in quality of life, 
and requires treatment to reduce symptoms and prevent or treat ischemic 
events.\28\ Treatment options for symptomatic PAD include noninvasive 
treatment such as medication and life-style modification (for example, 
exercise programs, diet, and smoking cessation) and invasive options 
which include endovascular treatment and surgical bypass. The 2013 
American College of Cardiology and American Heart Association (ACC/AHA) 
guidelines for the management of PAD recommend endovascular therapy as 
the first-line treatment for femoropopliteal artery lesions in patients 
suffering from claudication (Class I, Level A recommendation).\29\
---------------------------------------------------------------------------

    \28\ Tepe G, Zeller T, Albrecht T, Heller S, Schwarzwalder U, 
Beregi JP, Claussen CD, Oldenburg A, Scheller B, Speck U.: Local 
delivery of paclitaxel to inhibit restenosis during angioplasty of 
the leg. N Engl J Med 2008; 358: 689-99.
    \29\ Anderson JL, Halperin JL, Albert NM, Bozkurt B, Brindis RG, 
Curtis LH, DeMets D, Guyton RA, Hochman JS, Kovacs RJ, Ohman EM, 
Pressler SJ, Sellke FW, Shen WK.: Management of patients with 
peripheral artery disease (compilation of 2005 and 2011 ACCF/AHA 
guideline recommendations): a report of the American College of 
Cardiology Foundation/American Heart Association Task Force on 
Practice Guidelines. J Am Coll Cardiol 2013; 61:1555-70. Available 
at: http://dx.doi.org/10.1016/j.jacc.2013.01.004.
---------------------------------------------------------------------------

    The applicants for LUTONIX[supreg] and IN.PACTTM 
AdmiralTM stated that, in patients diagnosed with PAD, the 
femoropopliteal artery is characterized by difficult to treat lesions 
that can be long and diffuse, in a vessel that is considered the most 
mechanically stressed artery with a number of dynamic forces that 
impact the artery including shortening/elongation, torsion, compression 
and flexion. According to the applicants, the unique challenges of 
treating disease in the femoropopliteal region in patients with PAD are 
related to limitations of current endovascular treatment options. PTA 
and stents have high restenosis rates. In the case of stents the region 
is often a no stent zone with concerns of stent fracture and limiting 
future treatment options with permanent implants. Coating of femoral 
and coronary stents with an antiproliferative drug, such as paclitaxel, 
is intended to reduce the development of restenosis in the stented 
segment of the artery.30 31
---------------------------------------------------------------------------

    \30\ Owens, CD.: Drug eluting balloon overview: technology and 
therapy. Presented at LINC 2011, Leipzig, Germany.
    \31\ Scheller B.: Opportunities and limitations of drug-coated 
balloon in interventional therapies. Herz 2011;36:232-40.
---------------------------------------------------------------------------

    The applicants stated that the drug-coated balloon catheter is a 
device-drug combination product comprised of a device component (an 
over-the-wire balloon catheter) and a drug component (a paclitaxel-urea 
coating in the case of IN.PACTTM AdmiralTM and a 
paclitaxel-sorbitol for LUTONIX[supreg]) on the balloon, intended for 
the treatment of patients with PAD, specifically superficial femoral 
artery (SFA) and popliteal artery disease. The device is engineered for 
two modes of action: The primary mode of action is attributable to the 
balloon's mechanical dilatation of de novo or restenotic lesions in the 
vessel; and the secondary mode of action consists of drug delivery and 
application of paclitaxel to the vessel wall to inhibit the restenosis 
that is normally associated with the proliferative response to the PTA 
procedure. Following predilatation with a nondrug-coated PTA balloon, 
the interventionalist selects a drug-coated balloon with diameter of 
100 percent of reference vessel diameter (RVD) and length sufficient to 
treat 5mm proximal and distal to the target lesion and predilated 
segment (including overlap of multiple balloons). The interventionalist 
inflates the drug-coated balloon for a minimum inflation time of 30 
seconds for delivery of paclitaxel, and keeps the balloon inflated for 
as long as necessary to achieve a satisfactory procedural result, which 
is the standard of care for all balloon angioplasties.
    According to both applicants, LUTONIX[supreg] and 
IN.PACTTM AdmiralTM are the first drug coated 
balloons that can be used for treatment of patients who are diagnosed 
with PAD. As we stated in the proposed rule, because cases eligible for 
the two devices would group to the same MS-DRGs and we believe that 
these devices are substantially similar to each other (that is, they 
are intended to treat the same or similar disease in the same or 
similar patient population and are purposed to achieve the same 
therapeutic outcome using the same or similar mechanism of action), we 
believe that it is appropriate to evaluate both technologies as one 
application for new technology add-on payment under the IPPS. The 
applicants submitted separate cost and clinical data, and we reviewed 
and discuss each set of data separately. However, we are making one 
determination regarding new technology add-on payments that will apply 
to both devices. We believe that this is consistent with our policy 
statements in the past regarding substantial similarity. Specifically, 
we have noted that approval of new technology add-on payments would 
extend to all technologies that are substantially similar (66 FR 
46915), and that we believe that continuing our current practice of 
extending a new technology add-on payment without a further application 
from the manufacturer of the competing product or a specific finding on 
cost and clinical improvement if we make a finding of substantial 
similarity among two products is the better policy because we avoid--
     Creating manufacturer-specific codes for substantially 
similar products;
     Requiring different manufacturers of substantially similar 
products from having to submit separate new technology applications.
     Having to compare the merits of competing technologies on 
the basis of substantial clinical improvement; and
     Bestowing an advantage to the first applicant representing 
a particular new technology to receive approval (70 FR 47351).
    If these substantially similar technologies had been submitted for 
review in different (and subsequent) years, rather than the same year, 
we would evaluate and make a determination on the first application and 
apply that same determination to the second application. However, 
because the technologies have been submitted for review in the same 
year, we believe it is appropriate to consider both sets of cost data 
and clinical data in making a determination because we do not believe 
that it is possible to choose one set of data over another set of data 
in an objective manner.
    CR Bard, Inc. received FDA approval for LUTONIX[supreg] on October 
9, 2014. Commercial sales in the U.S. market began on October 10, 2014. 
Medtronic received FDA approval for IN.PACTTM 
AdmiralTM on December 30, 2014. Commercial sales in the U.S. 
market began on January 29, 2015.
    As stated in section II.G.1.a. of the preamble of the FY 2016 IPPS/
LTCH PPS proposed rule and this final rule, effective October 1, 2015 
(FY 2016), the ICD-10 coding system will be implemented. In the 
proposed rule, we stated that the applicants applied for a

[[Page 49463]]

new ICD-10-PCS procedure code for consideration at the March 18-19, 
2015 ICD-10-CM/PCS Coordination and Maintenance Committee Meeting. In 
this final rule, we note that new ICD-10-PCS procedure codes (listed in 
the chart below) which uniquely identify procedures involving the 
LUTONIX[supreg] and Medtronic drug coated balloons have been 
established.

------------------------------------------------------------------------
     ICD-10-PCS Code                      Code description
------------------------------------------------------------------------
047K041..................  Dilation of right femoral artery with drug-
                            eluting intraluminal device using drug-
                            coated balloon, open approach.
047K0D1..................  Dilation of right femoral artery with
                            intraluminal device using drug-coated
                            balloon, open approach.
047K0Z1..................  Dilation of right femoral artery using drug-
                            coated balloon, open approach.
047K341..................  Dilation of right femoral artery with drug-
                            eluting intraluminal device using drug-
                            coated balloon, percutaneous approach.
047K3D1..................  Dilation of right femoral artery with
                            intraluminal device using drug-coated
                            balloon, percutaneous approach.
047K3Z1..................  Dilation of right femoral artery using drug-
                            coated balloon, percutaneous approach.
047K441..................  Dilation of right femoral artery with drug-
                            eluting intraluminal device using drug-
                            coated balloon, percutaneous endoscopic
                            approach.
047K4D1..................  Dilation of right femoral artery with
                            intraluminal device using drug-coated
                            balloon, percutaneous endoscopic approach.
047K4Z1..................  Dilation of right femoral artery using drug-
                            coated balloon, percutaneous endoscopic
                            approach.
047L041..................  Dilation of left femoral artery with drug-
                            eluting intraluminal device using drug-
                            coated balloon, open approach.
047L0D1..................  Dilation of left femoral artery with
                            intraluminal device using drug-coated
                            balloon, open approach.
047L0Z1..................  Dilation of left femoral artery using drug-
                            coated balloon, open approach.
047L341..................  Dilation of left femoral artery with drug-
                            eluting intraluminal device using drug-
                            coated balloon, percutaneous approach.
047L3D1..................  Dilation of left femoral artery with
                            intraluminal device using drug-coated
                            balloon, percutaneous approach.
047L3Z1..................  Dilation of left femoral artery using drug-
                            coated balloon, percutaneous approach.
047L441..................  Dilation of left femoral artery with drug-
                            eluting intraluminal device using drug-
                            coated balloon, percutaneous endoscopic
                            approach.
047L4D1..................  Dilation of left femoral artery with
                            intraluminal device using drug-coated
                            balloon, percutaneous endoscopic approach.
047L4Z1..................  Dilation of left femoral artery using drug-
                            coated balloon, percutaneous endoscopic
                            approach.
047M041..................  Dilation of right popliteal artery with drug-
                            eluting intraluminal device using drug-
                            coated balloon, open approach.
047M0D1..................  Dilation of right popliteal artery with
                            intraluminal device using drug-coated
                            balloon, open approach.
047M0Z1..................  Dilation of right popliteal artery using drug-
                            coated balloon, open approach.
047M341..................  Dilation of right popliteal artery with drug-
                            eluting intraluminal device using drug-
                            coated balloon, percutaneous approach.
047M3D1..................  Dilation of right popliteal artery with
                            intraluminal device using drug-coated
                            balloon, percutaneous approach.
047M3Z1..................  Dilation of right popliteal artery using drug-
                            coated balloon, percutaneous approach.
047M441..................  Dilation of right popliteal artery with drug-
                            eluting intraluminal device using drug-
                            coated balloon, percutaneous endoscopic
                            approach.
047M4D1..................  Dilation of right popliteal artery with
                            intraluminal device using drug-coated
                            balloon, percutaneous endoscopic approach.
047M4Z1..................  Dilation of right popliteal artery using drug-
                            coated balloon, percutaneous endoscopic
                            approach.
047N041..................  Dilation of left popliteal artery with drug-
                            eluting intraluminal device using drug-
                            coated balloon, open approach.
047N0D1..................  Dilation of left popliteal artery with
                            intraluminal device using drug-coated
                            balloon, open approach.
047N0Z1..................  Dilation of left popliteal artery using drug-
                            coated balloon, open approach.
047N341..................  Dilation of left popliteal artery with drug-
                            eluting intraluminal device using drug-
                            coated balloon, percutaneous approach.
047N3D1..................  Dilation of left popliteal artery with
                            intraluminal device using drug-coated
                            balloon, percutaneous approach.
047N3Z1..................  Dilation of left popliteal artery using drug-
                            coated balloon, percutaneous approach.
047N441..................  Dilation of left popliteal artery with drug-
                            eluting intraluminal device using drug-
                            coated balloon, percutaneous endoscopic
                            approach.
047N4D1..................  Dilation of left popliteal artery with
                            intraluminal device using drug-coated
                            balloon, percutaneous endoscopic approach.
047N4Z1..................  Dilation of left popliteal artery using drug-
                            coated balloon, percutaneous endoscopic
                            approach.
------------------------------------------------------------------------

    More information on the request for and the approval of these codes 
can be found on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html and the FY 2016 New ICD-10-PCS Codes can be found at the 
CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/2016-ICD-10-PCS-and-GEMs.html.
    As we discussed in the proposed rule, the approval of new 
technology add-on payments extends to all technologies that are 
substantially similar. Moreover, as discussed, we believe that 
applications for substantially similar technologies should be evaluated 
in a manner that avoids, among other things, having to compare the 
merits of competing technologies on the basis of substantial clinical 
improvement. If we receive applications for substantially similar 
technologies in different years, we would apply the first determination 
to any subsequent applications for substantially similar technologies. 
Because, in this case, two substantially similar technologies have 
applied for a new technology add-on payment for the same Federal fiscal 
year, we believe it is consistent with our policy to make one 
determination using all of the information submitted for the 
technologies rather than choosing one set of information to consider 
and not considering the other set of information.
    In accordance with our policy, we stated in the proposed rule that 
we believe it is appropriate to use the earliest market availability 
date submitted as the beginning of the newness period. Accordingly, for 
both devices, we stated in the proposed rule that if approved for new 
technology add-on payments, we believe that the beginning of the 
newness period would be October 10, 2014.
    In the proposed rule we did not articulate any concerns regarding 
whether this technology meets the newness criterion, but we invited 
public comments on whether these two technologies meet the newness 
criterion. We did not receive any public comments concerning whether 
the technologies meet the newness criterion. Therefore, based on the 
information provided by the applicants, we believe that both 
LUTONIX[supreg] and IN.PACTTM AdmiralTM DCBs meet 
the newness criterion.
    As we stated above, each applicant submitted separate analyses 
regarding the cost criterion for each of their devices and both 
applicants maintained

[[Page 49464]]

that their device meets the cost criterion. As we did in the proposed 
rule, we summarize each analysis below.
    With regard to the LUTONIX[supreg], to demonstrate that the 
technology meets the cost criterion, the applicant performed three 
different analyses. The applicant first searched the FY 2013 MedPAR 
data file that was used for the recalibration of the FY 2015 MS-DRG 
relative payment weights in the FY 2015 IPPS/LTCH PPS final rule. The 
applicant applied the standard trims that CMS used when selecting cases 
for IPPS rate recalibration as described in the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 49911). In other words, the applicant included cases 
from IPPS hospitals and Maryland hospitals and excluded cases paid by 
Medicare Advantage plans, cases from hospitals that did not submit 
charges in a sufficiently broad range of revenue centers, and 
statistical outlier cases as described in the FY 2015 IPPS/LTCH PPS 
final rule. The applicant then searched for all claims reporting ICD-9-
CM procedure code 39.50 (Angioplasty of other non-coronary vessel(s)) 
and also reporting at least one of the following seven ICD-9-CM 
diagnosis codes (440.20 (Atherosclerosis of native arteries of the 
extremities, unspecified), 440.21 (Atherosclerosis of native arteries 
of the extremities with intermittent claudication), 440.22 
(Atherosclerosis of native arteries of the extremities with rest pain), 
440.23 (Atherosclerosis of native arteries of the extremities with 
ulceration), 440.24 (Atherosclerosis of native arteries of the 
extremities with gangrene), 440.29 (Other atherosclerosis of native 
arteries of the extremities), and 443.9 (Peripheral vascular disease, 
unspecified indicating peripheral artery disease). The applicant 
excluded all claims that reported any ICD-9-CM procedure codes 
involving a stent. A total of 23,157 cases reporting peripheral 
angioplasty were identified. Of these 23,157 cases, MS-DRGs 252, 253, 
and 254 (Other Vascular Procedures with MCC, with CC and without CC/
MCC, respectively) accounted for 65 percent of cases; MS-DRGs 237 and 
238 (Major Cardiovascular Procedures with MCC and without MCC, 
respectively), MS-DRGs 239 and 240 (Amputation for Circulatory System 
Disorders Except Upper Limb and Toe with MCC and with CC, 
respectively), and MS-DRG 853 (Infectious and Parasitic Diseases with 
Operating Room Procedure with MCC) accounted for 17 percent of cases 
(among these, peripheral angioplasty was secondary to some other 
circulation-related procedure: A major cardiovascular procedure (MS-
DRGs 237 and 238), amputation due to poor circulation (MS-DRGs 239 and 
240), or (typically) amputation with sepsis (MS-DRG 853)). The 
remaining 18 percent of cases were spread across a large number of 
other MS-DRGs. Next, the applicant obtained the average case-weighted 
charge per case based on the distribution of cases by MS-DRG and then 
identified the average case-weighted threshold for the three MS-DRG 
groupings from the threshold amounts in Table 10 of the FY 2015 IPPS/
LTCH PPS final rule. The applicant then calculated the unadjusted 
(unstandardized) average case-weighted charge per case for all MS-DRGs. 
According to the applicant, charges were not removed for any prior 
technology. To estimate the charge for the new technology, the 
applicant divided the projected cost per patient by the national 
average CCR for supplies (0.292) in the FY 2015 IPPS/LTCH PPS final 
rule, to arrive at the average case-weighted standardized charges per 
case. The average case-weighted standardized charges per case for the 
three primary MS-DRGs 252-254 group (65 percent), the five additional 
MS-DRGs 237-240 and MS-DRG 853 group (17 percent), and the other MS-
DRGs (18 percent) were $69,243, $81,156, and $95,138, respectively. The 
applicant then inflated the average standardized case-weighted charges 
per case from FY 2013 to FY 2015 using the 2-year inflation factor of 
10.44 percent specified in the FY 2015 IPPS/LTCH PPS final rule and 
added charges related to the new technology to the average case-
weighted standardized charges per case, although the applicant 
indicated that it was not clear on the need to include an inflation 
factor. The final inflated average case-weighted standardized charges 
per case for the three primary MS-DRG groups (65 percent), the five 
additional MS-DRG groups (17 percent), and across other MS-DRGs (18 
percent) were $85,386, $98,543, and $104,052, respectively. Because the 
final inflated average case-weighted standardized charge amounts exceed 
the corresponding average case-weighted threshold amounts of $69,594, 
$74,449, and $75,215, respectively, using the FY 2015 IPPS Table 10, 
the applicant stated that LUTONIX[supreg] meets the cost criterion for 
new technology add-on payments.
    With regard to the IN.PACTTM AdmiralTM, to 
demonstrate that the technology meets the cost criterion, the applicant 
performed two different analyses. The applicant believed that a case 
involving an angioplasty procedure that used the IN.PACTTM 
AdmiralTM drug-coated balloon catheter would map to the same 
MS-DRGs as a case involving a plain balloon angioplasty procedure, MS-
DRGs 252, 253, and 254 (Other Vascular Procedures with MCC, with CC, 
and without CC/MCC, respectively). The applicant first searched the FY 
2013 MedPAR claims data that were used for the recalibration of the FY 
2015 MS-DRG relative payment weights in the FY 2015 IPPS/LTCH PPS final 
rule. The data in this file included discharges occurring on October 1, 
2012 through September 30, 2013. The applicant excluded claims for all 
discharges for Medicare beneficiaries enrolled in a Medicare Advantage 
plan. The applicant also limited claims to those hospitals that were 
included in the FY 2013 IPPS Final Rule Impact File. In addition, the 
applicant removed claims in accordance with the trims specified in the 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53326) that were used to 
recalibrate the MS-DRG relative payment weights. The applicant then 
searched for all claims reporting ICD-9-CM procedure code 39.50 
(Angioplasty of other non-coronary vessel(s)) in combination with 
claims reporting at least one of the following seven ICD-9-CM diagnosis 
codes (440.20 through 440.24, 440.29, and 443.9) indicating peripheral 
artery disease. The applicant excluded all claims that reported any 
ICD-9-CM procedure codes for stent implantation. The applicant believed 
that excluding all cases reporting stenting procedures would 
potentially underestimate the average charges for cases reporting 
peripheral angioplasty. A total of 23,157 cases involving peripheral 
angioplasty procedures were identified. Of these 23,157 cases, a 
majority (65 percent; 15,040 cases) mapped to one of the 3 primary MS-
DRGs, MS-DRGs 252, 253, or 254. The remaining 35 percent of the cases 
(8,117) were assigned to a number of MS-DRGs other than the 3 primary 
MS-DRGs. Next, the applicant determined the distribution of cases by 
MS-DRG and the case-weighted threshold amounts from Table 10 in the FY 
2015 IPPS/LTCH PPS final rule, for both the primary MS-DRG group and 
the total MS-DRG group. The applicant began by calculating the 
unadjusted (unstandardized) case-weighted average charge per case for 
all MS-DRGs. Following this computation, the applicant standardized the 
charges on each of the identified claims using the FY 2013 factors from 
the FY 2015 IPPS/LTCH PPS Final Rule Impact File, to match the year of 
the claims data used

[[Page 49465]]

in this analysis (FY 2013 MedPAR file). According to the applicant, 
charges were not removed for any other specific technologies that may 
have been used because the applicant expected that a plain balloon will 
be utilized to predilate the vessel in a majority of drug-coated 
balloon angioplasty cases prior to the use of the drug-coated balloon 
(that is, the applicant did not believe it was necessary to remove 
charges associated with the other specific prior technology (a plain 
PTA balloon catheter in this case).) The applicant then inflated the 
average case-weighted standardized charges per case from FY 2013 to FY 
2015 using the 2-year inflation factor of 10.44 percent specified in 
the FY 2015 IPPS/LTCH PPS final rule and added charges related to the 
new technology to the average charges per case. The final inflated 
average case-weighted standardized charge per case both for the primary 
MS-DRGs group and the total MS-DRG group were $82,944 and $101,611, 
respectively. Because the final inflated average case-weighted 
standardized charge per case for the applicable MS-DRG exceeds the 
average case-weighted threshold amounts of $69,594 and $75,215, 
respectively, using the FY 2015 IPPS Table 10, the applicant stated 
that the IN.PACTTM AdmiralTM technology meets the 
cost criterion for new technology add-on payments.
    In the proposed rule, we stated that we were concerned that both 
applicants excluded cases of patients that received stent implantations 
from their analysis because the applicants believed that the 
technologies can be used instead of stenting procedures. We invited 
public comments on whether the LUTONIX[supreg] and the 
IN.PACTTM AdmiralTM meet the cost criterion.
    In their original cost analysis, both applicants included cases 
with diagnoses of PTA (identified by ICD-9-CM code 39.50) and cases 
with diagnoses of PAD (identified by diagnosis codes: 440.2x 
(Atherosclerosis of arteries of the extremities) or 443.9 (Peripheral 
vascular disease, unspecified)), but excluded cases with stent 
implantation. The applicants for the LUTONIX[supreg] and the 
IN.PACTTM AdmiralTM submitted public comments 
that responded separately to our concern regarding the rationale for 
excluding cases involving stenting procedures for the cost analyses. We 
summarize these comments separately below.
    Comment: One of the applicants (Medtronic, the manufacturer of the 
IN.PACTTM AdmiralTM DCB) stated that in its 
original cost analysis it included cases with procedures of PTA 
(identified by ICD-9-CM code 39.50) and cases with diagnoses of PAD 
(identified by diagnosis codes: 440.2x (Atherosclerosis of arteries of 
the extremities) or 443.9 (Peripheral vascular disease, unspecified)), 
but excluded cases with stent implantation because it viewed the 
patient population for PTA diagnoses as similar to the patient 
population eligible for DCB. The applicant also believed that the 
resulting analysis would be the clearest and simplest way to 
demonstrate that DCB meets the new technology add-on payment cost 
criterion. The applicant further stated that, upon further 
consideration, it believed that some patients who receive treatment 
involving stents could otherwise be indicated for and receive DCB 
therapy instead. In addition, the applicant believed that there may be 
a proportion of patients who are treated with provisional stenting 
procedures in addition to DCB therapy. Therefore, in addition to the 
patients diagnosed with only PTA included in its initial analysis, the 
applicant provided additional analyses taking into consideration 
patients treated with stenting procedures.
    In its public comment specifically in response to CMS' concern, to 
demonstrate that the IN.PACTTM AdmiralTM 
technology meets the cost criterion taking into consideration cases 
involving stent procedures, the applicant performed additional cost 
analyses and identified all discharges with a diagnosis of peripheral 
artery disease reported using ICD-9-CM diagnosis code 440.2x 
(Atherosclerosis of arteries of the extremities) or discharges 
reporting ICD-9-CM diagnosis code 443.9 (Peripheral vascular disease, 
unspecified), with a percutaneous transluminal angioplasty (PTA) or 
stent procedure code using ICD-9-CM procedure code 39.50 (non-coronary 
angioplasty) or any one of the following ICD-9-CM codes for peripheral 
vascular stenting procedures: 39.90 (Insertion of non-drug-eluting 
peripheral (non-coronary) vessel stent(s)); 00.55 (Insertion of drug-
eluting stent(s) of other peripheral vessel(s)); or 00.60 (Insertion of 
drug-eluting stent(s) of superficial femoral artery).
    Based on the results of the subsequent analysis, the applicant 
stated that its assumptions about real-world use of DCBs, based on 
approximate estimates from internal market models, concluded that: The 
IN.PACTTM AdmiralTM DCB technology could be used 
to augment the effective treatment of patients diagnosed only with PTA 
in approximately 42 percent of the cases identified; the 
IN.PACTTM AdmiralTM DCB technology could be used 
in addition to stents in approximately 25 percent of the cases 
identified; and the IN.PACTTM AdmiralTM DCB 
technology could replace the use of stents in approximately 33 percent 
of the cases identified. Using the distribution of potential cases 
eligible for treatment using the IN.PACTTM 
AdmiralTM DCB technology obtained from internal market 
research estimates, 42 percent, 25 percent, and 33 percent respectively 
across the three sources of potential cases eligible for treatment 
using the IN.PACTTM AdmiralTM DCB technology 
described above, the applicant ascertained an average case-weighted 
charge per case for ``real-world'' cases involving the 
IN.PACTTM AdmiralTM DCB technology. The final 
average case-weighted standardized charges per ``real-world'' cases 
involving the IN.PACTTM AdmiralTM DCB technology 
were $86,037 for the three primary MS-DRGs, and $103,887 for all MS-
DRGs. Both of the average case-weighted standardized charges per case 
exceeded the respective average case-weighted threshold amounts for 
these sets of MS-DRGs, which are $68,643 for MS-DRGs 252, 253, and 254, 
and $74,799 for all MS DRGs, respectively. Therefore, the applicant 
maintained that the IN.PACTTM AdmiralTM 
technology meets the cost criterion for new technology add-on payments.
    To address CMS' concern regarding the exclusion of cases involving 
stent procedures, the applicant for the LUTONIX[supreg] technology 
conducted an additional costs analysis that accounted for cases 
involving angioplasty and stent procedures by simply adding the charges 
for both angioplasty and stent procedures to the charges determined in 
its original analysis. The applicant determined average case-weighted 
standardized charges per case for the three primary MS-DRGs (MS-DRGs 
252, 253, and 254), the five additional MS-DRGs (MS-DRGs 237, 238, 239, 
240 and MS-DRG 853) and the other MS-DRGs were $74,039, $83,650, and 
$90,170, respectively. The applicant determined that the final average 
case-weighted standardized charges per case for the three primary MS-
DRG groups, the five additional MS-DRG groups and across other MS-DRGs 
were $90,683, $101,298, and $108,498, respectively. Because the final 
average case-weighted standardized charges per case for all three 
scenarios exceed the corresponding average case-weighted threshold 
amounts for the respective MS-DRGs of $68,712, $73,775, and $74,836, 
respectively, the applicant maintained that the LUTONIX[supreg] meets

[[Page 49466]]

the cost criterion for new technology add-on payments based on the 
results of the subsequent cost analysis.
    Response: We appreciate both of the applicants' submission of 
additional information and responses. After review of the applicants' 
subsequent analyses and consideration of the public comments we 
received, we believe that both technologies meet the cost criterion.
    With regard to substantial clinical improvement for 
LUTONIX[supreg], the applicant stated that LUTONIX[supreg] represents a 
substantial clinical improvement because it meets an unmet clinical 
need by providing access to ``no stent zones'' and because it can 
achieve greater patency; preserve the flexibility of future 
interventions; and address stent fractures and re-
stenosis.32 33
---------------------------------------------------------------------------

    \32\ Scheinert, D., et al.: Prevalence and clinical impact of 
stent fractures after femoropopliteal stenting. J Am Coll Cardiol, 
2005. 45(2): p. 312-5.
    \33\ Klein, A.J., et al.: Quantitative assessment of the 
conformational change in the femoropopliteal artery with leg 
movement. Catheter Cardiovasc Interv, 2009. 74(5): p. 787-98.
---------------------------------------------------------------------------

    The applicant shared the findings from its LEVANT 1 and LEVANT 2 
trials.
    LEVANT 1: In the LEVANT 1 trial, 101 patients were randomized to a 
LUTONIX[supreg] drug-coated balloon treatment group or a control group 
that received percutaneous transluminal angioplasty (PTA) only. The 
primary endpoint of mean angiographic Late Lumen Loss at 6 months 
favored the LUTONIX[supreg] drug-coated balloon treatment group 
(0.461.13) compared to the control PTA group (1.091.07), with a p-value of 0.016.
    LEVANT 2: The LEVANT 2 study is the applicant's pivotal study that 
was conducted as a prospective, multicenter, single blind, 2:1 (test: 
control) randomized trial comparing the LUTONIX[supreg] drug-coated 
balloon angioplasty to standard balloon angioplasty used during the 
treatment of patients with femoropopliteal arteries. The applicant 
documented that the patient characteristics and lesions in both groups 
were well-matched; 43 percent of patients were diabetic; 35 percent 
were current smokers; 37 percent were female; and 8 percent had 
critical limb ischemia.
    The study was conducted to show that drug-coated balloon 
angioplasty improves clinical outcomes for a patient population as 
compared to currently available treatments. All endpoints were 
adjudicated by a blinded Clinical Events Committee (CEC) and duplex 
ultrasound and angiographic core laboratories.
    The applicant specified two primary endpoints that must both be met 
in order for the study to be successful. The first endpoint was primary 
patency at 12 months, defined as freedom from target lesion restenosis 
and target lesion revascularization (TLR). The results were the 
following: Primary patency for LUTONIX[supreg] was 65.2 percent 
compared to primary patency of 52.6 percent for PTA. Kaplan-Meier 
analysis was 73.5 percent for LUTONIX[supreg] compared to 56.8 percent 
for PTA (p<0.001). The second primary efficacy endpoints were composite 
safety endpoints at 12 months, which included freedom from index-limb 
amputation; reintervention and related death. The results were 83.9 
percent for LUTONIX[supreg] compared to 79.0 percent for PTA.
    The secondary efficacy endpoints at 12 months for this trial were 
freedom from Target lesion revascularization (TLR), and the results 
were 89.7 percent for the LUTONIX[supreg] treatment group compared to 
84.8 percent for the PTA control group, with p=0.17. Another end point 
was freedom from target vessel revascularization (TVR), where the 
result for the LUTONIX[supreg] treatment group was 76.2 percent 
compared to 66.6 percent in the control group with a p-value of 0.041. 
Clinical indicators, such as ankle brachial index (ABI), Rutherford 
scores (categorization of symptomology), quality of life (QOL), walking 
distance, and walking impairment WIQ, were significantly improved with 
a p-value of <0.001. The applicant assessed the primary safety endpoint 
using Kaplan-Meier survival analysis and stated that there was no 
evidence of statistical difference.
    Regarding the LEVANT 1 trial, in the proposed rule, we stated our 
concern that the results of the LEVANT 1 trial were not statistically 
significant with regard to the p-value documented. In addition, adverse 
events were similar for both groups and through 24 months; the 
percentage of patients with any death, amputation, or target vessel 
thrombosis was 8 percent in the treatment group compared to 12 percent 
in the control group.
    Regarding the LEVANT 2 study, in the proposed rule we stated our 
concern that the patient population included in the study may not 
reflect the Medicare population. We also noted that only 37 percent of 
the studied patients were female. We stated that it could be beneficial 
to see additional subgroup analyses to test for statistical interaction 
between treatment and subgroups to ascertain that there is no imbalance 
in response to different subpopulations, such as males versus females.
    We invited public comments on whether LUTONIX[supreg] (and 
IN.PACTTM AdmiralTM) meets the substantial 
clinical improvement criterion.
    Comment: The applicant submitted public comments in response to 
CMS' concerns regarding the statistical significance and adverse events 
documented in the LEVANT 1 trial. The applicant stated that the LEVANT 
1 trial was a first-in-human study designed to provide a preliminary 
look at the efficacy of the LUTONIX[supreg] compared to standard PTA, 
along with a safety assessment of this novel technology in a human 
clinical study. The applicant reiterated that the primary endpoint for 
the LEVANT 1 study was angiographic Late Lumen Loss at 6 months. In 
conclusion, the applicant stated that the data did show a statistically 
significant benefit from the use of the LUTONIX[supreg] over the 
control PTA group (p-value = 0.016), and the study also assessed 
clinical endpoints such as target lesion revasculuarization (TLR) at 
several time points. The applicant further stated that although the 
study was not designed to show a statistical difference in TLR rates, 
there was a trend towards superiority for the LUTONIX[supreg] over 
standard PTA treatments.
    Response: We appreciate the applicant's submission of additional 
information in response to our concerns regarding the LEVANT 1 trial. 
While we do not believe that the results of this trial alone 
sufficiently demonstrate a substantial clinical improvement, we note 
that the applicant also submitted additional clinical data in support 
of its representation of a substantial clinical improvement.
    Comment: In response to CMS' concerns regarding the LEVANT 2 study, 
the applicant and manufacturer of the LUTONIX[supreg] technology 
submitted public comments in which it stated that the proportion of 
females in the LEVANT 2 study is consistent with other reported 
randomized superficial femoral artery (SFA) DCB and SFA stent studies, 
and noted that the percentage of females in the DCB and stent arms for 
these studies ranges from 29.1 percent to 41.0 percent, and the PTA arm 
ranges from 33.1 percent to 42 percent. The applicant stated that the 
LEVANT 2 study enrolled patients at 55 sites globally, including 42 
sites across the U.S. to ensure inclusion of a diverse population of 
patients diagnosed with PAD. The applicant also presented enrollment 
data from other PAD trials such as the THUNDER, IN.PACT, and ZilverPTX 
and indicated that the percentages of females enrolled were 35 percent, 
35 percent, and 34.3 percent, respectively. The applicant conceded that 
the LEVANT 2 study was not designed to study subgroups (including

[[Page 49467]]

females). Therefore, the applicant suggested that data analyses from 
such subgroups should be viewed with caution.
    Response: We appreciate the applicant's submission of additional 
information in response to our concerns regarding the LEVANT 2 trial. 
We acknowledge and have taken into consideration that there is a 
historical underrepresentation of women in PAD trials, and the 
epidemiology and the differential treatment rates between genders may 
also explain the lower rates of women enrolled in the trial. We note 
that, while the LUTONIX[supreg] LEVANT 2 study was not designed to 
study subgroups, Medtronic (the co-applicant) submitted a detailed 
subgroup analysis for the IN.PACTTM AdmiralTM 
technology, which responded to our concerns and is discussed below.
    With regard to substantial clinical improvement for the 
IN.PACTTM AdmiralTM, the applicant stated that 
evidence demonstrates that the technology significantly improves key 
clinical outcomes compared to previous technologies for patients with 
intermittent claudication. Examples of such key clinical outcomes 
included a decrease in recurrence of restenosis (disease process); a 
decrease in rates of repeat interventions (subsequent therapeutic 
interventions); a decrease in future hospitalizations; improved patient 
symptoms (decreased pain), and improvement in quality of life and 
function. To further demonstrate substantial clinical improvement, the 
applicant asserted that historical proof-of-concept research has 
demonstrated the utility of various drug-coated balloon technologies in 
reducing restenosis and reintervention compared with 
PTA.34 35 With this assertion, the applicant stated that 
there was no evidence of the promising primary patency and target 
lesion revascularization rates from large randomized controlled trials. 
This led the applicant to design the IN.PACTTM SFA Trial. 
The IN.PACTTM SFA Trial is a prospective, randomized-
controlled, global, multicenter, single-blinded study conducted with 
independent, blinded adjudication of all key endpoints. The primary 
safety end point was freedom from device-related and procedure-related 
death through 30 days, and freedom from target limb major amputation 
and clinically-driven TVR through 12 months. The primary effectiveness 
endpoint was primary patency, a composite endpoint comprising an 
anatomic measure (binary restenosis as measured by duplex ultrasound or 
angiography) and a clinical measure (Clinically Driven Target Lesion 
Revascularization (CD-TLR)). The IN.PACTTM SFA Trial was 
designed as a two-phase, global, multicenter trial in which 331 
patients with symptoms of claudication or rest pain and with a positive 
diagnostic finding of de novo stenosis and/or non-stented restenotic 
lesions in the SFA and/or popliteal artery (PPA) were randomized in a 
2:1 fashion to treatment with IN.PACTTM Admiral 
TM drug-coated balloon or uncoated balloon angioplasty. The 
trial was prospectively designed to be conducted in two phases: 
IN.PACTTM SFA Phase I (conducted in Europe) and 
IN.PACTTM SFA Phase II (conducted in the United States), 
jointly referred to as IN.PACTTM SFA Trial. According to the 
applicant, the patient demographics were well-matched, noting that 34 
percent of the patients were women.
---------------------------------------------------------------------------

    \34\ Werk M, Albrecht T, Meyer DR, Ahmed MN, Behne A, Dietz U, 
Eschenbach G, Hartmann H, Lange C, Schnorr B, Stiepani H, Zoccai GB, 
H[auml]nninen EL.: Paclitaxel-coated balloons reduce restenosis 
after femoropopliteal angioplasty: evidence from the randomized 
PACIFIER trial. Circ Cardiovasc Interv 2012 5: 831-40.
    \35\ Tepe G, Zeller T, Albrecht T, Heller S, Schwarzw[auml]lder 
U, Beregi JP, Claussen CD, Oldenburg A, Scheller B, Speck U.: Local 
delivery of paclitaxel to inhibit restenosis during angioplasty of 
the leg. N Engl J Med 2008; 358: 689-99.
---------------------------------------------------------------------------

    The applicant noted that, during the SFA Trial, both the study 
subjects and trial sponsor were blinded to the treatment assignments 
through completion of the 12-month primary endpoint evaluations. The 
applicant also stated that the independent Clinical Events Committee 
and the Core Laboratories were blinded to the treatment assignment and 
the duration of the follow-up of study participants. In addition, 
operators (implanting physicians and catheterization laboratory staff, 
including research coordinators) were not blinded to the treatment 
delivered due to macroscopic visual differences between 
IN.PACTTM AdmiralTM drug-coated balloon and 
control technology.
    The applicant reported the following: The primary endpoints were: 
improved primary patency rates in the IN.PACTTM 
AdmiralTM drug-coated balloon arm compared to the control 
arm; and primary patency within 12 months is defined as freedom from 
clinically driven target lesion revascularization and freedom from 
restenosis as determined by duplex ultrasonography peak systolic 
velocity ratio <=2.4 or <=50 percent stenosis as assessed by 
angiography. Results showed that the 12-month primary patency rate was 
82.2 percent in the IN.PACTTM AdmiralTM drug-
coated balloon arm versus 52.4 percent in the PTA arm (P <0.001). In 
addition, the 12-month freedom from binary restenosis (assessed by DUS/
angiography) was 83.5 percent in the IN.PACTTM 
AdmiralTM drug-coated balloon group compared to 66.3 percent 
in the PTA group (P = 0.001). The second endpoint measured was Ankle-
Brachial Index (ABI) showing 0.951 in the IN.PACTTM 
AdmiralTM drug-coated balloon arm compared to 0.866 in the 
control arm, P = 0.002. The ABI is an objective hemodynamic measure 
used to predict the severity of PAD in the lower extremity. The test is 
done by comparing the systolic blood pressure at the ankle and the 
systolic blood pressure in the arm while a person is at rest. In 
general, higher values are better than lower values; a normal resting 
ankle-brachial index is from 1.0 to 1.4, an abnormal resting ankle-
brachial index is 0.9 or lower and an ABI of 0.91 to 0.99 is considered 
borderline abnormal.\36\ Secondary endpoints were primary sustained 
clinical improvement, defined as freedom from target limb amputation, 
target vessel revascularization, and increase in Rutherford class; 
comparing IN.PACTTM AdmiralTM with the control 
arm was 85.2 percent versus 68.9 percent; P <0.001. The rate of repeat 
target lesion revascularization (TLR), defined by the applicant as 
repeat revascularization of the target lesion by percutaneous 
endovascular treatment or bypass surgery, was 2.4 percent in the 
IN.PACTTM AdmiralTM drug-coated balloon arm 
compared to 20.6 percent in the control arm. In addition, the target 
vessel revascularization (TVR) procedures (that is, any 
revascularization done to any segment of the entire target vessel that 
may reflect restenosis of a target lesion or disease progression 
causing a new lesion in the target artery) \37\ was 4.3 percent in the 
IN.PACTTM AdmiralTM drug-coated balloon arm 
compared to 23.4 percent in the control arm with a p-value of <0.001).
---------------------------------------------------------------------------

    \36\ Hirsch AT, Haskal ZJ, Hertzner NR, et al.: ACC/AHA 
guidelines for the management of subjects with peripheral arterial 
disease (lower extremity, renal, mesenteric, and abdominal aorta): 
executive summary. J Am Coll Cardiol 2006;47:1239-312.
    \37\ Werk M, Langner S, Reinkensmeier B, Boettcher HF, Tepe G, 
Dietz U, Hosten N, Hamm B, Speck U, Ricke J.: Inhibition of 
restenosis in femoropopliteal arteries: paclitaxel-coated versus 
uncoated balloon: femoral paclitaxel randomized pilot trial. 
Circulation 2008;118: 1358-65.
---------------------------------------------------------------------------

    Other secondary endpoints were conducted and the patients were 
followed at 1, 6, and 12 months to assess the following claudication 
symptoms: EQ-5D; Walking Impairment Questionnaire (WIQ); 6-minute walk 
test in a subset. Claudication symptoms were 7.3 percent in the 
IN.PACTTM

[[Page 49468]]

AdmiralTM drug-coated balloon arm compared to 20.7 percent 
in the control arm. For WIQ (defined as the ability of PAD patients to 
walk defined distances and speeds, plus climb stairs, thus evaluating 
claudication severity levels \38\), the gains in improvement were 
similar in both groups. The 6-minute walk test, which is a measure of 
functional exercise capacity, was equivocal in both arms. Quality of 
life (QOL) was measured using five domains of the EQ-5D (mobility, 
self-care, usual activities, pain/discomfort, and anxiety/depression) 
and was found to be equivocal. EQ-5DTM is a standardized 
instrument for use as a measure of health outcome.\39\
---------------------------------------------------------------------------

    \38\ Jones WS, Schmit KM, Vemulapalli S, Subherwal S, Patel MR, 
Hasselblad V, Heidenfelder BL, Chobot MM, Posey R, Wing L, Sanders 
GD, Dolor RJ.: Treatment Strategies for Patients With Peripheral 
Artery Disease. Comparative Effectiveness Review No. 118. (Prepared 
by the Duke Evidence-based Practice Center under Contract No. 290-
2007-10066-I.) AHRQ Publication No. 13-EHC090-EF. Rockville, MD: 
Agency for Healthcare Research and Quality; May 2013. Available at: 
http://www.effectivehealthcare.ahrq.gov/reports/final.
    \39\ http://www.euroqol.org/.
_____________________________________-

    The applicant also conducted extensive subgroup analyses of the 
primary safety end point, efficacy endpoint, and TLR rates to assess 
the response to IN.PACTTM AdmiralTM in various 
subpopulations, including: Rutherford category (2, 3, and 4); diabetes; 
age (>=75); lesion length (<5 cm, >=5 cm to <10 cm, >=10 cm to <18 cm); 
total occlusion, and gender. According to the applicant, although the 
trial was not designed to power the subgroup analyses, in 9 of these 11 
subgroups, patients in the IN.PACTTM AdmiralTM 
treatment group were shown to have statistically significant better 
outcomes than patients in the PTA control group in the primary 
effectiveness and safety endpoints as well as clinically-driven TLR. 
This includes subgroups: Rutherford categories 2 &3; diabetes; age 
(>=75); lesion length >=5 cm to <10 cm; lesion length >=10 cm to <18 
cm; total occlusion; and gender (both male and female). In the two 
subgroups that did not meet statistical significance (Rutherford 
category 4 and lesion length <5 cm), data for the primary effectiveness 
and safety endpoints as well as the clinically driven TLR trended in 
favor of IN.PACTTM AdmiralTM.
    After reviewing the clinical data described above, in the proposed 
rule we raised a number of concerns related to the substantial clinical 
improvement criterion. Similar to the LUTONIX[supreg] LEVANT studies, 
in the proposed rule we stated that we were concerned that the 
IN.PACTTM SFA trial did not match the gender variable. Also, 
in the proposed rule we stated that we were concerned about the 
clinical meaningfulness of some of the endpoints measured by the 
IN.PACT SFA Trial conducted by Medtronic. For example, there were no 
changes in functional measures such as walking distances. The applicant 
indicated that this may be because patients in the control group had 
additional procedures to the point their symptoms were controlled to 
the same extent as those of the drug-coated balloon group. We stated 
that we believe that this assertion could be better supported with 
data. We also cited the higher ankle-brachial index in the drug-coated 
balloon catheter group as a related example of concern about the 
clinical meaningfulness of some of the endpoints measured by the 
IN.PACT SFA trials. While this is also consistent with an enduring 
physiologic effect of the drug-coated balloon device, we stated our 
concern that these ABI measurements appear to have been made by 
unblinded study personnel. As a result, we stated that the 
IN.PACTTM AdmiralTM technology may not be the 
optimal treatment for all patients diagnosed with peripheral arterial 
disease. The drug-coated balloon catheter has been compared only with a 
standard balloon, and no other alternatives, such as stents, surgery, 
or intensive exercise therapy. Therefore, it is unknown whether a drug-
coated balloon strategy would yield the same, better, or worse outcomes 
than these alternatives. We also noted that while there appears to be 
broader anatomical applicability, not all of the studies provided 
definitively indicate that it is a clinical improvement over PTA.
    We invited public comments on whether IN.PACTTM 
AdmiralTM (and LUTONIX[supreg]) meets the substantial 
clinical improvement criterion.
    Comment: The applicant submitted public comments in response to 
CMS' concern regarding matching on the gender variable, in which the 
applicant stated that historically, the proportion of females enrolled 
in Peripheral Artery Disease (PAD) trials has been lower than that of 
males. The applicant provided data of lower percentages of women 
recruited for similar studies. In addition, the applicant noted that 
evidence suggests that women diagnosed with PAD may be less likely to 
undergo lower extremity revascularization than men. The applicant 
further stated that gender differences in the treatment of patients 
diagnosed with PAD, similar to that found with the treatment patients 
diagnosed with congestive heart disease (CHD), have been reported. 
Overall, multiple factors including differences in epidemiology, 
clinical presentation, and awareness of PAD may have contributed to 
differential selection for PAD treatment and, by extension, 
participation in a clinical trial. However, the applicant agreed that 
it is important to ensure adequate representation of women in PAD 
trials and address barriers to treatment/trial enrollment.
    The applicant further asserted that with respect to outcomes of 
women treated with IN.PACTTM AdmiralTM DCB verses 
standard PTA options in the IN.PACT SFA Trial, detailed subgroup 
analyses were carried out to study treatment effects and interactions 
by gender and other variables. According to the applicant, results show 
that the use of DCB significantly improved outcomes compared to 
standard PTA options in both males and females. The primary 
effectiveness endpoint of primary patency at 12 months was 
statistically significant in favor of the IN.PACTTM 
AdmiralTM DCB versus standard PTA options for both females 
and males. Similar findings were observed for the primary safety 
composite endpoint. In addition clinically-driven target lesion 
revascularization (TLR) rates were significantly lower in the 
IN.PACTTM AdmiralTM DCB arm versus the PTA arm 
for both males and females. These gender specific analyses demonstrated 
no differences in treatment effects between men and women (that is, 
there was no gender by treatment interaction). The applicant stated 
that given the statistically significant results for the primary safety 
and effectiveness endpoints in both genders, it believed that a more 
balanced enrollment in the male and female subgroups would be expected 
to show the same results, with tighter confidence intervals.
    Response: We appreciate the applicant's response and, as noted 
above, we have taken into consideration that there is a historical 
underrepresentation of women in PAD trials in our determination of 
whether the technology represents a substantial clinical improvement.
    Comment: The applicant submitted public comments in response to 
CMS' concern regarding the clinical meaningfulness of some of the 
endpoints measured by the IN.PACT SFA Trial. The applicant stated that 
the IN.PACTTM AdmiralTM SFA Trial was designed to 
assess the safety and efficacy of the IN.PACTTM 
AdmiralTM DCB in treating femoropopliteal artery disease, 
with primary patency and safety composite as the primary

[[Page 49469]]

endpoints at 12 months. However, the applicant noted that it also 
assessed important functional and quality of life outcomes as key 
secondary end points including the EQ-5D and walking impairment (WIQ). 
The applicant's results showed that patients in the 
IN.PACTTM AdmiralTM DCB arm had better EQ-5D 
results at 6 and 12 months relative to the baseline than patients in 
the PTA arm. At 6 months, there was a significantly greater decline in 
QoL in the PTA arm indicating early treatment failure. At 12 months, 
the applicant asserted that improvements continued to trend in favor of 
the IN.PACTTM AdmiralTM DCB arm, approaching 
statistical significance in four of the five domains of the EQ-5D (all 
domains except anxiety/depression). The applicant noted that, although 
some of the functional outcome measures did not show statistically 
significant differences between treatment groups at 12 months, the PTA 
patients required 8.6 times more target vessel revascularizations to 
receive the same level of functional performance as 
IN.PACTTM AdmiralTM DCB patients. The applicant 
asserted that clinically-driven target vessel revascularization (CD-
TLR) is a key indicator for failed functional performance and both CD-
TLR and primary sustained clinical improvement at 12 months 
demonstrated statistical significance (p<0.001) favoring the 
IN.PACTTM AdmiralTM DCB group. The applicant 
concluded that patients treated with IN.PACTTM 
AdmiralTM DCB had significantly better primary patency and a 
marked reduction in the need for target lesion revascularization and 
associated costs.
    Response: We appreciate the applicant's clarification. We believe 
that our concerns are satisfied by the additional documentation, which 
indicates that the assessment of the EQ-5D (EQ 5 domains) and walking 
impairment surveys are sufficient quality of life outcomes that 
demonstrated trends that favored IN.PACTTM 
AdmiralTM DCB over standard PTA.
    Comment: The applicant submitted public comment regarding CMS' 
concern on the clinical meaningfulness and measurement of the ankle 
branchial index (ABI) endpoint, in which the applicant stated that ABI 
is a simple noninvasive diagnostic test of choice when evaluating 
patients for PAD.40 41 The ABI is a result of a calculation 
based on an objective measurement of the pressures of the patient's 
ankles/toes and arms. The nurse/technologist performs the ABI/TBI test 
according to the institutional policy/procedure, using Doppler flow 
detectors, and immediately records the pressure readings. Because the 
ABI is a ratio of the blood pressure at the ankle and the arm, the risk 
of subjectivity in the ABI value is minimal. The applicant further 
stated the sensitivity and specificity of ABI in diagnosing PAD has 
been validated using angiograms, and the test was found to have high 
sensitivity (95 percent) and specificity (100 percent) in diagnosing 
PAD.\42\
---------------------------------------------------------------------------

    \40\ Lange SF, Trampisch HJ, Pittrow D, Darius H, Mahn M, 
Allenberg JR. Profound influence of different methods for 
determination of the ankle brachial index on the prevalence estimate 
of peripheral arterial disease. BMC Public Health. 2007;7:147.
    \41\ Shanmugasundaram M, Ram VK, Luft UC, Szerlip M, Alpert JS. 
Peripheral arterial disease--what do we need to know?. Clin Cardiol. 
Jun 29 2011;[Epub ahead of print].
    \42\ Bernstein EF, Fronek A. Current status of noninvasive tests 
in the diagnosis of peripheral arterial disease. Surg Clin North Am. 
1982;62:473-487.
---------------------------------------------------------------------------

    Response: We appreciate the applicant's expanded explanation and 
input.
    Comment: In the applicant's submitted public comment in response to 
CMS' concern that the IN.PACTTM AdmiralTM 
technology may not be the optimal treatment for all patients diagnosed 
with peripheral arterial disease, the applicant asserted that the 
IN.PACTTM AdmiralTM DCB is not intended to be the 
optimal treatment for all patients with PAD and is not indicated for 
patients diagnosed with below-the-knee PAD. Rather, the applicant 
explained that the technology is indicated for treatment of de novo or 
restenotic lesions up to 180 mm in length in native superficial femoral 
or popliteal arteries with reference vessel diameters of 4-7 mm (after 
pre-dilatation). The applicant further stated that current ACC/AHA 
Guidelines recommend the use of endovascular therapies for treatment of 
patients with vocational or lifestyle-limiting disability due to 
intermittent claudication only after inadequate response to exercise or 
medication, and when there is a favorable risk-benefit ratio. Patients 
diagnosed with intermittent claudication (IC) eligible for endovascular 
therapy based on guidelines may benefit from the IN.PACTTM 
AdmiralTM DCB. The applicant believed that there will also 
be a portion of patients needing provisional stenting, or even surgery 
to achieve optimal outcomes that may benefit from the 
IN.PACTTM AdmiralTM.
    Another commenter referenced an article that states that there 
remains a significant unmet clinical need in patients diagnosed with 
PAD, as well as a significant progress in the use of vascular 
procedures (both diagnostic and therapeutic) and preventive care.\43\ 
The commenter recommended that CMS approve new technology add-on 
payments for the LUTONIX[supreg] IN.PACTTM 
AdmiralTM.
---------------------------------------------------------------------------

    \43\ Goodney, Tarulli, Faerber, et al. Fifteen-Year Trends in 
Lower Limb Amputation, Revascularization, and Preventive Measures 
among Medicare Patients. JAMA Surg. 2015; 150(1):84-86.
---------------------------------------------------------------------------

    Response: We appreciate the applicant's submission of the 
additional data on the specific unmet need that may be met by use of 
the LUTONIX[supreg] and IN.PACTTM AdmiralTM 
technology. We believe that the information provided satisfies our 
concerns, and the totality of the data from the submitted studies 
demonstrates that the technologies meet the substantial clinical 
improvement criterion.
    After consideration of the comments we received, we are approving 
the LUTONIX[supreg] and IN.PACTTM AdmiralTM 
technologies for new technology add-on payments for FY 2016. Cases 
involving the use of LUTONIX[supreg] and IN.PACTTM 
AdmiralTM DCBs that are eligible for new technology add-on 
payments will be identified by one of the ICD-10-PCS procedure codes 
identified in the table earlier in this section.
    Each of the applicants submitted operating costs for its DCB. The 
manufacturer of the LUTONIX[supreg] stated that a mean of 1.37 drug-
coated balloons was used during the LEVANT 2 clinical trial. The 
acquisition price for the hospital will be $1,900 per drug-coated 
balloon, or $2,603 per case (1.37 x $1,900). The applicant projects 
that approximately 8,875 cases will involve use of the LUTONIX[supreg] 
for FY 2016. The manufacturer for the IN.PACTTM 
AdmiralTM stated that a mean of 1.4 drug-coated balloons was 
used during the IN.PACTTM AdmiralTM DCB arm. The 
acquisition price for the hospital will be $1,350 per drug-coated 
balloon, or $1,890 per case (1.4 x $1,350). The applicant projects that 
approximately 26,000 cases will involve use of the IN.PACTTM 
AdmiralTM for FY 2016.
    New technology add-on payments for cases involving these 
technologies will be based on the weighted average cost of the two DCBs 
described by the ICD-10-PCS procedure codes listed above (which are not 
manufacturer specific). Because ICD-10 codes are not manufacturer 
specific, we cannot set one new technology add-on payment amount for 
IN.PACTTM AdmiralTM and a different new 
technology add-on payment amount for LUTONIX[supreg]; both technologies 
will be captured by using

[[Page 49470]]

the same ICD-10-PCS procedure code. As such, we believe that the use of 
a weighted average of the cost of the standard DCBs based on the 
projected number of cases involving each technology to determine the 
maximum new technology add-on payment would be most appropriate. To 
compute the weighted cost average, we summed the total number of 
projected cases for each of the applicants, which equaled 34,875 cases 
(26,000 plus 8,875). We then divided the number of projected cases for 
each of the applicants by the total number of cases, which resulted in 
the following case-weighted percentages: 25 percent for the 
LUTONIX[supreg] and 75 percent for the IN.PACTTM 
AdmiralTM. We then multiplied the cost per case for the 
manufacturer specific DCB by the case-weighted percentage (0.25 * 
$2,603 = $662.41 for LUTONIX[supreg] and 0.75 * $1,890 = $1,409.03 for 
the IN.PACTTM AdmiralTM). This resulted in a 
case-weighted average cost of $2,071.45 for DCBs. Under Sec.  
412.88(a)(2), we limit new technology add-on payments to the lesser of 
50 percent of the average cost of the device or 50 percent of the costs 
in excess of the MS-DRG payment for the case. As a result, the maximum 
payment for a case involving the LUTONIX[supreg] or 
IN.PACTTM AdmiralTM DCBs is $1,035.72 for FY 
2016.
e. VERASENSETM Knee Balancer System (VKS)
    OrthoSensor submitted an application for new technology add-on 
payments for the VERASENSETM Knee Balancer System (VKS) for 
FY 2016. The VKS is a sterile, single patient use device to 
intraoperatively provide a means to dynamically balance the patient's 
knee during total knee arthroplasty (TKA) surgery. The applicant stated 
that quantitative metrics, viewed on a monitor through real time 
wireless information, enable the surgeon to improve soft tissue 
stability and kinetics during TKA surgery. The VKS device includes a 
tibial trial insert composed of an array of responsive sensors that 
delivers quantified kinetic balance data during TKA surgery. Therefore, 
the applicant believed that the quantitative data provides a basis for 
the surgeon to make data-based decisions regarding tissue dissection 
during TKA surgeries, resulting in a more stable outcome.
    According to the applicant, the VKS device combines dual sensor 
elements, coupled with micro-processing technology, to accurately 
depict intra-articular kinetics and contact point locations within the 
knee. The tibial trial insert is placed in the knee capsule. Proper 
placement of the insert does not require any force or infiltration of 
the bone or soft tissue in the knee. The applicant stated that the VKS 
device uses wireless communication protocols that overcome line-of-
sight or other interference issues, therefore eliminating the need for 
line-of-sight or direct antenna-based tracking during the TKA surgery.
    The first version of the VKS received FDA approval in 2009 for the 
OrthoRex Intra-Operative Load Sensor. The device was indicated for use 
as a tool to adjust the femoral knee implant to reduce instability from 
flexion gap asymmetry using a single patient use sterile force sensor. 
The applicant noted that the first version of the VKS was not available 
on the U.S. market at the time of FDA approval in 2009. The applicant 
stated that the 510K approval from the FDA allowed permission to 
continue to test the device and improve upon the specificity of the 
sensors. The applicant stated that the first version of the VKS did not 
enter on the U.S. market until late 2011. Further advancements were 
made to the VKS to more accurately refine the sensor specificity, which 
provides more accurate balance data unique to the contours of specific 
knee implant components. The applicant further explained that the 
tibial trial sensor was redesigned to respond quantitatively and 
specifically to the variations of the contours of specifically 
manufactured knee implants. The advanced sensor specificity, developed 
in conjunction with data gained from clinical trials, provides 
information regarding force and balance metrics that aid the surgeon's 
understanding and measurement of knee balance. The applicant noted that 
without the advancements to the sensor specificity, which were 
perfected based on knowledge gained from the clinical trials, the 
sensor would not be as clinically useful as it is currently. According 
to the applicant, these advancements resulted in additional FDA 
clearances on June 13, 2013, and October 14, 2013, and the product's 
description was updated on January 28, 2014.
    The applicant maintained that the VKS meets the newness criterion 
for new technology add-on payments. In the FY 2016 IPPS/LTCH PPS 
proposed rule (80 FR 24453), we stated that we believe that the 
beginning of the newness period for the VKS commenced when the product 
was first made available on the U.S. market in late 2011, and the 3-
year anniversary date of the product's availability on the U.S. market 
occurred in late 2014, which is prior to the beginning of FY 2016. We 
also stated that the advancements made to the VKS that resulted in the 
additional FDA approval clearances in 2013 may not be significant 
enough to distinguish the advanced technology from the first version of 
the VKS, which received FDA approval in 2009. Therefore, we did not 
believe that the VKS technology could be considered ``new'' for 
purposes of new technology add-on payments.
    As discussed in the FY 2005 IPPS final rule (69 FR 49003), once 
data become available to reflect the cost of the technology in the 
relative weights, a technology can no longer be considered ``new'' and 
eligible to receive new technology add-on payments. Section 
412.87(b)(2) states that a medical service or technology may be 
considered new within 2 or 3 years after the point at which data begin 
to become available reflecting the ICD-9-CM code assigned to the new 
service or technology (depending on when a new code is assigned and 
data on the new service or technology become available for DRG 
recalibration). After CMS has recalibrated the DRGs based on available 
data that reflects the costs of an otherwise new medical service or 
technology, the medical service or technology will no longer be 
considered ``new'' under this criterion. The applicant analyzed the 
relative weights from 2010 to 2014 for the MS-DRGs that may contain 
cases that would be eligible for treatment using the advanced VKS 
technology (MS-DRGs 461 through 470). As a result of its analysis, the 
applicant noted that there was no increase in the calculation of the FY 
2014 or FY 2015 relative weights for these MS-DRGs that would represent 
and include the additional cost of cases involving the advanced VKS 
technology. To the contrary, in the FY 2016 IPPS/LTCH PPS proposed 
rule, we stated that we believe that the costs of this technology are 
included in the charge data and the MS-DRGs have been recalibrated 
using that data. Therefore, we believe that the technology can no 
longer be considered ``new'' for the purposes of this provision, 
regardless of whether or not there was an increase in the MS-DRG 
relative weights during FYs 2014 and 2015, specifically because of the 
inclusion of the cost of the technology.
    Specifically, as discussed in the proposed rule, in the FY 2010 
IPPS/RY 2010 LTCH PPS final rule (74 FR 43813 through 43814) as part of 
the newness criterion, we established criteria for evaluating whether a 
new technology is substantially similar to an existing technology, 
specifically: (1) Whether a product uses the same or a similar 
mechanism of action to achieve a therapeutic outcome; (2) whether a

[[Page 49471]]

product is assigned to the same or a different MS-DRG; and (3) whether 
the new use of the technology involves the treatment of the same or 
similar type of disease and the same or similar patient population. If 
a technology meets all three of the criteria, it would be considered 
substantially similar to an existing technology and would not be 
considered ``new'' for purposes of new technology add-on payments.
    In evaluating the VKS new technology add-on payment application 
under the substantial similarity criteria, in the FY 2016 IPPS/LTCH PPS 
proposed rule, we stated that we believe that the first version of the 
VKS and the advance version of the VKS use the same mechanism of action 
to achieve the desired outcome by using a sterile device that is 
equipped with sensors used to adjust the femoral knee implant to reduce 
instability from flexion gap asymmetry. In addition, we believe that 
cases involving the first version of the VKS would be assigned to the 
same MS-DRG as the cases involving the advanced VKS. Moreover, it 
appeared that both the first version of the VKS and the advanced 
version of the VKS would treat the same or similar disease and the same 
or similar patient population. We concluded that, because the 
technology appeared to meet all three elements of the substantial 
similarity criteria, we believe that the beginning of the newness 
period for this technology would commence when it became available on 
the U.S. market in late 2011, and therefore the VKS may not be 
considered ``new'' for purposes of new technology add-on payments.
    We invited public comments regarding whether or not the VKS 
technology is substantially similar to existing technologies, and 
whether or not the VKS technology meets the newness criterion.
    Comment: The applicant submitted comments in response to our 
concerns regarding whether the anniversary date of entry onto the U.S. 
market for the VKS is within the 2 to 3 year limit in accordance with 
the newness criterion. According to the applicant, the technical 
evolution of the device received FDA 510k clearance in June 2013 based 
on a completely new operating principal and expanded functionality 
(tibia and overall limb alignment), which is representative of the 
advanced version of the device currently used. The applicant further 
stated that, in addition to the ability to measure both load and 
alignment of the knee (which are capabilities of the evolved use of the 
device since the FDA clearance was granted in June 2013), there also 
has been effective use of the technology in a revision knee capacity, 
which is an added indication that is currently under review by FDA for 
clearance as an additional indication for the use of the technology. 
The applicant believed that improved TKA outcomes lead to greater 
mobility, reduced morbidity, and a reduced need for revision knee 
surgery as evidenced by experience demonstrating that the use of the 
TKS device leads to a more stable TKA and, subsequently, to a 
significantly reduced probability of the need for revision TKA 
procedures. The applicant added that the approval of new technology 
add-on payments for this technology would enable broader access to the 
benefits of the TKS's capabilities and allow patients to experience 
statistically significantly improved TKA outcomes. The applicant also 
noted that new technology add-on payment newness criterion dictates 
eligibility by limiting the product's ``newness'' classification within 
the statutory time of 2 to 3 years, and recognized that the intent of 
the limit is to ensure that there is no current data reflecting the 
cost of the new technology that would be used to recalibrate the MS-
DRGs. However, the applicant explained that the charges and costs 
relating to the use of the advanced version of the new technology 
(which is the subject of the application) are not reflected in the most 
current claims data and have not been used to recalibrate MS-DRGs and, 
therefore, the MS-DRG payment rate otherwise applicable to the cost of 
procedures involving the use of the advanced version of the new 
technology would be inadequate.
    Response: We appreciate the details included in the applicant's 
response to distinguish the 2013 advanced version of the VKS that 
received FDA clearance from prior versions of the technology, which 
also have received FDA approvals. However, after considering the 
information provided, we continue to believe that the advancements made 
to the VKS that resulted in the additional FDA approval clearances in 
2013 are not significant enough to distinguish the advanced version of 
the technology from the first version of the VKS, which received FDA 
approval in 2009. In addition, in examining the FDA labeling included 
in the FDA approvals in 2009 and 2013, we recognize that the language 
from the labeling included in the 2013 FDA approval does not reflect 
the changes mentioned by the applicant with regard to its indications 
and use. Therefore, it appears that data of the current version of the 
VKS is already reflected within the MS-DRGs. We discuss the comments 
related to the substantial similarity components of the newness 
criterion, including MS-DRG assignment of cases involving this 
technology, in our responses to other comments below.
    Comment: In response to CMS' concerns whether the 2013 advanced 
version of the VKS device has a different mechanism of action than the 
previous version of the VKS device, the applicant explained in its 
comment that the mechanism of action for the 2013 FDA-cleared advanced 
version of the VKS uses novel proprietary changes to the electrical 
engineering principles in order to capture, measure, analyze, and 
report measures of load, balance, alignment and rotational congruency, 
which, when compared to the 2009 FDA-approved device, uses a different 
mechanism of action. The applicant noted that this development was a 
significant engineering change requiring reworking of the programs for 
the sensors, including modifying the internal design, placement, and 
programming to correctly capture and report measurements related to 
balance, load, and alignment relative to rotational congruency across 
the tibial plateau.\44\ The applicant indicated that the advanced 
version of the VKS device that received FDA clearance in 2013 made note 
of the expanded capability, which added measurement of ``alignment,'' 
whereas the capability of the prior VKS device design could only 
measure load and balance.
---------------------------------------------------------------------------

    \44\ Roche MW, Elson LC, Anderson CR. A Novel Technique Using 
Sensor-Based Technology to Evaluate Tibial Tray Rotation. 
Orthopedics. 2015 Mar 1;38(3).
---------------------------------------------------------------------------

    The applicant further noted that, when comparing this advanced 
device to its predecessor, its use produces patient outcomes that are 
similar because both devices measured load relative to ligament 
balance, and outcomes were measured as a function of load. The 
applicant stated that the advanced device approved by the FDA in 2013 
has the ability to uniquely report relative femoro-tibial rotation and 
has changed the variables regarding how the surgeon can use the device 
relative to the soft tissue (ligament) dissection and implant 
positioning, which allows the surgeon to better measure varus/valgus 
angles relative to load and balance, and allows for empirically-based 
decisions used in making angular cuts for both primary and revision TKA 
procedures. The applicant believed that the introduction of new 
engineering principles used in the 2013 FDA-cleared advanced version of 
the VKS device captures, measures, and reports more accurately 
intercompartmental load,

[[Page 49472]]

overall limb alignment, and component rotation, which significantly 
distinguishes its capabilities from the prior version of the VKS 
device.
    Response: We appreciate the information and details included in the 
applicant's comment. However, we remain concerned that the 2013 FDA-
cleared advanced version of the VKS uses the same mechanism of action 
as the prior versions of the VKS that previously received FDA clearance 
in 2009 and 2011. We note that each technology previously approved for 
this device used similar mechanisms of action to balance a patient's 
knee joint during TKA surgery. In addition, it is unclear whether the 
device's current engineering changes, which include the added 
capability of measurement for knee joint load, balance, and limb 
alignment, resulted in improvements that go beyond what could be 
considered a software patch to make adjustments to refine the 
computation of kinetic knee joint stability and ``balance.'' Therefore, 
we do not believe there has been a change in the mechanism of action 
with the current VKS device.
    Comment: In response to CMS' concerns whether cases involving the 
advanced version of the VKS device would be assigned to the same MS-DRG 
as cases involving the previous versions of the VKS device, and whether 
each version of the VKS device could be used to treat the same or 
similar disease and the same or similar patient population, the 
applicant in its comment stated that it believed that cases 
representing patients requiring revision knee surgery, which map to MS-
DRG 466, 467 and 468 (Revision of Hip or Knee replacement with MCC, 
with CC, and without CC/MCC, respectively), would now be eligible for 
evaluation as candidates eligible for treatment using the advanced 
version of the VKS device. The applicant believed that a new population 
of patients exists that could benefit from treatments in which 
intraoperative use of the VKS device can be further validated and 
improve upon the outcomes of these types of procedures. The applicant 
further explained that engineering advances extended the VKS' 
capabilities that created a seamless surgical process supporting key 
intraoperative challenges of revision knee surgery. The applicant 
stated that the ability to gain a seamless surgical flow during complex 
surgery, and having refined metrics including load and balance relative 
to the anatomy of a revision, enables surgeons to consider a new 
patient population. The applicant noted that the prior versions of the 
VKS device could not accommodate varus/valgus angles, and did not have 
the refined ability to provide information for angular bony cuts. The 
applicant stated that the advancements achieve outcomes based on a 
different mechanism of action that provides a higher degree of accuracy 
when reporting load, alignment, and balance, which enables accurate 
localization of load using metrics that convert to surgeon dissection 
specific to the patient's knee. The applicant believed that these 
advancements also allow a new population of patients to be considered 
for these types of procedures that map to MS-DRGs 466, 467, 468.
    Response: In examining the FDA labeling included in the FDA 
approvals and indications for the technology's uses from 2009 and 2013, 
we do not recognize any language in the labeling included in the 2013 
FDA approval of the advanced version of the VKS that reflects the 
changes in indication or recommend use, as mentioned by the applicant. 
Therefore, we are unable to determine if the advancements made to the 
2013 FDA-cleared version of the VKS are significant enough that cases 
involving the advanced version would not be assigned to the same or 
different MS-DRGs or involve the treatment of the same or different 
patient population as would cases involving the previously FDA-cleared 
versions of the VKS.
    As stated in section II.G.1.a. of the preamble of the FY 2016 IPPS/
LTCH PPS proposed rule and this final rule, effective October 1, 2015 
(FY 2016), the ICD-10 coding system will be implemented. In the 
proposed rule, we noted that the applicant had applied for a new ICD-
10-PCS procedure code at the March 18-19, 2015 ICD-10-CM/PCS 
Coordination and Maintenance Committee Meeting. In this final rule, we 
note that the new ICD-10-PCS procedure codes XR2G021 (Monitoring of 
Right Knee Joint using Intraoperative Knee Replacement Sensor, Open 
Approach, New Technology Group 1) and XR2H021 (Monitoring of Left Knee 
Joint using Intraoperative Knee Replacement Sensor, Open Approach, New 
Technology Group 1), were established as shown in Table 6B (New 
Procedure Codes), which will uniquely identify procedures involving the 
VKS technology. More information on this request and the approval can 
be found on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html and 
the FY 2016 New ICD-10-PCS Codes can be found at the CMS Web site at: 
http://www.cms.gov/Medicare/Coding/ICD10/2016-ICD-10-PCS-and-GEMs.html.
    With regard to the cost criterion, the applicant supplied three 
analyses to demonstrate that it meets the cost criterion. The applicant 
believed that cases that are eligible for the VKS technology map to MS-
DRGs 461 and 462 (Bilateral or Multiple Major Joint Procedures of Lower 
Extremity with MCC and without MCC, respectively), MS-DRGs 466 through 
468 (Revision of Hip or Knee replacement with MCC, with CC, and without 
CC/MCC, respectively), and MS-DRGs 469 and 470 (Major Joint Replacement 
or Reattachment of Lower Extremity with MCC and without MCC, 
respectively). The first analysis used data from the 2012 National 
Inpatient Sample (NIS) from the Agency for Research and Quality (AHRQ). 
We note that the NIS includes Medicare, Medicaid, and commercial and 
uninsured claims data. However, the applicant limited its search to 
Medicare cases only.
    The applicant searched for all Medicare cases assigned to MS-DRGs 
461 and 462 and found 812 and 14,200 cases respectively (for a total of 
15,012 cases). The applicant noted that the 15,012 cases assigned to 
MS-DRGs 461 and 462 also include cases representing hip revision 
procedures. Therefore, to determine the number of eligible cases 
reporting bilateral knee revisions assigned to MS-DRGs 461 and 462, 
based on clinical information, \45\ the applicant approximated that 4 
percent of the cases assigned to MS-DRGs 461 and 462 represent Medicare 
beneficiaries who may be eligible for the VKS for a bilateral knee 
revision procedure. As a result, the applicant focused its analysis on 
32 cases assigned to MS-DRG 461 (812 cases * .04), and 568 cases 
assigned to MS-DRG 462 (14,200 cases * .04). In the FY 2016 IPPS/LTCH 
PPS proposed rule, we stated we were concerned that the statistical 
data obtained from clinical information that the applicant used to 
determine the percentage of cases representing bilateral knee revisions 
still includes cases representing hip revision procedures. 
Specifically, the applicant did not uniquely identify cases 
representing bilateral knee revisions and only produced a percentage of 
all cases that still includes cases for hip revision procedures.
---------------------------------------------------------------------------

    \45\ Memtsoudis SG, Valle AGD, Besculides MC, Gaber, Sculco TP.: 
In-hospital complications and mortality of unilateral, bilateral, 
and revision TKA. 2008, Clin Orthop Relat Res, 466:2617-2627.
---------------------------------------------------------------------------

    According to the applicant, eligible cases for the VKS technology 
include cases representing knee revision procedures that also map to 
MS-DRGs 466 through 468 (which represent

[[Page 49473]]

degrees of severity calculated for each MS-DRG). To determine the 
number of eligible cases reporting knee revision procedures assigned to 
MS-DRGs 466 through 468, the applicant first searched the NIS database 
for the total number of Medicare cases assigned to these MS-DRGs. This 
resulted in a total of 54,105 cases. The applicant noted that MS-DRGs 
466 through 468 also include cases for hip and knee revision 
procedures. Therefore, to determine the number of cases representing 
knee revision procedures in each of these three MS-DRGs, the applicant 
first divided the number of Medicare cases for each MS-DRG (5,195 for 
MS-DRG 466, 28,650 for MS-DRG 467, and 20,260 for MS-DRG 468) by the 
total number of Medicare cases assigned to MS-DRGs 466, 467, and 468 
(54,105). The applicant then multiplied the percentage for each MS-DRG 
(9.6 percent for MS-DRG 466, 52.9 percent for MS-DRG 467, and 37.4 
percent for MS-DRG 468) by the total amount of cases assigned to each 
MS-DRG. Based on this calculation, the applicant approximated the 
following number of cases representing knee revision procedures 
assigned to each of these three MS-DRGs: 3,054 cases in MS-DRG 466; 
16,842 in MS-DRG 467; and 11,910 in MS-DRG 468. In the proposed rule we 
stated that the methodology the applicant used to determine the 
percentage of cases representing knee revision procedures still 
includes cases representing hip revision procedures. Specifically, in 
its methodology, the applicant did not use any source of statistical 
relevance to isolate cases representing knee revision procedures. 
Rather, the applicant used the percentage of Medicare cases assigned to 
each MS-DRG of the overall total cases for the three MS-DRGs, which 
includes knee and hip revisions, and multiplied by this percentage to 
further reduce the total number of cases. We stated that we do not 
believe that this further reduction to the total number of Medicare 
cases has sufficiently isolated cases representing knee revision 
procedures.
    According to the applicant, eligible cases for the VKS technology 
also include TKA procedures that map to MS-DRGs 469 and 470. To 
determine the number of eligible cases reporting TKA procedures 
assigned to MS-DRGs 469 and 470, the applicant first searched the NIS 
database for the total number of Medicare cases assigned to these MS-
DRGs. This resulted in 35,740 cases in MS-DRG 469 and 547,955 cases in 
MS-DRG 470. The applicant noted that MS-DRGs 469 and 470 also include 
cases representing hip replacement and other joint replacement 
procedures. Therefore, in order to determine the number of TKA 
procedures within these MS-DRGs, the applicant searched the NIS 
database for cases reporting ICD-9-CM procedure codes that typically 
map to these MS-DRGs. The applicant first searched for cases 
representing TKA across all MS-DRGs that reported ICD-9-CM procedure 
code 81.54 (Total knee replacement) and found 336,050 cases. The 
applicant then searched the NIS database for cases representing hip and 
other joint replacement procedures across all MS-DRGs that reported 
ICD-9-CM procedure codes 81.51 (Total hip replacement), 81.52 (Partial 
hip replacement), 81.56 (Total ankle replacement), 81.57 (Replacement 
of joint of foot and toe), and 81.59 (Revision of joint replacement of 
lower extremity, not elsewhere classified) and found 238,050 cases. 
This resulted in a total of 574,100 cases representing knee, hip, and 
other joint replacement procedures.
    The applicant then divided the number of cases representing TKA 
procedures by the total number of cases (336,050/574,100) and 
determined that 58.5 percent of all cases assigned to MS-DRGs 469 and 
470 are related to TKA procedures. The applicant then multiplied the 
percent of cases representing TKA procedures (58.5 percent) by the 
number of cases assigned to MS-DRGs 469 and 470, which resulted in 
20,920 cases in MS-DRG 469 (35,740 * .585) and 320,746 cases in MS-DRG 
470 (547,955 * .585). In the proposed rule we stated we were concerned 
that the methodology the applicant used to determine the percentage of 
cases representing TKA procedures still includes cases representing hip 
and other joint replacement procedures. Specifically, the applicant did 
not uniquely identify cases representing TKA procedures and only 
produced a percentage of all cases, which still includes cases 
representing hip and other joint replacement procedures.
    Based on the analysis above, the applicant asserted that the total 
number of cases across MS-DRGs 461 and 462 and MS-DRGs 466 through 470 
was 374,071. The applicant determined an average case-weighted charge 
per case of $57,341. The applicant then determined that it was 
necessary to remove charges related to the other computer-assisted 
devices/technologies used during these procedures and charges for 
operating room time because procedures involving the VKS do not require 
operating room time, and the charges for the VKS technology would 
inevitably be different. Therefore, the applicant removed approximately 
$146 from the average case-weighted charge per case for cases assigned 
to MS-DRGs 461 and 462, and $73 from the average case-weighted charge 
per case for cases assigned to MS-DRGs 466 through 470. The applicant 
noted that the $146 in charges removed from the average case-weighted 
charges per case for cases assigned to MS-DRGs 461 and 462 was slightly 
higher than the charges removed from cases assigned to MS-DRGs 466 
through 470 because these charges were for bilateral procedures which 
require additional operating room time.
    Data from the NIS database is only available on a national level 
and not on a hospital-specific level. Therefore, in order to 
standardize the charges per case, the applicant used the FY 2012 IPPS 
Impact File and the mean value of all relevant standardization factors 
to standardize the charges per case. In the FY 2016 IPPS/LTCH PPS 
proposed rule (80 FR 24455), we stated that the analysis provided by 
the applicant did not use hospital-specific data and, therefore, the 
standardization process may be inaccurate because of the use of mean 
factors rather than hospital-specific factors. By using mean factors 
rather than hospital-specific factors, we stated that we believe that 
the standardization performed by the applicant does not sufficiently 
take into account hospital variations.
    The applicant then inflated the charges using an inflation factor 
of 10.4227 percent based on the inflation factor in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50379), and added the charges related to the 
VKS technology to the adjusted average case-weighted standardized 
charge per case. This resulted in a final inflated average case-
weighted standardized charge per case of $68,121. Using the FY 2015 
IPPS Table 10 thresholds, the applicant determined that average case-
weighted threshold amount for MS-DRGs 461 and 462 and MS-DRGs 466 
through 470 is $57,341. Because the final inflated average case-
weighted standardized charge per case for the applicable MS-DRGs 
exceeds the average case-weighted threshold amount, the applicant 
asserted that the technology meets the cost criterion.
    The applicant's second analysis used data from the 2013 American 
Hospital Discharge Data (AHD) based on 57 randomly selected hospitals. 
The applicant searched the data and did not find any cases assigned to 
MS-DRG 461. The applicant noted that it used a value of 10 cases for 
its analysis of cases assigned to MS-DRG 461 because data

[[Page 49474]]

reflecting a zero value indicates that the hospital performed less than 
10 procedures. The applicant found 533 cases assigned to MS-DRG 462. To 
determine the number of cases representing bilateral knee revision 
procedures in MS-DRG 462, similar to the first analysis, the applicant 
multiplied the total number of cases assigned to MS-DRG 462 by 4 
percent, which resulted in 21 cases. Similar to our statement about the 
first analysis, in the proposed rule we were concerned that the 
applicant did not uniquely identify cases representing bilateral knee 
revision procedures and only produced a percentage of all cases, which 
still includes cases representing hip revision procedures.
    To determine the number of eligible cases reporting knee revision 
procedures assigned to MS-DRGs 466 through 468, the applicant first 
searched the AHD database for the total number of cases assigned to 
these MS-DRGs. This resulted in a total of 2,969 cases. Because these 
MS-DRGs include cases representing hip and knee revision procedures, to 
determine the number of cases representing knee revision procedures in 
each of these three MS-DRGs, the applicant first divided the number of 
cases for each MS-DRG (122 for MS-DRG 466; 1,746 for MS-DRG 467; and 
1,101 for MS-DRG 468) by the total number of cases in MS-DRGs 466 
through 468 (2,969). The applicant then multiplied the percentage for 
each MS-DRG (4.1 percent for MS-DRG 466; 58.8 percent for MS-DRG 467; 
and 37.1 percent for MS-DRG 468) by the total number of cases in each 
MS-DRG. Based on this calculation, the applicant approximated the 
following number of cases representing knee revision procedures in each 
of these three MS-DRGs: 1,307 cases in MS-DRG 466; 18,704 in MS-DRG 
467; and 11,794 in MS-DRG 468. Similar to our concerns about the first 
analysis, in the proposed rule (80 FR 24455), we stated we were 
concerned that the methodology the applicant used to determine the 
percentage of cases of knee revision procedures still includes cases 
representing hip revision procedures. Specifically, in its methodology, 
the applicant did not use any source of statistical relevance to 
isolate cases representing knee revision procedures. The applicant 
simply used the percentage of Medicare cases for each MS-DRG of the 
overall total cases for the three MS-DRGs, which include knee and hip 
revision procedures, and multiplied by this percentage to further 
reduce the number of cases. We stated that we do not believe that this 
further reduction to the total number of Medicare cases has isolated 
cases representing knee revision procedures.
    The applicant used the same methodology from the first analysis to 
determine the number of eligible cases representing TKA procedures 
assigned to MS-DRGs 469 and 470. The applicant searched the AHD 
database and found 1,217 cases assigned to MS-DRG 469 and 24,620 cases 
assigned to MS-DRG 470. To determine the number of cases representing 
TKA procedures within these MS-DRGs, the applicant multiplied the total 
number of cases within these MS-DRGs by the percentage of 58.5 percent 
from the NIS database, which represents the percentage of knee 
replacement procedure cases among the total number of cases 
representing knee, hip and joint replacement procedures. This resulted 
in 712 cases in MS-DRG 469 (1,217 * .585) and 14,411 cases in MS-DRG 
470 (24,620 * .585). Similar to our concerns expressed earlier (and in 
the proposed rule), the methodology that the applicant used to 
determine the percentage of cases representing TKA procedures still 
includes cases representing hip replacement and other joint replacement 
procedures. Specifically, the applicant did not uniquely identify cases 
representing TKA procedures and only produced a percentage of all 
cases, which still includes cases representing hip and other joint 
replacement procedures.
    Based on this analysis, the applicant asserted that the total 
number of cases across MS-DRGs 461 and 462 and MS-DRGs 466 and 470 was 
46,960. The applicant determined an average case-weighted charge per 
case of $80,702. For the rest of the analysis, the applicant followed 
the same methodology as the first analysis. The applicant removed $146 
from the average case-weighed charge per case for cases assigned to MS-
DRGs 461 and 462 and $73 from the average case-weighted charge per case 
for cases assigned to MS-DRGs 466 through 470 for charges related to 
other computer-assisted devices/technologies used during these 
procedures and additional charges for the use of the operating room.
    Similar to the first analysis, the applicant used the FY 2012 IPPS 
impact file and the mean value of all relevant standardization factors 
from all hospitals to standardize the charges per case. Similar to our 
concerns expressed earlier (and in the proposed rule), the analysis 
provided by the applicant did not use hospital-specific data and, 
therefore, the standardization process may be inaccurate because of the 
use of mean factors rather than hospital-specific factors. By using 
mean factors rather than hospital-specific factors, the standardization 
performed by the applicant does not sufficiently take into account 
hospital variations.
    The applicant then inflated the charges using an inflation factor 
of 10.4227 percent based on the inflation factor in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50379), and added the charges related to the 
VKS technology to the adjusted average case-weighted standardized 
charge per case. This resulted in a final inflated average case-
weighted standardized charge per case of $90,515. Using the FY 2015 
IPPS Table 10 thresholds, the applicant determined that the average 
case-weighted threshold amount for MS-DRGs 461 and 462 and MS-DRGs 466 
through 470 is $80,699. Because the final inflated average case-
weighted standardized charge per case exceeded the average case-
weighted threshold amount for the applicable MS-DRGs, the applicant 
asserted that the VKS technology meets the cost criterion.
    The applicant's third analysis used data from the FY 2015 CMS 
Before Outliers Removed (BOR) file. The BOR file contained 469 cases in 
MS-DRG 461 and 9,396 cases in MS-DRG 462. To determine the number of 
cases representing bilateral knee revision procedures assigned to MS-
DRGs 461 and 462, similar to the first analysis, the applicant used an 
assumption of 4 percent, which resulted in 19 cases in MS-DRG 461 and 
376 cases in MS-DRG 462. Similar to our concerns stated earlier (and in 
the proposed rule (80 FR 24456)), the applicant did not uniquely 
identify cases representing bilateral knee revision procedures and only 
produced a percentage of all cases, which still includes cases 
representing hip revision procedures.
    To determine the number of eligible cases reporting knee revision 
procedures assigned to MS-DRGs 466 through 468, the applicant again 
analyzed the BOR file which contained a total of 44,420 cases. Similar 
to first two analyses, because these MS-DRGs include cases representing 
hip and knee revision procedures, to determine the number of cases 
representing knee revision procedures in each of these three MS-DRGs, 
the applicant first divided the number of cases for each MS-DRG (4,202 
for MS-DRG 466; 23,390 for MS-DRG 467; and 16,828 for MS-DRG 468) by 
the total number of cases in MS-DRGs 466 through 468 (44,420). The 
applicant then multiplied the percentage for each MS-DRG (9.5 percent 
for MS-DRG 466; 52.7 percent for MS-DRG 467; and 37.9 percent for MS-
DRG 468) by the total number of

[[Page 49475]]

cases in each MS-DRG. Based on this calculation, the applicant 
approximated the following number of cases representing knee revision 
procedures in each of these three MS-DRGs: 3,009 cases in MS-DRG 466; 
16,747 in MS-DRG 467; and 12,049 in MS-DRG 468. Similar to our concerns 
stated earlier (and in the proposed rule), the methodology the 
applicant used to determine the percentage of cases representing knee 
revision procedures still includes cases representing hip revision 
procedures. Specifically, in its methodology, the applicant did not use 
any source of statistical relevance to isolate cases representing knee 
revision procedures. Rather, the applicant used the percentage of 
Medicare cases for each MS-DRG of the overall total number of cases for 
the three MS-DRGs, which includes cases representing knee and hip 
revision procedures, and multiplied by this percentage to further 
reduce the number of cases. We stated that we do not believe that this 
further reduction to the total number of Medicare cases has isolated 
cases representing knee revision procedures.
    The applicant used the same methodology from the first analysis to 
determine the number of eligible cases reporting TKA procedures 
assigned to MS-DRGs 469 and 470. The BOR file contained 27,737 cases in 
MS-DRG 469 and 437,649 cases in MS-DRG 470. To determine the number of 
cases representing TKA procedures within these MS-DRGs, the applicant 
multiplied the total number of cases within these MS-DRGs by the 
percentage of 58.5 percent obtained from the NIS database, which 
represents the percentage of knee replacement cases among the total 
number of cases representing knee, hip, and joint replacement 
procedures. This resulted in 16,236 cases in MS-DRG 469 (27,737 * .585) 
and 256,178 cases in MS-DRG 470 (437,649 * .585). Similar to our 
concerns stated earlier (and in the proposed rule), the methodology 
that the applicant used to determine the percentage of cases 
representing TKA procedures still includes cases representing hip and 
other joint replacement procedures. Specifically, the applicant did not 
uniquely identify cases representing TKA procedures and only produced a 
percentage of all cases, which still includes cases representing hip 
and other joint revision procedures.
    Based on this analysis, the applicant asserted that the total 
number of cases across MS-DRGs 461 and 462 and MS-DRGs 466 through 470 
was 304,614. The applicant determined an average case-weighted charge 
per case of $56,282. For the rest of the analysis, the applicant 
followed the same methodology as the first analysis. The applicant then 
removed $146 from the average case-weighted charge per case for cases 
assigned to MS-DRGs 461 and 462 and $73 from the average case-weighted 
charge per case for cases assigned to MS-DRGs 466-470 for charges 
related to other computer-assisted devices/technologies used during 
these procedures and additional charges for the use of the operating 
room.
    Similar to the first analysis, the applicant used the FY 2012 IPPS 
Impact File and the mean value of all relevant standardization factors 
from all hospitals to standardize the charges per case. Similar to our 
concerns stated earlier (and in the proposed rule), the analysis 
provided by the applicant did not use hospital-specific data and, 
therefore, the standardization process may be inaccurate because of the 
use of mean factors rather than hospital-specific factors. By using 
mean factors rather than hospital-specific factors, we stated that we 
believe that the standardization performed by the applicant did not 
sufficiently take into account hospital variations.
    The applicant then inflated the charges using an inflation factor 
of 10.4227 percent based on the inflation factor in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50379), and added the charges related to the 
VKS technology to the adjusted average case-weighted standardized 
charge per case. This resulted in a final inflated average case-
weighted standardized charge per case of $66,382. Using the FY 2015 
IPPS Table 10 thresholds, the applicant determined that the average 
case-weighted threshold amount for MS-DRGs 461 and 462 and MS-DRGs 466 
through 470 is $64,280. Because the final inflated average case-
weighted standardized charge per case exceeds the average case-weighted 
threshold amount for the applicable MS-DRGs, the applicant asserted 
that the VKS technology meets the cost criterion.
    Based on the information provided by the applicant, combined with 
the weight of our concerns, in the proposed rule we stated that we were 
unable to determine if and how the VKS technology meets the cost 
criterion. We invited public comments on whether or not the VKS 
technology meets the cost criterion, specifically with regard to the 
concerns raised.
    Comment: The applicant submitted comments in response to CMS' 
concerns that included an alternative analysis that the applicant 
conducted to demonstrate that the VKS technology meets the cost 
criterion. In its analysis, the applicant used the FY 2013 MedPAR file 
(which contained inpatient hospital claims data for discharges from 
October 1, 2012 to September 30, 2013) to search for cases involving 
TKA procedures that reported the following ICD-9-CM procedure codes: 
00.80 (Revision of knee replacement, total (all components)); 00.81 
(Revision of knee replacement, tibial component); 00.82 (Revision of 
knee replacement, femoral component); 00.83 (Revision of knee 
replacement, patellar component); 00.84 (Revision of total knee 
replacement, tibial insert (liner)); 81.54 (Total knee replacement); 
and 81.55 (Revision of knee replacement, not otherwise specified). The 
applicant focused its analysis on MS-DRGs 461 through 470 because these 
are the MS-DRGs that cases involving TKA procedures typically map to. 
The applicant noted that that analysis revealed that MS-DRGs 461 and 
466 did not contain any cases because the MedPAR claims data do not 
include hospitals with less than 10 discharges. The applicant 
identified 283,123 claims (5,417 claims in MS-DRG 462; 2,918 claims in 
MS-DRG 467; 1,549 claims in MS-DRG 468; 1,673 claims in MS-DRG 469; 
271,566 claims in MS-DRG 470). The applicant then standardized the 
charges, applied an inflation factor of 1.10443 based on the 2-year 
charge inflation factor listed in the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 50379), which resulted in an inflated average case-weighted 
standardized charge per case of $53,887. The applicant estimated device 
charges using the cost of the device and the national average CCR of 
0.28, and additional charges for operating room time related to the 
device. The applicant combined these charges with the inflated average 
case-weighted standardized charges per case and determined a final 
inflated average case-weighted standardized charge per case of $65,571. 
The average case-weighted threshold amount in the FY 2015 IPPS Table 10 
for these MS-DRGs was $61,870. Because the final inflated average case-
weighted standardized charge per case exceeds the average case-weighted 
threshold amount of $61,870, the applicant maintained that the VKS 
meets the cost criterion using this analysis.
    Response: We appreciate the applicant providing this alternative 
analysis under the cost criterion. After consideration of the 
additional information provided, we have determined that the VKS 
technology meets the cost criterion.
    With regard to the substantial clinical improvement criterion, the 
applicant asserted that the VKS technology represents a substantial 
clinical

[[Page 49476]]

improvement. The applicant stated that the device offers a treatment 
option for a patient population unresponsive to, or ineligible for, 
currently available treatments. The applicant explained that the use of 
the VKS technology has improved patient outcomes, including rapid 
recovery of patients diagnosed with comorbidities, the early return to 
normal activities, and increased levels of activity and functionality. 
The applicant noted that patients treated using the VKS technology 
during TKA procedures did not experience readmission within 30 days, 
nor was it necessary for the treating physician (the surgeon) to 
complete a problem focused medical evaluation during the patient's 
recovery. The applicant further noted that patients having a more 
favorable immediate outcome with a stable TKA were shown to return to 
normal function more rapidly than patients with unbalanced knees. 
Therefore, the applicant stated that patients with complex medical 
conditions would be able to respond to the early return of normal daily 
living.
    The applicant also believed that the device offers the ability to 
diagnose a medical condition for a patient population experiencing 
medical conditions that are currently undetectable, or offers the 
ability to diagnose a medical condition earlier than that which is 
capable using currently available technologies. The applicant explained 
that the VKS technology provides an improved evaluation/diagnosis 
compared to an unbalanced TKA implant. Specifically, the applicant 
stated that the device enables the surgeon to obtain intraoperative 
measures enabling the surgeon to improve upon the placement of the TKA 
tibial and femoral components. In addition, the applicant stated that, 
intraoperatively, the device leads to an immediate diagnosis of an 
implant that can now be accurately positioned due to informed fine 
tissue dissection. The applicant further stated that the intraoperative 
technique has been demonstrated to result in increased implant 
stability and functional congruence. The applicant cited the following 
examples of outcomes that have been frequently documented and evaluated 
within clinical studies of medical devices:
     Intended to address the leading causes of early implant 
failure in TKA: instability, malrotation and malalignment; \46\
---------------------------------------------------------------------------

    \46\ Rodriguez-Merchan EC.: Instability Following Total Knee 
Arthroplasty. HSSJ 2011; 7:273-278.
---------------------------------------------------------------------------

     Dynamic intercompartmental load data and Kinetic Tracking 
enables evidence based soft tissue releases to improve stability 
through full ROM; \47\
---------------------------------------------------------------------------

    \47\ Roche MW, Elson LC, Anderson CR.: A Novel Technique Using 
Sensor-Based Technology to Evaluate Tibial Tray Rotation. 
Orthopedics. 2014 (In Press).
---------------------------------------------------------------------------

     Provides intraoperative feedback on tibial-femoral 
component rotation, position of femoral Contact Points and femoral 
roll-back to facilitate optimal component position;
     Enables reproducible, teachable surgical technique through 
quantifying surgeon ``feel''; and
     Captures intraoperative data for inclusion in patient EMR, 
registries or comparative effectiveness studies.
    The applicant stated that use of the device significantly improves 
clinical outcomes for a patient population experiencing these types of 
medical procedures when compared to currently available treatments. The 
applicant explained that extensive research and development has 
resulted in the VKS technology demonstrating improved patient outcomes 
in multi-center studies. The applicant further explained that the VKS 
technology has intraoperatively provided a unique opportunity to 
observe the short-term clinical outcomes of patients with a 
quantifiably balanced knee versus those who have quantifiably 
unbalanced knees. According to the applicant, in a multi-center study, 
the use of the VKS technology has been shown to reduce post-operative 
pain and improve activity and patient satisfaction scores with 
statistical significance. Additionally, the applicant stated that 97 
percent of patients whose knees were balanced using the VKS technology 
reported that they were ``satisfied'' to ``very satisfied'' at 1-year 
post-operative compared to 81 percent patient satisfaction after a TKA 
procedure without the use of the VKS technology. The applicant stated 
that the VKS technology provided a 16-percent improvement in patient 
satisfaction for VKS-balanced knees; the first significantly notable 
increase of patient-reported satisfaction in over 30 years.\48\
---------------------------------------------------------------------------

    \48\ Gustke KA, et al.: Increased satisfaction after total knee 
replacement using sensor-guided technology. Bone Joint J 2014;96-
B:1333-8.
---------------------------------------------------------------------------

    According to the applicant, the use of the VKS technology avoided 
early implant failure. The applicant explained that considering the 
objective to ameliorate the present risks of revision in TKA 
procedures, the VKS technology has been advanced to address the need 
for improved knee balance through fine tissue dissection using 
information from the VKS technology intelligent tibial trial. While not 
disturbing the surgical flow of TKA procedures, the applicant stated 
that the VKS technology provides the surgeon with data on the dynamic 
intercompartmental load, and kinetic tracking enables evidence-based 
soft tissue releases to improve stability through full ROM.\49\ The 
applicant noted that the results of multi-center studies, using the VKS 
technology intraoperatively, have provided an opportunity to observe 
the short-term clinical outcomes of patients with a VKS-quantified 
balanced knee versus those who have VKS-quantified unbalanced knees.
---------------------------------------------------------------------------

    \49\ Gustke, Golladay, et al.: A New Method for Defining 
Balance: Promising Short-Term Clinical Outcomes of Sensor-Guided 
TKA. The Journal of Arthroplasty 25 November 2013 (Article in Press 
DOI: 10.1016/j.arth.2013.10.020).
---------------------------------------------------------------------------

    The applicant further stated that the VKS technology provides 
intraoperative information on tibial-femoral component rotation, 
position of femoral contact points and femoral roll-back to facilitate 
optimal component position. One clinical study \50\ reported 170 
primary TKA procedures where the VKS technology corrected what would 
have resulted in unbalanced and malrotated implants in 53 percent of 
the patients. The applicant noted that when referencing the tibial 
tubercle to maximize tibiofemoral congruency, 53 percent of patients 
exhibited asymmetrical tibiofemoral congruency in extension. The 
applicant further stated that of those patients, 68 percent were shown 
to have excessive internal rotation of the tibial tray relative to the 
femur, while 32 percent exhibited excessive external rotation. 
Additionally, the average tibiofemoral incongruency deviated from a 
neutral position by 6[deg], ranging from 0.5[deg] to 19.2. The 
applicant stated that when comparing the VKS with the convention of 
using the tibial tubercle to maximize tibiofemoral congruency to 
confirm the final rotation of the tibial tray, the VKS technology 
provided superior information. The applicant added that data from using 
the tibial tubercle to maximize tibiofemoral congruency to confirm the 
final rotation of the tibial tray are highly variable and inconsistent 
for confirming the final rotation of the tibial tray.
---------------------------------------------------------------------------

    \50\ Roche MW, Elson LC, Anderson CR: A Novel Technique Using 
Sensor-Based Technology to Evaluate Tibial Tray Rotation. 
Orthopedics. 2015 (In Press).
---------------------------------------------------------------------------

    The applicant stated that the VKS technology has demonstrated and 
resulted in a ``balanced knee'' after TKA procedures with 6 month and 1 
year outcome scores showing a significant improvement over conventional 
or computer-assisted TKA procedures. According to the applicant, by not

[[Page 49477]]

disrupting the surgical flow the VKS technology has been viewed by 
surgeons to provide information enabling them to improve upon the 
balance of the knee, reduce the degree of rotation and only dissect the 
fine tissue as needed sparing the release of the ligaments. The 
applicant further stated that the VKS technology has been shown to 
enable reproducible, teachable surgical technique through quantifying 
surgeon ``feel.''
    The applicant provided patient outcomes at 6 months and believed 
that this demonstrated a significant improvement for the ``balanced 
knee'' TKA procedures using the VKS technology. According to the 
applicant, multivariate binary logistic regression analyses were 
performed for both Knee Society Scores (KSS) and Western Ontario and 
McMaster Universities Arthritis Index (WOMAC) scores at 6 months. 
Variables run in these analyses included: Age at surgery, body mass 
index (BMI), gender, preoperative ROM, preoperative alignment, change 
in activity level (preoperative to 6 months), and joint state (balanced 
versus unbalanced). For KSS and WOMAC, both step-wise and backward 
multivariate logistic regression analyses were calculated to be best 
fit models with similar significance (P=0.001). Ultimately, the step-
wise model was used. The applicant stated that the binary model 
revealed that the variable exhibiting the most significant effect of 
improvement on KSS and WOMAC scores was balanced joint state (P=0.001; 
P=0.004). The applicant noted that joint state was the most highly 
significant variable; this demonstrated similar levels of significance 
throughout all possible combinations of variables included in the model 
(P=0.001). The applicant added that joint state was also observed to be 
the sole significant factor in patient-reported outcome score 
improvement (P b 0.001).
    The applicant added that analysis of the data revealed there was 
also a concurrent significance observed with activity level (P=0.005). 
However, the applicant noted that activity level was not significant on 
its own. The applicant concluded that a balanced joint state results in 
a higher activity level,\51\ which would make activity level more of a 
dependent variable, rather than a predictor. Therefore, to demonstrate 
activity level, the applicant used a regression analysis and evaluated 
KSS and WOMAC scores at 6 months, with odds ratios. According to the 
applicant, odds ratios were calculated based on meaningful clinical 
improvement in KSS scores, WOMAC scores, and activity levels at 6 
months. In addition, the applicant pointed out that, based on 
literature review, ``meaningful improvement'' for KSS scores were 
anything greater than 50 points; WOMAC scores greater than 30 points; 
and gains in activity level greater than or equal two 2 lifestyle 
levels (from lowest score to highest: Sedentary, semisedentary, light 
labor, moderate labor, heavy labor). Also, scores from the unbalanced 
group were used as the reference point. The applicant stated that odds 
ratio for balanced joint state and improved KSS score was 2.5, with a 
positive coefficient (95 percent CI). The applicant believed that this 
suggested a high probability of obtaining a meaningful improvement in 
KSS with a balanced knee joint, over those who do not have a balanced 
knee. According to the applicant, the odds ratio for balanced joint 
state and improved WOMAC score was 1.3, with a positive coefficient (95 
percent CI). The applicant believed that this suggested a favorable 
probability that patients with a balanced joint state will achieve a 
meaningful improvement in WOMAC score, over those that do not have a 
balanced knee. According to the applicant, the odds ratio for balanced 
joint state and improved activity level was 1.8, with a positive 
coefficient (95 percent CI). The applicant believed that this also 
suggested a favorable probability of meaningful gains in activity level 
in those with a balanced knee, versus those with an unbalanced knee.
---------------------------------------------------------------------------

    \51\ Gustke, Golladay, et al.: A New Method for Defining 
Balance: Promising Short-Term Clinical Outcomes of Sensor-Guided 
TKA. The Journal of Arthroplasty 25 November 2013 (Article in Press 
DOI: 10.1016/j.arth.2013.10.020).
---------------------------------------------------------------------------

    The applicant further stated that 1 year clinical trial evidence 
supports the VKS technology protocol for TKA procedures. According to 
the applicant, of the 135 patients undergoing sensor-guided surgery, 13 
percent remained unbalanced (by surgeon discretion). The applicant 
stated that ``surgeon discretion,'' in this analysis, indicates that 
the surgeon recognized and accepted the ``unbalanced'' 
intercompartmental load difference as presented by the VKS technology, 
but believed that the knee was in a clinically acceptable state. Pre-
operatively, there was no statistical difference in any outcomes 
measures between the two cohorts, the averages of which were: Total KSS 
= 105 24.6; total WOMAC = 47 14.8.
    Additionally, according to the applicant, at 1 year, the average 
total KSS score of balanced patients exceeded that of unbalanced 
patients by 23.3 points (P<0.001); 17917.2 and 15623.4 for the balanced and unbalanced cohort, respectively. The 
balanced cohort average score for KSS pain and function, separately, 
were 96.4 and 82.4 respectively; the unbalanced cohort scored 87.8 and 
68.3 points for pain and function. The applicant stated that the 
disparities between the balanced and unbalanced patients' pain and 
function scores were also highly statistically significant (P<0.001, 
P=0.022).
    For WOMAC, the applicant noted that that the balanced cohort 
improved their score by 8 points; 1011.8 and 1817 for balanced and unbalanced patients, respectively (WOMAC is 
scored with an inverse scale; lower scores indicate more improvement). 
The applicant further stated that while this difference did not prove 
to be statistically significant by the standards set forth for this 
analysis (P=0.085), the authors believed that this is due, in part, to 
the large standard deviations associated with both cohorts.
    According to the applicant, the balanced cohort's average activity 
level score was 48.6, which corresponds with the light to moderate 
labor categories (tennis, light jogging, heavy yard work) and the 
unbalanced patient's average activity level score was 26.7, which 
corresponds to the upper limits of the semi-sedentary range (light 
housework, walking for limited distances). The applicant believed that 
the difference between the average scores was statistically significant 
(P=0.015). The applicant noted that the most notable aspect of every 
outcome measure collected is that the unbalanced patient scores at 1 
year still failed to achieve the level of improvement of the balanced 
patient scores at 6 months.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24458 and 24459), 
we presented a number of concerns regarding the applicant's assertions 
regarding substantial clinical improvement. First, we stated that 
during the trials, after using the device, surgeons continued to make 
manual adjustments to the spacers to set the knee replacement. The 
applicant asserted that the VKS technology presents better accuracy for 
the surgeon when making adjustments to the spacers when implanting a 
knee replacement. However, we stated that the evidence does not 
delineate the degree of any improved outcomes or patient satisfaction 
associated with use of the VKS technology versus additional manual 
adjustments made by the surgeon. We also stated that most of the 
clinical evidence is based on patient satisfaction surveys. While the 
survey data appeared to demonstrate that

[[Page 49478]]

patient satisfaction improved, we stated that we do not believe the 
data presented are sufficient to determine if the VKS technology 
represents a substantial clinical improvement over manual adjustment. 
Furthermore, the use of historical literature controls might be useful 
during early clinical development, but there are possible biases and 
limitations of this research design. Specifically, there could be 
multiple differences in the pre-procedure clinical characteristics of 
patients with ``unbalanced'' knees and those with ``balanced'' knees 
that could affect outcomes, such as more severe initial disease, more 
pre-operative misalignment, more obesity, or more comorbidity. These 
and other potential confounders were not documented or adjusted for in 
the analyses of outcomes in the literature provided by the applicant. 
Additionally, as discussed above, the applicant released a first 
version of the VKS technology in 2011 and advancements were made to the 
VKS technology that resulted in additional FDA clearances in 2013. The 
applicant stated in its application that the first version is 
considered the first technology of its kind. Therefore, we stated in 
the proposed rule that we believe the VKS technology may no longer be 
considered new. The applicant submitted an application for the advanced 
version of the VKS technology from 2013. However, the applicant did not 
present clinical data to distinguish the improvements made to the 
advanced version from the first version. Therefore, in the proposed 
rule, we stated that we were unable to determine if the advanced 
version represents a substantial clinical improvement over existing 
technologies (that is, the first version of the VKS technology).
    We invited public comments on whether the VKS technology meets the 
substantial clinical improvement criterion, specifically with regard to 
our concerns.
    Comment: One commenter stated that recently published data shows 
improved short-term results for procedures using the VKS. The commenter 
further stated that sensor technology similar to that utilized with the 
VKS technology will become an important tool in achieving optimal 
clinical outcomes in knee replacement surgery, and encouraged CMS to 
approve new technology add-on payments to offset the added costs of 
this new technology and encouraged its expanded use to include a 
broader population of patients.
    Another commenter questioned whether a knee defined as balanced by 
use of the VKS produced a significantly more favorable outcome than a 
knee defined as unbalanced by use of the VKS. The commenter stated that 
improved outcomes have not been demonstrated by the VKS that are 
significantly increased when compared to improved outcomes achieved 
with additional manual adjustments made by surgeons.
    Response: We appreciate the commenters' input. We considered these 
comments in our determination of whether the VKS represents a 
substantial clinical improvement over existing technologies.
    Comment: The applicant submitted comments in response to CMS' 
concerns as to whether the technology demonstrated a substantial 
clinical improvement. The applicant indicated that its objective has 
always been to improve the outcome of primary TKA procedures relative 
to instability, stiffness, pain, and patient immobility. The commenter 
noted that early findings inspired surgeons to propose measures of 
ligament balance as a function of load and balance. The applicant 
explained that the concept of ligament balance has always been a 
subjective surgical process due to the absence of an objective means to 
measure variables such as load and alignment intraoperatively. The 
applicant stated that continued research and development identified 
ideal load, balance and kinematics as well as rotational alignment 
metrics now available with the 2013 devices.
    According to the applicant, the devices FDA-cleared in June 2013 
differ from those used in the early stages (2012) of the study. The 
applicant stated that engineering changes maintain the prior device 
measurements of balance as a function of load but the new approval 
added alignment within these measurements and improves upon the 
surgical flow, all features which are important to achieve a more 
stable TKA procedure result. The applicant noted that the device's 
expanded functionality (from June 2013 clearance) of the addition of 
alignment has spurred use in revision cases and is a new indication for 
use in the 510k currently under review.
    The applicant also stated that outcome studies represent a series 
of patients enrolled and operated on by surgeons trained on the 
technique, using an early device and transitioning to the 2013 
engineering changes. The applicant noted that participating surgeons 
adhered to the study design and surgical protocol and did not make 
additional manipulations of the knee after the surgeon captured the VKS 
metrics. The applicant further noted that, early on, some surgeons did 
not change their tissue dissection based upon the data from the VKS 
(the device was used merely to collect intercompartmental load data in 
these cases), as the data assessed from these earlier stage surgical 
cases were seen to have results indicating unbalanced knees. The 
applicant stated that early recognition of these ``unbalanced'' knees 
gave rise to the surgeon now modifying their tissue dissection based on 
the VKS information and provided an ``unbalanced'' set of patients to 
compare outcomes.
    The applicant also stated that highly statistically significant P-
values of 0.0001 were reported using the KSS and WOMAC score. The 
applicant noted that KSS and WOMAC are validated scoring tools 
specifically designed to capture patient functional outcomes, including 
pain scores. The applicant also noted patient satisfaction measures 
were also collected which demonstrated that the VKS KSS and WOMAC 
scores were statistically higher than traditional scores for primary 
TKA or navigated TKA.\52\
---------------------------------------------------------------------------

    \52\ Gustke K, Golladay G, Jerry G, Roche MW, Elson LC, Anderson 
CR. Increased Patient Satisfaction After Total Knee replacement 
using sensor-guided technology. Bone Joint J. 2014 Oct;96-
B(10):1333-8.
---------------------------------------------------------------------------

    The applicant stated that BMI of the VKS balanced cohort was 
compared to historical TKA controls. The applicant noted that 
historically patients tend to gain weight after TKA which contributes 
to poorer outcomes.53 54 55 56 57 58 Rather than gaining 
weight, as reported in the historical meta-analysis, the applicant 
further noted that average weight loss of the VKS cohort (over 65 years 
of age)

[[Page 49479]]

was 10 lbs. at 1 year.\59\ The applicant stated that patients treated 
with the VERASENSE intraoperative technique defining ``balance and 
load'' relative to intercompartmental congruency and alignment not only 
had positive KSS and WOMAC scores, but their improved functional status 
resulted in a loss of weight and BMI classification when compared to 
historical controls. The applicant further asserted that the VKS 
features in the 2013 FDA-cleared advanced version of the device 
resulted in statistically improved KSS and WOMAC scores as well as a 
16-point increase in patient satisfaction measured over 2 years. The 
applicant concluded that the results offer further substantial clinical 
evidence that the VKS is a novel tool delivering improved 
intraoperative surgical skills to the orthopedic surgeon to 
quantitatively improve their operative technique and thereby give 
patients highly valued primary TKA outcomes.
---------------------------------------------------------------------------

    \53\ Mackie A, et al., Association Between Body Mass Index 
Change and Outcome in the First Year After Total Knee Arthroplasty, 
J Arthroplasty (2014). Available at: http://dx.doi.org/10.1016/j.arth.2014.09.003.
    \54\ Donovan J, Dingwall I, McChesney S. Weight change 1 year 
following total knee or hip arthroplasty. ANZ J Surg. 2006; 76(4): 
222-225.
    \55\ Zeni JA, Snyder-Mackler L. Most patients gain weight in the 
2 years after total knee arthroplasty: comparison to a healthy 
control group. (NIH Public Access Manuscript) Osteoarthritis 
Cartilage. 2010; 18(4): 510-514.
    \56\ Heisel C, Silva M, dela Rosa MA, et al. The effects of 
lower-extremity total joint replace net for arthritis on obesity. 
Orthopedics. 2005; 28(2): 157-159.
    \57\ Riddle DL, Singh JA, Harmsen WS, et al. Clinically 
important body weight gain following knee arthroplasty: a five-year 
comparative cohort study. Arthritis Care Res (Hoboken). 2013; 65(5): 
669-677.
    \58\ Abu-Rajab RB, Findlay H, Young D, et al. Weight changes 
following lower limb arthroplasty: a prospective observational 
study. Scott Med J. 2009; 54(1): 26-28.
    \59\ Golladay GJ, Jerry GJ, Gustke KA, Roche MW, Elson L, 
Anderson C. Post-operative weight gain after total knee 
arthroplasty: Prevalence and its possible attenuation using 
intraoperative sensors. Reconstructive Review 2014 March Vol 4, No 
138-41.
---------------------------------------------------------------------------

    Response: As stated above, most of the clinical evidence presented 
by the applicant is based on patient satisfaction surveys. While the 
survey data appeared to demonstrate that patient satisfaction improved, 
we still do not believe that the data presented are sufficient to 
determine if the VKS technology represents a substantial clinical 
improvement over existing technique. Specifically, the studies 
conducted were based on a limited study design, given that the 
applicant was in the process of establishing the definition of a 
balanced knee, lending to the possibility of confounding and bias. For 
example, there was no randomization of participants because physicians 
were given the discretion whether to use the device. We also noted that 
this study was a retrospective, observational study that was sufficient 
to assist in determining the evolving definition of a balanced knee, 
but not designed to determine if a balanced knee leads to substantial 
clinical improvement. Finally, as mentioned above, we were concerned 
that there could be multiple differences in the pre-procedure clinical 
characteristics of patients with ``unbalanced'' knees and those with 
``balanced'' knees that could affect outcomes, such as more severe 
initial disease, more pre-operative misalignment, more obesity, or more 
comorbidity. These and other potential confounders were not documented 
or adjusted for in the analyses of outcomes in the literature provided 
by the applicant. However, we note that the applicant is currently 
conducting randomized controlled studies measuring surgical technique 
and patient outcomes. Overall, based on the clinical evidence provided 
to date, we are not convinced that the VKS device leads to better 
outcomes over manual adjustments achieved by currently available 
treatment options. Therefore, after consideration of the public 
comments we received, we do not believe that the VKS technology 
represents a substantial clinical improvement over existing 
technologies, and we are not approving new technology add-on payments 
for the VKS technology for FY 2016.
    Comment: One commenter stated that the VKS technology shows to be 
an effective, objective, and technically proficient advance in TKA 
procedures. The commenter believed that by using the new reengineered 
2013 FDA-cleared advanced device, orthopedic surgeons can now 
quantitatively measure load, ``balance,'' and alignment to achieve 
optimal implant rotation and relative rotation between the tibial and 
femoral components, and soft tissue balancing. The commenter noted that 
tracking patient's readmission rate with ``balanced'' knees did not 
require a 30-day readmission nor did they require a clinical visit with 
their surgeon. The commenter stated that the VKS appears to be a 
valuable innovation that surgeons can implement and patients can derive 
benefit.
    The commenter further stated that published findings provide 
evidence that the device significantly reduces the incidence of TKA 
failure due to stiffness and instability. The commenter added that the 
VKS technology should reduce the need for revision knee surgery and the 
morbidity patients learn to live with when their implant is not stable 
or incorrectly placed.
    The commenter stated that estimates find Medicare spends over $1 
billion annually just on facility and physician payment related to 
revision knee surgeries. The commenter noted that preventing 
complications and keeping patients out of acute and long term care 
facilities saves money and avoids added complications that can result 
in unintended consequences leading to excessive costs to the healthcare 
system and the patient. The commenter stated that hospitals have tight 
margins and recommended that CMS grant the VKS a new technology add-on 
payment for FY 2016.
    The commenter also asserted that engineering advances of the 2013 
FDA-cleared advanced device uses data gained from prior research and 
development consistent with the newness criterion and the demonstration 
of substantial clinical improvement. The commenter believed that 
payment for MS-DRGs 469 and 470 is inadequate, and with consideration 
of the 2013 FDA approval, payment for MS-DRGs 466, 467 and 468 payment 
would also be inadequate.
    The commenter believed that the VKS technology meets all three 
criteria for new technology add-on payments. The commenter also 
believed that, in the absence of added payment, surgeons would be 
denied the opportunity to quantitatively correct fine tissue dissection 
leading to a correctly ``balanced'' primary TKA and patients would be 
inappropriately served.
    With regard to our first concern on substantial clinical 
improvement, the commenter stated that surgeons responded to the device 
metrics early on in the trial for collection only of ``balance'' 
information in order to establish a baseline for objectively defining 
what intraoperative balance meant (a definition that, prior to 
availability of the VKS technology, was not possible). The commenter 
further stated that upon establishment of a differential ``window'' 
between medial and lateral compartments of 15 pounds the sensor was 
then used as a tool to direct soft tissue dissection to achieve an 
intraoperative balance (within 15 pounds) result. The commenter 
explained that this cohort of patient results comprised the 
``balanced'' population within the trial and, when compared with the 
``unbalanced'' cohort (which were predominantly patients who received 
``manual adjustments''), showed improved outcomes and patient 
satisfaction associated with the use of VKS technology.
    With regard to our second concern on substantial clinical 
improvement, the commenter stated that KSS and WOMAC scores are the 
most reported outcome tools for TKA procedures. The commenter asserted 
that patient satisfaction scores are equally validated outcome metrics. 
The commenter noted that the clinical outcomes at 6 months, and 2 years 
were recently published and reported that the VKS used by a trained 
surgeon delivers clinical outcomes much better than traditional primary 
TKA patients compared with the KSS and WOMAC scores. The commenter 
cited studies that showed patients with balanced knees at 6 months had 
higher functional outcome scores than

[[Page 49480]]

traditional patients at 2 years.60 61 The commenter stated 
that the scope of 2 to 3 years of the newness criterion makes it 
impossible to achieve more data, while also designing the best device 
to achieve the outcomes. The commenter believed that the studies were 
well-designed, had Institutional Review Board (IRB) approval, and were 
excellent protocol adherence with outcome data captured correctly.
---------------------------------------------------------------------------

    \60\ Gustke K, Golladay G, Jerry G, Roche MW, Elson LC, Anderson 
CR. Increased Patient Satisfaction After Total Knee replacement 
using sensor-guided technology. Bone Joint J. 2014 Oct;96-
B(10):1333-8.
    \61\ Gustke KA, Golladay GJ, Roche M, Elson L, Anderson C. 
Primary TKA patients with Quantifiably Balanced Soft-Tissue Achieve 
Significant Clinical Gains Sooner than Unbalanced Patients. Adv 
Orthop. 2014:628695.
---------------------------------------------------------------------------

    Response: For the reasons previously stated, we do not believe that 
the VKS represents a substantial clinical improvement over existing 
technologies, and we are not approving new technology add-on payments 
for the VKS for FY 2016.
f. WATCHMAN[supreg] Left Atrial Appendage (LAA) Closure Technology
    Boston Scientific Corporation submitted an application for new 
technology add-on payments for FY 2016 for the WATCHMAN[supreg] Left 
Atrial Appendage (LAA) Closure Technology (WATCHMAN[supreg] System). 
(We note that, as discussed in detail later in this section, the 
applicant submitted an application for new technology add-on payments 
for FY 2015 for the WATCHMAN[supreg] System, but withdrew its 
application after we issued the FY 2015 IPPS/LTCH PPS proposed rule.) 
According to the applicant, when a patient has been diagnosed with 
atrial fibrillation (AF), the left atrium does not expand and contract 
normally. As a result, the left atrium is not capable of completely 
emptying itself of blood. Blood may pool, particularly in the part of 
the left atrium called the left atrial appendage. This pooled blood is 
prone to clotting, causing formation of a thrombus. If a thrombus 
breaks off, it is called an embolism (or thromboembolism). An embolism 
can cause a stroke or other peripheral arterial blockage.
    The applicant asserted that the WATCHMAN[supreg] System device is 
an implant that acts as a physical barrier, sealing the LAA to prevent 
thromboemboli from entering into the arterial circulation from the LAA, 
thereby reducing the risk of stroke and potentially eliminating the 
need for Warfarin therapy for patients diagnosed with nonvalvular AF 
who are eligible for Warfarin therapy but for whom the risks of long-
term oral anticoagulation outweigh the benefits.
    With regard to newness criterion, the applicant received FDA 
approval on March 15, 2015. According to the applicant, the 
WATCHMAN[supreg] System is the first LAA closure device approved by the 
FDA. Therefore, the applicant believes that the technology meets the 
newness criterion. Effective October 1, 2004 (FY 2005), ICD-9-CM 
procedure code 37.90 (Insertion of left atrial appendage device) was 
created to identify and describe procedures using the WATCHMAN[supreg] 
Left Atrial Appendage (LAA) Closure Technology. As stated in section 
II.G.1.a. of the preamble of the FY 2016 IPPS/LTCH PPS proposed rule 
and this final rule, effective October 1, 2015 (FY 2016), the ICD-10 
coding system will be implemented. Under the ICD-10-PCS, procedure code 
02L73DK (Occlusion of left atrial appendage with intraluminal device, 
percutaneous approach) is the comparable translation for ICD-9-CM 
procedure code 37.90.
    In the FY 2016 IPPS/LTCH proposed rule (80 FR 24459), we did not 
state any concerns regarding whether the WATCHMAN[supreg] System meets 
the newness criterion. We invited public comments on if, and how, the 
WATCHMAN[supreg] System meets the newness criterion.
    Comment: One commenter, the applicant, reiterated that the 
WATCHMAN[supreg] System is not substantially similar to any FDA-
approved technology currently on the market and satisfies the newness 
criteria.
    Response: We thank the applicant for its additional comments. We 
agree that the WATCHMAN[supreg] System meets the newness criterion. We 
note that CMS received a formal National Coverage Decision (NCD) 
request from the manufacturer asking that CMS cover percutaneous, 
transcatheter, intraluminal LAA closure using an implanted device. We 
refer readers to the CMS Web site at: http://www.cms.gov/medicare-coverage-database/details/nca-details.aspx?NCAId=281 for information 
related to this ongoing NCD. The tracking sheet for this National 
Coverage Analysis (NCA) indicates an expected NCA completion date of 
February 19, 2016. The processes for evaluation and determination of an 
NCD and the processes for evaluation and approval of an application for 
new technology add-on payments are independent of each other. However, 
any payment made under the Medicare program for services provided to a 
beneficiary would be contingent on CMS' coverage of the item, and any 
restrictions on the coverage would apply.
    As discussed in the proposed rule (80 FR 24459), with regard to the 
cost criterion, the applicant used the FY 2013 MedPAR file (which 
contained inpatient hospital claims data for discharges from October 1, 
2012 to September 30, 2013) to search for cases reporting ICD-9-CM 
procedure code 37.90. The applicant provided two analyses. The first 
analysis includes all claims that reported ICD-9-CM procedure code 
37.90, regardless of whether the code indicated a principal procedure 
that determined the MS-DRG assignment of the case. This analysis 
identified 507 cases across 29 MS-DRGs. The applicant noted that the 
MedPAR file contained claims that were returned to the provider that 
reported charges for actual cases from clinical trials that used the 
WATCHMAN[supreg] System that were well below post-FDA approval pricing. 
Therefore, the applicant removed the premarket device related charges. 
The applicant then standardized the charges, applied an inflation 
factor of 1.10443 based on the 2-year charge inflation factor listed in 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50379) and then added post-
FDA approval charges for the WATCHMAN[supreg] System. Using the 
anticipated cost of the device after FDA approval and the National 
Average Implantable Device cost center CCR, the applicant estimated 
device charges post-FDA approval, combined those with the inflated 
average case-weighted standardized charges per case, and determined a 
final inflated average case-weighted standardized charge per case of 
$150,213. The average case-weighted threshold amount in the FY 2015 
IPPS Table 10 for these MS-DRGs was $97,505. Because the final inflated 
average case-weighted standardized charge per case exceeds the average 
case-weighted threshold amount of $97,505, the applicant maintained 
that the WATCHMAN[supreg] System meets the cost criterion using this 
analysis.
    In the applicant's second analysis, cases eligible for the 
WATCHMAN[supreg] System were identified by claims reporting ICD-9-CM 
procedure code 37.90 assigned to MS-DRGs 250 and 251 (Percutaneous 
Cardiovascular Procedures without Coronary Artery Stent with MCC and 
without MCC, respectively). The applicant believed that these are the 
MS-DRGs to which cases are typically assigned if the WATCHMAN[supreg] 
System is used in the principal procedure performed during the 
inpatient stay. The applicant applied the trims in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 49910

[[Page 49481]]

through 49911), which resulted in 369 cases.
    As with its first analysis, the applicant determined standardized 
nondevice charges for the applicable cases using claims data from the 
FY 2013 MedPAR file and applied an inflation factor. The applicant 
calculated average nondevice charges by subtracting what the applicant 
believed was the average total implantable device charges (calculated 
as the sum of the five individual device charge fields in the MedPAR 
file that constitute the Implantable Device cost center). Similar to 
its first analysis, the applicant then standardized the charges, 
applied an inflation factor of 1.10443, subtracted the device charges 
reported on the MedPAR claims (reflecting costs during the IDE study) 
and replaced them with the anticipated charges following FDA approval 
(converting the costs of the device to charges with a CCR of 0.349 
based on the national average implantable device CCR from the FY 2015 
IPPS/LTCH PPS final rule (79 FR 49914)), combined those with the 
inflated average case-weighted standardized charges per case, and 
determined a final inflated average case-weighted standardized charge 
per case of $117,663. The average case-weighted threshold amount for 
these MS-DRGs in the FY 2015 IPPS Table 10 was $72,804. Because the 
final inflated average case-weighted standardized charge per case 
exceeds the average case-weighted MS-DRG threshold amount of $72,804, 
the applicant maintained that the WATCHMAN[supreg] System meets the 
cost criterion using this analysis. We note that the applicant searched 
for cases reporting ICD-9-CM procedure code 37.90. In section II.G.3.b. 
of the preamble of this final rule, we are finalizing a proposal 
regarding cardiac ablation and other specified cardiovascular 
procedures. Specifically, we proposed to assign the procedures 
performed within the heart chambers using intracardiac techniques, 
including those identified by ICD-9-CM procedure code 37.90, to two new 
MS-DRGs: MS-DRG 273 (Percutaneous Intracardiac Procedures with MCC) and 
MS-DRG 274 (Percutaneous Intracardiac Procedures without MCC). In the 
proposed rule, we stated that we believe that this could have 
implications for determining whether the applicant meets the cost 
criterion. There have been instances in the past where the coding 
associated with a new technology application is included in a finalized 
policy to change one or more MS-DRGs. For example, in the FY 2013 IPPS/
LTCH PPS final rule, we describe the cost analysis for the 
Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm Endovascular Graft 
which was identified by ICD-9-CM procedure code 39.78. In that same 
rule, we finalized a change to the assignment of that procedure code, 
reassigning it from MS-DRGs 252, 253, and 254 to MS-DRGs 237 and 238. 
Because of that change, we determined that, for FY 2013, in order for 
the Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm Endovascular 
Graft to meet the cost criteria, it must demonstrate that the average 
case-weighted standardized charge per case exceeds the thresholds for 
MS-DRGs 237 and 238 (77 FR 53360). We note that, in that example, MS-
DRGs 237 and 238 existed previously; therefore, thresholds that were 75 
percent of one standard deviation beyond the geometric mean 
standardized charge for these DRGs were available to the public in 
Table 10 at the time the application was submitted. In the FY 2016 
IPPS/LTCH proposed rule, we stated that in this case, if MS-DRGs 273 
and 274 were to be finalized for FY 2016, we recognize that thresholds 
that are 75 percent of one standard deviation beyond the geometric mean 
standardized charge would not have been available at the time the 
application was submitted. We stated that we believe that it could be 
appropriate for the applicant to demonstrate that the average case-
weighted standardized charge per case exceeds these thresholds for MS-
DRGs 273 and 274. Accordingly, we made available supplemental threshold 
values on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html that were calculated 
using the data used to generate the FY 2015 IPPS/LTCH PPS Table 10 and 
reassigned the procedure codes in accordance with the finalized 
policies discussed in section II.G.3.b. of the preamble of this final 
rule.
    In the FY 2016 IPPS/LTCH proposed rule, we invited public comments 
on whether considering these supplemental threshold values as part of 
the cost criterion evaluation for this application is appropriate and 
also on how to address similar future situations in a broader policy 
context should they occur. We also invited public comments on the 
whether the WATCHMAN[supreg] System meets the cost criterion based on 
the applicant's analysis.
    Comment: Commenters disagreed that it would be appropriate to 
consider the supplemental thresholds as part of the cost analysis and 
recommended that CMS continue its current policy to evaluate the cost 
threshold provided by the applicant at the time an application is 
submitted. One commenter argued the following three reasons why CMS 
should maintain the current policy: (1) An application with newly 
created MS-DRGs will be treated differently than an application 
associated with a procedure whose MS-DRGs are not newly created and, 
therefore, will be held to a higher standard, a standard that is beyond 
an applicant's control; (2) applicants whose applications are 
associated with a procedure that CMS proposed to be reassigned to a 
newly created MS-DRG will have less time to review the supplemental 
thresholds; and (3) a short period of time makes it more difficult to 
review or verify CMS' calculations of the supplemental thresholds. 
Another commenter stated that the primary purpose of the final rule is 
to establish the processes and values that will be used during the next 
fiscal year. Therefore, the commenter asserted that CMS review should 
be conducted based on the same MS-DRGs and associated cost thresholds 
from the final rule and these thresholds should be the basis of CMS' 
determination whether the applicant satisfies the cost criterion.
    Commenters urged CMS to consider using the following sequence for 
new technology add-on payment applications that are associated with 
procedures that CMS proposes be reassigned to newly created MS-DRGs: 
First, CMS should evaluate the cost threshold in effect at the time the 
new technology add-on payment application is submitted to determine if 
an applicant exceeds the cost threshold. Second, CMS should determine 
if the application meets the new technology add-on payment criteria, 
including the cost threshold, in place at the time the new technology 
add-on payment was submitted. Third, CMS should reassign procedures 
associated with new technology add-on payments to a different MS-DRG 
after the new technology add-on payment decision is made. One commenter 
stated that such a sequence would be identical to the current policy 
CMS uses when reassigning procedures already associated with a new 
technology add-on payment to new DRGs. The commenter further stated 
that in cases when CMS reassigns procedures already associated with a 
new technology add-on payment to a different set of DRGs than were 
originally used to determine if the applicant met the cost criterion, 
CMS does not require the new technology add-on payment to be reassessed 
using cost thresholds for the newly assigned MS-DRGs. The commenter 
noted that CMS did not

[[Page 49482]]

reassess in the FY 2016 IPPS/LTCH PPS proposed rule whether the 
MitraClip[supreg] System (which was approved for FY 2015 new technology 
add-on payments) meets the cost criterion using the supplemental table 
values for the newly created DRGs 273 and 274 into which CMS proposed 
reassigning the procedure associated with MitraClip[supreg] System. The 
commenter stated that it believed CMS should follow the same process 
for the WATCHMAN[supreg] System this year and other applications in the 
future (should the need arise).
    Response: We agree with the commenters that we should evaluate the 
cost threshold in effect at the time the new technology add-on payment 
application is submitted to determine if an applicant exceeds the cost 
threshold. We agree that this policy is most predictable for 
applicants. For the same reason, we are maintaining our current policy 
to use the thresholds issued with each final rule for the upcoming 
fiscal year (that is, for FY 2017 we will use Table 10 issued with this 
FY 2016 final rule, along with any updated MS-DRG assignments) when 
making a determination to continue add-on payments for those new 
technologies that were approved for new technology add-on payments from 
the prior fiscal year.
    Comment: The applicant submitted a public comment using the 
methodology and analysis above to further demonstrate the 
WATCHMAN[supreg] System meet the cost criterion compared to the 
supplemental thresholds.
    Response: We thank the applicant for providing this additional 
analysis. As discussed above, we are using the thresholds from FY 2015 
to determine if the WATCHMAN[supreg] System meets the cost criterion. 
Based on the analysis described in the proposed rule, we have 
determined that the WATCHMAN[supreg] System meets the cost criterion.
    Regarding the substantial clinical improvement criterion, we note 
that the applicant applied for new technology add-on payments for FY 
2015 (as discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 
28043 through 28045)). However, prior to the publication of the FY 2015 
IPPS/LTCH PPS final rule, the applicant withdrew the application. 
Before the withdrawal of the application, CMS stated its concerns with 
the application in the FY 2015 IPPS/LTCH PPS proposed rule. The 
applicant included responses to CMS' previous concerns with the FY 2015 
application in its FY 2016 application. Therefore, we addressed the 
applicant's responses to the previous concerns specified in the FY 2015 
IPPS/LTCH PPS proposed rule as well as our observations on the current 
FY 2016 application in the FY 2016 IPPS/LTCH PPS proposed rule, as we 
set forth below.
    The applicant asserted that the WATCHMAN[supreg] System, a system 
that reduces the risk of thromboembolic stroke in patients diagnosed 
with high-risk nonvalvular AF who are eligible for Warfarin therapy, 
but in whom the potential risks of Warfarin therapy outweigh the 
potential benefits, meets the substantial clinical improvement 
criterion because the WATCHMAN[supreg] System is superior to currently 
available treatments. The applicant claimed that the WATCHMAN[supreg] 
System is ideal for patients diagnosed with a prior hemorrhagic stroke 
while on Warfarin therapy, patients not adherent to Warfarin therapy, 
patients with difficulty achieving a therapeutic international 
normalized ratio (INR), and patients with an increased risk or history 
of falls. The applicant acknowledged that anticoagulation using 
Warfarin therapy or one of the novel oral anticoagulation agents 
(NOACs), such as dabigatran, rivaroxaban, or apixaban, is effective for 
preventing thromboembolism in patients who can tolerate such medication 
over the long term. However, these medications are associated with 
certain risks. The applicant stated that the most used and studied 
agent, Warfarin, requires dietary restrictions, has a high-risk of drug 
interactions, genetic variability in dose-response, and the need for 
frequent monitoring. According to the applicant, the average patient 
diagnosed with AF and treated with Warfarin therapy achieves a 
therapeutic INR for approximately one-half of the treatment time. The 
applicant further stated that these NOACs also have nonadherence risks, 
high discontinuation rates (up to 20 percent within 2 years), are 
difficult to monitor effectiveness, and in some cases have no readily 
available reversal strategy.
    As discussed in the proposed rule (80 FR 24460), in support of its 
assertion that the WATCHMAN[supreg] System is a substantial 
improvement, the applicant submitted data from two pivotal studies 
(PROTECT AF and the WATCHMAN[supreg] Left Atrial Appendage Closure 
Device in Patients With Atrial Fibrillation Versus Long-Term Warfarin 
Therapy (PREVAIL)). The data included results of a meta-analysis of the 
PROTECT AF and PREVAIL studies, an imputed placebo analysis, and a post 
hoc analysis of the bleeding risks associated with the WATCHMAN[supreg] 
System. According to the applicant, the clinical evidence from these 
trials and analyses establish the following: implantation of the 
WATCHMAN[supreg] System is safe; the WATCHMAN[supreg] System is 
superior to Warfarin when evaluated against a composite endpoint of all 
stroke, systemic embolism, and cardiovascular unexplained death in 
long-term follow-up; the WATCHMAN[supreg] System provides a greater 
reduction in major bleeding events after the conclusion of post 
procedure anti-thrombotic medication; and the WATCHMAN[supreg] System 
reduces the incidence of ischemic stroke when compared to patients 
diagnosed with AF who are not treated with Warfarin or other 
anticoagulation medication.
    We note that, unlike in the FY 2015 application, the applicant did 
not include data from the ASAP study. In the FY 2015 IPPS/LTCH PPS 
proposed rule (79 FR 28043 through 28045), we expressed concerns that 
data from the ASAP study suggested that the device did not prevent 
strokes and was insufficient to demonstrate efficacy in the secondary 
patient population (patients diagnosed with AF who were ineligible for 
oral anticoagulation). We specifically stated that the ASAP Registry 
(5) enrolled 150 patients, at one of four centers, that had a 
contraindication to even short-term anticoagulation, mostly a history 
of prior bleeding, and there was no control group. Device implantation 
led to a serious adverse event in 13 patients (8.7 percent), including 
one case of device thrombus leading to ischemic stroke. Five other 
patients had a device-related thrombus that did not lead to stroke (4 
of these patients were treated with low molecular weight heparin), 
resulting in an overall 4.0 percent incidence (6 out of 150) of device-
associated thrombus. In the PROTECT AF trial study, 20 of the 473 
patients (4.2 percent) had device-associated thrombus, 3 of which led 
to an ischemic stroke. The rates of device-related thrombus are similar 
in the two studies (4.0 percent versus 4.2 percent), but the number of 
patients studied is smaller in the ASAP Registry (5) study compared to 
the PROTECT AF clinical trial study. In the 14-month follow-up data for 
the ASAP Registry (5) study, the rate of stroke or systemic embolism 
was 2.3 percent per year, which was said to be ``lower than expected'' 
based on prior data for patients diagnosed with AF who were not treated 
with warfarin (there was no concurrent control group). The data 
provided suggested efficacy in this patient population. However, we 
stated that we were concerned that there was not strong evidence that 
the device prevents stroke.
    In the FY 2016 application, the applicant responded that, because 
the

[[Page 49483]]

current intended use and indications for the WATCHMAN[supreg] System in 
the United States do not include patients who are ineligible for 
treatment using Warfarin therapy, the data from the ASAP study are 
irrelevant to the FY 2016 application. The applicant provided data from 
an imputed placebo analysis, a post-hoc analysis that compared the 
observed rate of ischemic strokes in patients treated with the 
WATCHMAN[supreg] System compared to no therapy, in order to address our 
concern that there was no strong evidence that the device prevented 
stroke.
    Comment: One commenter, the manufacturer, stated that the ASAP data 
reflect patients who are intolerant to Warfarin. The commenter stated 
that it is not seeking coverage for such patients and therefore does 
not believe that the ASAP data are relevant to the FY 2016 new 
technology add-on payment application for the WATCHMAN[supreg] System 
and, thus, it was omitted. The commenter noted that patients from the 
ASAP study are not part of the FDA approved indication. Therefore, the 
commenter stated that the ASAP registry should not be included in the 
evaluation for either efficacy or safety. The commenter added that 
patients eligible for the WATCHMAN[supreg] System, although deemed 
suitable for Warfarin, have a good clinical reason to seek an 
alternative. The commenter stated that the WATCHMAN[supreg] System is 
not intended as a first line alternative to oral anticoagulation but 
should be considered in patients for whom the risks of long-term oral 
anticoagulation outweigh the benefits. The commenter concluded that the 
appropriate patient population for this application is based on the 
WATCHMAN clinical trials (PROTECT AF, CAP, PREVAIL, and CAP2).
    Response: We thank the commenter for its clarification concerning 
the appropriate patient population for the WATCHMAN[supreg] System.
    According to the applicant, in the PROTECT AF trial, 463 patients 
were randomized to the WATCHMAN[supreg] System device and 244 patients 
to Warfarin therapy. Most patients randomized to the WATCHMAN[supreg] 
System device had it implanted (408=88 percent). Over the average 3.8 
years of follow-up, more patients in the Warfarin therapy group 
withdrew (45 versus 15) or were lost to follow-up (11 versus 13) than 
in the WATCHMAN[supreg] System device group, leading to shorter mean 
follow-up (3.7 versus 3.9 years) in the Warfarin therapy group.
    The applicant presented data shown in the following table and 
maintained that the results of the PROTECT study demonstrate primary 
efficacy and support that the WATCHMAN[supreg] System is noninferior 
and superior at 4 years.

                                             Table 3--PROTECT Primary Efficacy Supports WATCHMAN[supreg] Non-Inferiority and Superiority at 4 Years
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     WATCHMAN[supreg]       Warfarin                                               * Posterior probability
                                                   Years of mean     System  observed    observed rate        Percentage    --------------------------------------------------------------------
                 Patient years                       follow-up        rate  per 100     per 100  patient    reduction vs.     Non-inferiority    Superiority  (S)
                                                                      patient years          years          warfarin  (%)        (NI)  (%)             (%)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1065...........................................                1.5                  3                4.9                 38              >99.9              90.00  NI.
1588...........................................                2.3                  3                4.3                 29              >99.9              84.60  NI.
2621...........................................                3.8                2.3                3.8                 40                >99                 96  NI and S.
2717...........................................                  4                2.2                3.7                 39              >99.9              95.40  NI and S.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* For Bayesian analysis, a posterior probability of 97.5 percent represents non-inferiority; >=95 percent represents superiority.

    In the FY 2015 IPPS/LTCH PPS proposed rule, we expressed concern 
that the evidence presented by the applicant demonstrating superiority 
compared to Warfarin therapy was insufficient. We expressed concern 
that the PROTECT AF trial was not designed to demonstrate superiority, 
and instead was designed to demonstrate noninferiority. We also 
expressed concern that the PREVAIL trial endpoint was not significantly 
improved in the conventional hypothesis testing statistical analysis at 
any time point. We stated that the longer term data showed improved 
efficacy and safety, but still remain sparse. In the FY 2016 
application, the applicant stated that, under a Bayesian analysis, the 
distributions of the posterior probabilities are not symmetrical. 
According to the applicant, posterior probabilities represent the 
appropriate way to determine statistical significance in Bayesian 
methodology. As predefined in the PROTECT AF trial, a posterior 
probability for noninferiority of equal to or more than 97.5 percent, 
and a prespecified level of at least 95 percent to support superiority 
were the criteria for statistical testing. According to the applicant, 
in both cases (noninferiority and superiority), the criteria were met 
for long-term follow-up as demonstrated in the results of the PROTECT 
AF trial. In the proposed rule, we stated that we agreed that the 
Bayesian methodology is a valid method of analysis. However, we were 
referencing the overall efficacy noninferiority in the PREVAIL trial.
    In the FY 2016 proposed rule (80 FR 24461), we again presented our 
continued concern that the data results from the PROTECT AF study are 
insufficient to show superiority of the WATCHMAN[supreg] System over 
Warfarin therapy. We noted that the study was unblinded with a 
noninferiority design. We stated that we believe that the reduction in 
cardiovascular mortality shown in the results from the PROTECT AF study 
was unexpected and not well explained. Among the 57 patients in the 
WATCHMAN[supreg] System group who died, only 53 patient cases were 
assigned a cause of death and only 5 of the 9 ``unexplained/other 
deaths'' were included in the primary endpoint, although the protocol 
established that unexplained deaths were to be considered as 
cardiovascular mortalities. The total number of ``cardiovascular or 
unexplained deaths'' would have been 21, not 17. In the Warfarin 
therapy group, there was 1 ``unexplained/other'' death that should have 
been included in the primary endpoint, resulting in a total of 23, not 
22. We acknowledged that it may be difficult to calculate the impact of 
these additional events as the intention-to-treat analysis of the 
primary endpoint. However, we stated our concern that the inclusion of 
the additional deaths could have made the posterior probabilities for 
the device less favorable. Based on the data at face value, we stated 
that it appears that the WATCHMAN[supreg] System does not demonstrate 
statistically significant superiority over treatment with Warfarin 
therapy until 3.8 years has elapsed and the patient has been 
administered 6 months of oral anticoagulation and been exposed to the 
risk of the device-related complications. We stated that we were 
concerned that the applicant has not demonstrated

[[Page 49484]]

substantially improved clinical outcomes.
    In the prospective randomized evaluation of the PREVAIL study, the 
goal was to assess the safety and efficacy of LAA occlusion for stroke 
prevention in patients diagnosed with NVAF compared to long-term 
Warfarin therapy. The PREVAIL study was a confirmatory randomized trial 
designed to further assess the efficacy and safety of the 
WATCHMAN[supreg] System device. Patient selection and study design were 
similar to the PROTECT AF study. Two efficacy and 1 safety coprimary 
endpoints were assessed at 18 months. The rate of the first coprimary 
efficacy endpoint overall efficacy (composite of stroke, systemic 
embolism [SE], and cardiovascular/unexplained death) was 0.064 in the 
WATCHMAN[supreg] System device group versus 0.063 in the control group 
(rate ratio 1.07 [95 percent credible interval (CrI) 0.57 to 1.89]) and 
did not achieve the prespecified criteria of noninferiority (upper 
boundary of 95 percent CrI 1.75). The rate for the second coprimary 
efficacy endpoint (stroke or SE >7 days' post-randomization) was 0.0253 
versus 0.0200 (risk difference 0.0053 [95 percent CrI -0.0190 to 
0.0273]), which achieved noninferiority. Early safety events were 
significantly lower than the results of the PROTECT AF study, which 
satisfies the prespecified safety performance goal. The PREVAIL study 
was designed to demonstrate noninferiority with wide efficacy margins. 
However, as previously stated, our concern was that the results of the 
study did not show the overall efficacy of the technology to be 
noninferior.
    Comment: The applicant responded to our concerns and commented that 
it appreciates that CMS agrees that the Bayesian approach is valid for 
analyzing PROTECT AF and PREVAIL trials as both were powered based on 
those statistics. Although CMS agrees with this approach, the applicant 
asserted that it appears contradictory also to judge PREVAIL efficacy 
using a frequentist approach. The applicant stated that the primary 
objective of PREVAIL was to confirm procedural safety due to early 
complications from the first half of PROTECT AF. The applicant noted 
that, although the procedural complication rates were reduced by 
approximately 50 percent in the second half of PROTECT AF, and were 
maintained in the CAP registry, the FDA required the applicant to 
perform a second randomized trial to confirm this improvement in 
safety. The applicant stated that PREVAIL was the confirmatory trial 
that demonstrated the safety profile of the WATCHMAN[supreg] System and 
showed the device could be safely implanted by both experienced and new 
operators.
    The applicant acknowledged that when the efficacy data are 
considered on their own, the WATCHMAN[supreg] arm in PREVAIL missed 
both co-primary efficacy endpoints (the 18-month rates of the composite 
of stroke (including hemorrhagic or ischemic), systemic embolism, and 
cardiovascular or unexplained death and the 18-month rates of ischemic 
stroke or systemic embolism excluding the first 7 days post-
randomization) in the October 2014 updated post hoc analyses. The 
applicant stated the reason why the stand-alone data in PREVAIL missed 
overall efficacy was due in large part to the over-performance of the 
Warfarin arm in PREVAIL. The applicant noted that when evaluating the 
Warfarin arm in PREVAIL, with respect to ischemic strokes, it 
outperformed historical Warfarin trials (and real-world experience) and 
the assumptions used for the design of the PREVAIL trial. Specifically, 
the applicant noted that the rate of ischemic strokes was three times 
less than any Warfarin control trial in the last decade, with an annual 
rate of 0.3 percent for ischemic stroke \62\ compared with 1.05 to 1.42 
percent in other trials of oral-anticoagulant trials that included over 
29,000 Warfarin patients.63 64 65 66 In addition, the 
applicant stated the following: That although the PREVAIL ischemic 
stroke rate in the WATCHMAN[supreg] arm was numerically higher than the 
Warfarin arm, it was consistent with the long-term follow up of all 
WATCHMAN[supreg] patients in all other trials; the ischemic stroke 
rates for the WATCHMAN[supreg] group are similar to those treated with 
anticoagulants as seen in PROTECT AF and the CAP registry when 
accounting for the higher CHA2DS2-VASc score. The 
applicant indicated that this implies the rates of ischemic stroke in 
the WATCHMAN[supreg] arm of the PREVAIL trial are comparable to those 
with treated with anticoagulants and shows a similar benefit as 
compared to Warfarin.\67\
---------------------------------------------------------------------------

    \62\ Holmes et al. Prospective randomized evaluation of the 
Watchman left atrial appendage Device in patients with atrial 
fibrillation versus long-term warfarin therapy; the PREVAIL trial. 
JACC, Vol. 4, No. 1, 2014, 1-11.
    \63\ Patel MR and the ROCKET AF Steering Committee for the 
ROCKET AF Investigators. Rivaroxaban versus warfarin in nonvalvular 
atrial fibrillation. N Engl J Med. 2011;365(10):883-891.
    \64\ Granger CB and the ARISTOTLE Committees and Investigators. 
Apixaban versus warfarin in patients with atrial fibrillation. N 
Engl J Med. 2011;365(11):981-992.
    \65\ Connolly SJ, Ezekowitz MD, Yusuf S, et al. and the RE-LY 
Steering Committee and Investigators. Dabigatran versus warfarin in 
atrial fibrillation patients. N Engl J Med. 2009;361:1139-51.
    \66\ Giugliano, R.P., C.T. Ruff, et al. (2013). ``Edoxaban 
versus Warfarin in Patients with Atrial Fibrillation.'' New England 
Journal of Medicine 369(22): 2093-2104.
    \67\ Friberg L. et al. Evaluation of risk stratification schemes 
for ischaemic stroke and bleeding in 182,678 patients with atrial 
fibrillation: the Swedish Atrial Fibrillation cohort study. Eur 
Heart J (2012). NICE UK (2014).
---------------------------------------------------------------------------

    The applicant further noted that although the PREVAIL efficacy 
endpoints were missed, the data was consistent with demonstrating non-
inferiority (93 percent posterior probability of non-inferiority) of 
WATCHMAN[supreg] compared to Warfarin and came close to achieving 
statistical proof of non-inferiority (that is, posterior probability of 
95.69 percent) with respect to the primary efficacy endpoint of 
composite stroke, systemic embolism and cardiovascular death.
    The applicant also noted that in the primary December 2013 analysis 
specified by the protocol (using data locked in January 2013), the 
Bayesian estimate for the 18-month rate ratio was 1.07 with a 95 
percent credible interval of 0.57 to 1.89. The applicant stated that 
the upper bound of 1.89 was not lower than the non-inferiority margin 
of 1.75 defined in the statistical analysis plan, the non-inferiority 
criterion was not met in the pre-specified analysis (the posterior 
probability of non-inferiority was 95.69 percent). In the ad hoc 
October 2014 Bayesian analysis (using data locked in June 2014), the 
applicant noted that the 18-month rate was 0.065 for the Device group 
and 0.057 for the Control group. Also, the Bayesian estimate for the 
18-month rate ratio was 1.21 with a 95 percent credible interval of 
0.69 to 2.05. The applicant stated that because the upper bound of 2.05 
was not lower than the non-inferiority margin of 1.75 defined in the 
statistical analysis plan, the non-inferiority criterion was still not 
met (the posterior probability of non-inferiority was 92.6 percent).
    The applicant stated that the second primary endpoint evaluated the 
post-procedure difference between the WATCHMAN[supreg] System and 
Warfarin in terms of ischemic stroke and systemic embolism. The 
applicant noted the following: In the December 2013 data (using the 
January 2013 data lock), the pre-specified primary analysis time point, 
the 18 month rate difference was 0.0053, with a posterior probability 
of non-inferiority of 97.6 percent with the device meeting its 
endpoint; in October 2014, an updated analysis was performed on a data 
set locked in June 2014 where the rate difference increased to 0.0163 
due to additional ischemic

[[Page 49485]]

stroke events; the upper bound crossed the pre-specified boundary of 
0.0275 resulting in the endpoint being missed with a posterior 
probability of non-inferiority of 89.2 percent. The applicant stated 
that the WATCHMAN[supreg] arm of PREVAIL was performing similarly to 
the other trials and the additional ischemic strokes aligned with the 
stroke risk over longer term follow up in the PROTECT trial.
    The applicant noted that the PROTECT AF trial provided the 
informative prior for PREVAIL under the Bayesian analysis. The 
applicant stated that the total number of patients and duration of 
follow-up in PROTECT far exceeds that of PREVAIL as PROTECT AF 
represents over 75 percent of the randomized patient follow-up data, 
while PREVAIL accounts for less than a quarter.
    For long-term performance of WATCHMAN[supreg], the applicant stated 
that CMS should evaluate the primary efficacy data from PROTECT AF 
where patients have completed 2,717 patient years of follow up 
(compared to PREVAIL at 860 patient years) and have consistently 
demonstrated non-inferiority to Warfarin and shown superiority at 2,621 
patient years. The applicant noted that, although PROTECT AF was not 
designed to show superiority of WATCHMAN[supreg] to Warfarin, as it was 
designed to be a non-inferiority trial, it was also designed to have 
the potential to demonstrate superiority. The applicant noted that 
while the protocol allowed for testing of superiority provided that 
non-inferiority was shown, the lack of power to show superiority means 
that the study was not likely to demonstrate superiority given the 
sample size and expected performance of WATCHMAN[supreg] vs. Warfarin.
    The applicant also noted the following: Although the 95 percent 
posterior probability of superiority does not cross the boundary until 
the 3.8 year time point, the data are consistent with superiority as 
early as the 1.3 year (900 patient year) analysis; the rate ratio is 
relatively constant thereafter, reflecting consistency of the benefit 
of WATCHMAN[supreg] versus Warfarin from that point onward.
    The applicant also provided data from a patient level meta-analysis 
that combined the PROTECT AF and PREVAIL data to support the efficacy 
of the WATCHMAN[supreg] System and show the device was performing as 
expected when compared to the Warfarin control arm. The applicant 
stated the following major results from the meta-analysis of the 
PROTECT AF and PREVAIL randomized studies:
     Primary Efficacy Endpoint: The WATCHMAN[supreg] System was 
associated with a 21 percent reduction in the risk of a primary 
efficacy endpoint event, though not statistically significant (p=0.23).
     Stroke and Systemic Embolism: The WATCHMAN[supreg] System 
is similar to Warfarin in preventing all-cause stroke and systemic 
embolism (HR=1.02, p=0.93). It is associated with a decrease in the 
relative risk of hemorrhagic stroke (88 percent, p=0.004); however, the 
device is not as effective as Warfarin in reducing the risk of ischemic 
stroke (HR=1.96, p=0.049). The applicant stated that in considering the 
total risks and benefits of the WATCHMAN[supreg] System, it is 
important to take into account more than the ischemic stroke event such 
as comparison of stroke severity (hemorrhagic versus ischemic), major 
bleeds, and mortality.
     Stroke Severity: Using the mRS instrument, those strokes 
occurring in the WATCHMAN[supreg] device arms were significantly less 
likely to be disabling (49 percent relative reduction in disabling 
strokes, p=0.044) than those occurring in the Warfarin groups.
     Major Bleeds: Warfarin can cause bleeding in anatomic 
locations other than the brain, such as the eye or spine. When 
considering all major bleeds unrelated to the implant procedure, 
Warfarin was associated with an approximately two-fold relative 
increase in the risk of a major bleed (p=0.002).
     Mortality: Use of the WATCHMAN[supreg] System is 
associated with a 27 percent relative reduction in the risk of all-
cause mortality, though not statistically significant (p=0.074) and a 
52 percent relative reduction in the risk of cardiovascular (CV)/
unexplained mortality (p=0.006).
    The applicant stated that the primary efficacy endpoint for each of 
the trials included cardiovascular (or unexplained) death, all strokes 
(both ischemic and hemorrhagic) and systemic embolism. Of the 
components of this endpoint, the commenter stated that death is the 
most devastating, followed in importance by hemorrhagic strokes (which 
are generally catastrophic and typically result in greater disability 
than ischemic strokes). Therefore, when interpreting the patient-level 
meta-analyses, the applicant asserted that the overall conclusion is 
that the WATCHMAN[supreg] System is a reasonable alternative to 
Warfarin. The applicant noted that use of the WATCHMAN[supreg] System 
did not change the overall rate of all-cause stroke, but it did alter 
the proportion of stroke subtypes: There was a reduction in hemorrhagic 
stroke which was offset by less effective prevention of ischemic 
stroke. The applicant also noted the following: Although the overall 
rate of all-cause stroke was unchanged, patients with the 
WATCHMAN[supreg] System were significantly less likely to have a 
disabling stroke; when compared to Warfarin, the WATCHMAN[supreg] 
System yielded a significant relative reduction in the risk of major 
bleeding by 51 percent as well as a significant relative reduction in 
the risk of mortality due to CV or unknown causes by 52 percent; \68\ 
while the rates of all-stroke in the meta- analysis were the same 
between groups (HR=1.02, p=0.94), the rate of ischemic strokes was less 
in the Warfarin arm (HR=1.95, p=0.05) while the rate of hemorrhagic 
strokes was much less in the WATCHMAN[supreg] arm (HR=0.22, p=0.004).
---------------------------------------------------------------------------

    \68\ Holmes DR, Jr., Doshi SK, Kar S, et al. Left Atrial 
Appendage Closure as an Alternative to Warfarin for Stroke 
Prevention in Atrial Fibrillation: A Patient-Level Meta-Analysis. J 
Am Coll Cardiol. 2015;65(24):2614-2623. doi:10.1016/
j.jacc.2015.04.025. (In Press).
---------------------------------------------------------------------------

    The applicant stated the following conclusions: While PREVAIL was 
never intended nor powered to stand-alone for demonstrating overall 
efficacy, the primary purpose was to demonstrate procedural safety; 
although the PREVAIL primary efficacy endpoint was missed, CMS should 
not judge overall efficacy of the WATCHMAN[supreg] System in the 
absence of the long-term follow-up data from PROTECT AF and the meta-
analysis which provides a more complete picture of the data showing 
that WATCHMAN[supreg] efficacy outcomes are similar to those of 
Warfarin in patients who do not take oral anticoagulants; the 
WATCHMAN[supreg] System performance was consistent across trials and 
the additional ischemic strokes seen over time in PREVAIL align 
appropriately with the higher stroke risk scores in this trial (that 
is, patients with mean CHADS2 scores ranging from 2.2 to 2.7 
in the consecutive trials, and CHA2DS2-VASc 
scores from 3.5 to 4.5, with the majority of patients in all trials 
considered high risk and anticoagulation recommended per AHA/ACC/HRS 
guidelines).
    Response: We thank the applicant for the additional information and 
clarifications. We also appreciate the additional meta-analysis which 
we considered in our decision below. However, we continue to be 
concerned that the 95 percent posterior probability of superiority is 
not met for a number of years. In addition, there is no data 
establishing sustained effectiveness and superiority long term.
    Comment: With regard to CMS' interpretation of CV unexplained 
death,

[[Page 49486]]

one commenter clarified that all four studies employed an independent 
Clinical Events Committee (CEC) to review and adjudicate site-reported 
adverse events and ascertain their seriousness, relationship of the 
event to the device or procedure, and relationship of study medications 
to the study endpoints.\69\ The commenter stated that the four deaths 
questioned by CMS were adjudicated by this independent committee and 
were assigned to the correct mortality categories. The commenter also 
noted that there are two mortality categories with the word ``other'': 
``Cardiovascular--Unexplained/other'' and ``Other (Non-
Cardiovascular)''. The commenter explained that for determining the 
appropriate category, if a specific cause of death could not be 
determined, the death was assigned conservatively to the 
``Cardiovascular--Unexplained/other'' category and it was factored into 
the PROTECT AF primary efficacy endpoint and if the cause of a death 
was known but not cardiovascular-related, such as suicide or motor 
vehicle accident, then the death was assigned to the ``Other (Non-
Cardiovascular)'' category. The commenter stated that CMS is 
incorrectly implying that the four deaths assigned in the ``Other (Non-
Cardiovascular)'' category should be included in the ``Cardiovascular--
Unexplained/other'' category. The commenter explained that such an 
interpretation is incorrect because the causes of these deaths were 
known and determined not to be cardiovascular-related.
---------------------------------------------------------------------------

    \69\ The Establishment and Operation of Clinical Trial Data 
Monitoring Committees for Clinical Trial Sponsors; Guidance for 
Clinical Trial Sponsors--Establishment and Operation of Clinical 
Trial Data Monitoring Committees, issued March 2006.
---------------------------------------------------------------------------

    Response: We thank the commenter for clarifying and resolving our 
concern with regard to CV unexplained death and how these deaths were 
classified into either the ``Cardiovascular--Unexplained/other'' or 
``Other (Non-Cardiovascular)'' category.
    As discussed in the proposed rule (80 FR 24462), the applicant 
submitted data from a patient-level meta-analysis that combined the 
data from the PROTECT AF study with the data from the PREVAIL study. 
According to the applicant, this analysis supports the efficacy of the 
WATCHMAN[supreg] System and shows that the device was performing as 
expected compared to the Warfarin therapy control arm. The datasets 
were combined and weighted. According to the applicant, multiple 
outcomes of interest were examined, starting with the primary efficacy 
endpoint and then looking at individual outcomes: All stroke (ischemic 
and hemorrhagic) and associated disability; systemic embolism; 
cardiovascular/unexplained death; and major bleeding. The overall 
incidence of all strokes (ischemic and hemorrhagic) was not 
statistically different between the WATCHMAN[supreg] System arm and the 
Warfarin therapy arm. However, the applicant stated that there were 
statistical differences identified when it analyzed the stroke 
subtypes. The applicant indicated that, initially, there were more 
ischemic strokes in the WATCHMAN[supreg] System arm. However, after 
accounting for early procedural complications, including strokes 
(within 7 days post procedure) in the PROTECT AF study, the difference 
for ischemic stroke between the two arms fell below statistical 
significance (p=0.21). According to the applicant, there were 
significantly more hemorrhagic strokes and cardiovascular deaths in the 
Warfarin therapy arm compared to the WATCHMAN[supreg] System arm, 
showing a 78 percent and 52 percent reduction in those events 
respectively (p=0.004 and p=0.006). To better assess the clinical 
impact of the different subtypes of strokes on patients, the applicant 
also performed statistical tests on disabilities resulting from stroke. 
The applicant indicated that, using a validated stroke severity 
assessment tool (Modified Rankin score), analyses show that there were 
significantly less disabling strokes with the WATCHMAN[supreg] System 
than Warfarin therapy. The applicant believed that this represents a 
substantial clinical improvement for the WATCHMAN[supreg] System 
device.
    The applicant conducted an imputed placebo analysis to assess the 
benefit that untreated patients may expect with the WATCHMAN[supreg] 
System device. The applicant contended that many patients who are 
eligible for Warfarin therapy are not receiving any treatment and, 
therefore, are left unprotected from stroke. With annual ischemic 
stroke rates ranging from 5.6 percent to 7.1 percent, the applicant 
maintained that the WATCHMAN[supreg] System device provides a 
substantive clinical benefit. In order to assess the benefit that 
untreated patients may be able to expect with the WATCHMAN[supreg] 
System, the sponsor performed the following exploratory analysis. The 
observed device ischemic strokes rates were compared against the 
estimated stroke risk of untreated nonvalvular AF patients. A placebo 
arm was then constructed using ``well-established, validated 
literature'' models based on both the CHADS2 and 
CHA2DS2-VASc scores. The applicant reported that this 
analysis showed the WATCHMAN[supreg] System device reduced stroke in 
the untreated patient population by 65 to 81 percent.
    In the proposed rule, we noted that we previously expressed concern 
that there was a lack of strong evidence demonstrating that the 
WATCHMAN[supreg] System prevents stroke at all. The applicant responded 
that the imputed placebo analysis cited above addresses this concern. 
The applicant provided the table below as part of its FY 2016 
application to show the relative risk reduction in Ischemic stroke 
rates using the WATCHMAN[supreg] System versus no therapy.

        Table 5--WATCHMAN[supreg] Shows Significant Reduction in Ischemic Strokes Compared to No Therapy
----------------------------------------------------------------------------------------------------------------
                                      Average CHADS  (2       Observed
                                         footnote  on     WATCHMAN[supreg]
                Study                   acronym) score    annual ischemic   Imputed untreated    Relative risk
                                       WATCHMAN[supreg]   stroke rate  (95  annual event rate      reduction
                                           patients         Percent CI)
----------------------------------------------------------------------------------------------------------------
PROTECT AF..........................                2.2     1.3 (0.9, 2.0)         5.6 to 5.7     77% (64%, 84%)
PREVAIL-only........................                2.6     2.3 (1.3, 4.0)         6.6 to 6.7     65% (39%, 80%)
CAP.................................                2.5     1.2 (0.8, 1.8)                6.4     81% (72%, 88%)
----------------------------------------------------------------------------------------------------------------

    While the results of this analysis appear to suggest a large 
reduction in ischemic stroke rates in patients who did not receive any 
treatment, we continued to have some concerns regarding whether the 
WATCHMAN[supreg]

[[Page 49487]]

System device prevents strokes. The indication for the treatment of the 
WATCHMAN[supreg] System device is for patients who are eligible for 
Warfarin therapy as opposed to patients who are ineligible for Warfarin 
therapy. We stated that our concern is that the results of the imputed 
placebo analysis are not sufficient to determine whether the 
WATCHMAN[supreg] System reduces the risk of stroke in patients who are 
eligible for Warfarin therapy. The applicant suggested that patients 
who are subtherapeutic or noncompliant with Warfarin therapy would have 
the same risk of stroke as patients who do not receive any therapy. 
However, the applicant did not offer any evidence that these two groups 
have the same risk of stroke. The WATCHMAN[supreg] System device is 
intended only for use in patients who are eligible for the 
anticoagulation, not for patients who have contraindications to oral 
anticoagulation. Because the device will not be labeled for use in 
those patients, we stated in the proposed rule that we believe that an 
analysis comparing stroke risk of untreated patients to those patients 
treated with the WATCHMAN[supreg] System is of limited value in 
assessing the technology's benefit over existing therapy.
    Comment: The applicant commented and explained that the imputed 
placebo analysis compares patients enrolled in the WATCHMAN[supreg] 
trials to similar patients from large real-word databases. The 
applicant noted that a placebo arm was constructed using well-
established, validated literature models based on both the 
CHADS2 and CHA2DS2-VASc scores. The 
applicant stated that a benefit was then imputed, through analysis of 
the WATCHMAN[supreg] trials, for the WATCHMAN[supreg] System as 
compared to the imputed placebo patients, and a relative reduction in 
events was computed. The applicant clarified that this imputed placebo 
comparison is to ``untreated'' Warfarin-eligible non-valvular AF 
patients and not to patients contra-indicated or ineligible for 
Warfarin as the majority of these ``untreated patients'' are eligible 
for Warfarin and were not contraindicated for Warfarin. The applicant 
noted that when compared to untreated patients, each of the 
WATCHMAN[supreg] studies is associated with a substantial reduction in 
the risk of ischemic stroke, demonstrating a consistent and clinically 
meaningful response across each study. The applicant further noted that 
stroke risk reduction is between 65 and 81 percent when comparing the 
performance of the WATCHMAN[supreg] System to the groups used in the 
imputed placebo analyses.\70\ The applicant concluded that imputed 
placebo analyses show there is a strong expectation of a beneficial 
effect of WATCHMAN[supreg] when applied as intended to the patients who 
are eligible for Warfarin for the short-term but who are unable or 
unwilling to take the drug for the long-term and who would otherwise go 
untreated.
---------------------------------------------------------------------------

    \70\ Hanzel G, Almany S, Haines D, Berman A, Huber K, Kar S, 
Holmes D. Comparison of Imputed Placebo Versus Observed Ischemic 
Stroke Rates in the WATCHMAN Trials Represents a Significant 
Reduction in Risk (TCT2014 Presentation #176).
---------------------------------------------------------------------------

    Response: We thank the applicant for the additional input. We 
considered these comments in our decision below.
    As discussed in the proposed rule (80 FR 24463), the applicant 
asserted that one of the primary goals of mechanical LAA closure is to 
provide an alternative treatment for patients other than long-term 
Warfarin therapy and exposure to the associated risk for bleeding. 
Although the primary efficacy endpoint of the PROTECT AF and PREVAIL 
studies considered hemorrhagic stroke, it did not encompass other types 
of major bleeding that may be associated with the use of Warfarin. The 
applicant indicated that it performed a supplemental analysis to 
determine the relative risks of all types of bleeding. The applicant 
divided the follow-up interval into four subsections (7 days, 45 days, 
6 months, and 54 months). The applicant compared bleeding events in the 
WATCHMAN[supreg] System arm with the Warfarin therapy arm and concluded 
that, after 6 months (and discontinued use of Clopidogrel in the 
WATCHMAN[supreg] System group), the continued use of Warfarin was 
associated with a 3.4 fold increase in the risk of major bleeding. 
According to the applicant, the significant reduction in bleeding after 
the procedural and concomitant medication therapy (6 months) with the 
cessation of long-term anticoagulants illustrates the substantial 
clinical benefit of the WATCHMAN[supreg] System. However, given the 
high burden endured (most notably, the higher risk of bleeding 
occurring in the first 7 days of an inpatient hospital stay) to achieve 
a reduction in bleeding in the long term, we stated in the proposed 
rule that we do not believe the WATCHMAN[supreg] System meets the 
criteria for substantially improved clinical outcomes. In the proposed 
rule, we invited public comments on whether this technology meets the 
substantial clinical improvement criterion, particularly in light of 
the applicant's response to our previous concerns and our current 
concern that there remains insufficient evidence that the 
WATCHMAN[supreg] System substantially improves clinical outcomes in 
patients diagnosed with nonvalvular AF and who are eligible for 
Warfarin therapy.
    Comment: The applicant commented that despite WATCHMAN[supreg] 
System overall positive safety profile, CMS is choosing one specific 
event rate (that is, risk of peri-procedural bleeding) to conclude that 
WATCHMAN[supreg] System does not meet the criteria for substantial 
clinical improvement. The applicant argued that any device implant has 
some peri-procedural risks associated with the procedure (that is, 
pacemakers, defibrillators), but this should be balanced with the long-
term risks of not having the therapy available (for example, death). 
The applicant stated that as long as the potential device safety 
profile is well established in well-designed clinical trials and the 
risks are within the norms of other established device-based therapies, 
FDA approved treatment options should be eligible for consideration as 
a substantial improvement over available alternatives; this is 
especially true when the long-term risks of those alternatives, in this 
case non-treatment with long term oral anticoagulation, are high. The 
applicant noted that, in this regard, incidence of safety events fell 
from 9.9 percent in the first half of PROTECT AF to 4.8 percent in the 
second half after changes were made in operator training and technical 
aspects of the procedure. The applicant also noted that the reduction 
in safety events was evident in the CAP Registry where the safety event 
was 4.1 percent; the PREVAIL trial where the event rate was 2.2 percent 
with a 95 percent credible interval bound of 2.65 percent, within the 
pre- specified performance goal of 2.67 percent and in the CAP2 
registry where the safety event remained constant around 4.1 percent. 
The applicant noted that the WATCHMAN[supreg] procedural risks are on 
par with most left atrial cardiovascular medical device interventions 
(for example, ablation).\71\
---------------------------------------------------------------------------

    \71\ Boston Scientific FDA Panel October 2014.
---------------------------------------------------------------------------

    The applicant also noted the following: The one-time 7-day peri-
procedural WATCHMAN[supreg] complication rate of 3.8 to 4.1 percent is 
similar to the yearly frequency of major bleeding or intracranial 
hemorrhage for patients on long-term Warfarin, which is 3.1 to 3.6 
percent; 72 73 74 75 that any sequelae

[[Page 49488]]

associated with the upfront bleeding risks associated with the implant 
procedure, unlike those that occur in patients on long-term Warfarin, 
should be more effectively managed because they occur in-hospital under 
medical supervision where immediate treatment is available.
---------------------------------------------------------------------------

    \72\ Patel MR and the ROCKET AF Steering Committee for the 
ROCKET AF Investigators. Rivaroxaban versus warfarin in nonvalvular 
atrial fibrillation. N Engl J Med. 2011;365(10):883-891.
    \73\ Granger CB and the ARISTOTLE Committees and Investigators. 
Apixaban versus warfarin in patients with atrial fibrillation. N 
Engl J Med. 2011;365(11):981-992.
    \74\ Connolly SJ, Ezekowitz MD, Yusuf S, et al and the RE-LY 
Steering Committee and Investigators. Dabigatran versus warfarin in 
atrial fibrillation patients. N Engl J Med. 2009;361:1139-51.
    \75\ Giugliano, R.P., C.T. Ruff, et al. (2013). ``Edoxaban 
versus Warfarin in Patients with Atrial Fibrillation.'' New England 
Journal of Medicine 369(22): 2093-2104.
---------------------------------------------------------------------------

    The applicant also stated that CMS' analysis does not consider that 
the bleeding rate with oral anticoagulation therapy is compounded 
yearly (that is, the risk goes up with longer exposure to Warfarin), 
dramatically increasing the likelihood of hemorrhagic stroke. The 
applicant asserted that, in contrast, WATCHMAN[supreg] patients are 
free of the burden of life-long treatment with Warfarin (99 percent 
Warfarin cessation at 12 months in PREVAIL and CAP2) and the bleeding 
risk is constant and reduced in years 1-9 post implant. The applicant 
stated that the reduced bleeding benefits associated with the 
WATCHMAN[supreg] System continue to diverge from Warfarin outcomes and 
the magnitude of benefit increases over time.\76\ Furthermore, the 
applicant asserted that for patients with 
CHA2DS2VASC score of 2 or greater, who are not on 
long-term oral anticoagulation and are unprotected against ischemic 
stroke, the annual risk of stroke ranges from 2 to 24 percent and over 
a 5-year period, the risk is between10 to 75 percent that these 
patients may experience an ischemic stroke.
---------------------------------------------------------------------------

    \76\ Boston Scientific WATCHMAN FDA Panel Sponsor Presentation--
October 2014.
---------------------------------------------------------------------------

    Response: While we agree with the commenter that one specific event 
rate (that is, risk of peri-procedural bleeding) should not preclude 
the WATCHMAN[supreg] System from meeting the criteria for substantial 
clinical improvement, we continue to be concerned that the 95 percent 
posterior probability of superiority is not met for a number of years. 
In addition, there is no data establishing sustained effectiveness and 
superiority long term. While the WATCHMAN[supreg] System can be an 
alternative to the subset of patients with nonvalvular atrial 
fibrillation who are unable to tolerate warfarin long term, we are 
concerned that the WATCHMAN[supreg] System is not as effective as 
Warfarin in reducing the risk of ischemic stroke.
    Also, the clinical trials compared the WATCHMAN[supreg] System to 
Warfarin. Other anti-coagulants may be an effective treatment for this 
small population not eligible for Warfarin. Without additional clinical 
data, we are unable to determine if patients who respond to other anti-
coagulants would require the WATCHMAN[supreg] System. Therefore, based 
on the reasons stated above, we do not believe that the 
WATCHMAN[supreg] System meets the substantial clinical improvement 
criteria at this time and are not approving the WATCHMAN[supreg] System 
for new technology add on payment for FY 2016. We welcome the applicant 
to reapply next year as additional long-term data becomes available.
    Comment: Many commenters supported the approval of the 
WATCHMAN[supreg] System for new technology add-on payment for FY 2016. 
Many of the commenters spoke about their experience with the device and 
reiterated many of the points expressed by the applicant in its 
comments.
    Response: We thank the commenters for their comments. However, as 
mentioned above, we are not approving the WATCHMAN[supreg] System for 
new technology add-on payment for FY 2016.

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

A. Background

1. Legislative Authority
    Section 1886(d)(3)(E) of the Act requires that, as part of the 
methodology for determining prospective payments to hospitals, the 
Secretary adjust the standardized amounts for area differences in 
hospital wage levels by a factor (established by the Secretary) 
reflecting the relative hospital wage level in the geographic area of 
the hospital compared to the national average hospital wage level. We 
currently define hospital labor market areas based on the delineations 
of statistical areas established by the Office of Management and Budget 
(OMB). A discussion of the FY 2016 hospital wage index based on the 
statistical areas appears under sections III.A.2. and G. of the 
preamble of this final rule.
    Section 1886(d)(3)(E) of the Act requires the Secretary to update 
the wage index annually and to base the update on a survey of wages and 
wage-related costs of short-term, acute care hospitals. This provision 
also requires that any updates or adjustments to the wage index be made 
in a manner that ensures that aggregate payments to hospitals are not 
affected by the change in the wage index. The adjustment for FY 2016 is 
discussed in section II.B. of the Addendum to this final rule.
    As discussed in section III.J. of the preamble of this final rule, 
we also take into account the geographic reclassification of hospitals 
in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of the Act 
when calculating IPPS payment amounts. Under section 1886(d)(8)(D) of 
the Act, the Secretary is required to adjust the standardized amounts 
so as to ensure that aggregate payments under the IPPS after 
implementation of the provisions of sections 1886(d)(8)(B), 
1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate 
prospective payments that would have been made absent these provisions. 
The budget neutrality adjustment for FY 2016 is discussed in section 
II.A.4.b. of the Addendum to this final rule.
    Section 1886(d)(3)(E) of the Act also provides for the collection 
of data every 3 years on the occupational mix of employees for short-
term, acute care hospitals participating in the Medicare program, in 
order to construct an occupational mix adjustment to the wage index. A 
discussion of the occupational mix adjustment that we are applying, 
beginning October 1, 2015 (to the FY 2016 wage index), appears under 
sections III.E.3. and F. of the preamble of this final rule.
2. Core-Based Statistical Areas (CBSAs) for the FY 2016 Final Rule
    The wage index is calculated and assigned to hospitals on the basis 
of the labor market area in which the hospital is located. Under 
section 1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate 
hospital labor market areas based on OMB-established Core-Based 
Statistical Areas (CBSAs). The current statistical areas (which were 
implemented beginning with FY 2015) are based on revised OMB 
delineations issued on February 28, 2013, in OMB Bulletin No. 13-01. 
OMB Bulletin No. 13-01 established revised delineations for 
Metropolitan Statistical Areas, Micropolitan Statistical Areas, and 
Combined Statistical Areas in the United States and Puerto Rico, and 
provided guidance on the use of the delineations of these statistical 
areas based on new standards published on June 28, 2010 in the Federal 
Register (75 FR 37246 through 37252) and the 2010 Census of Population 
and Housing data (we refer to these revised OMB delineations as the 
``new OMB delineations'' in this final rule). A copy of this bulletin 
may be obtained at http://www.whitehouse.gov/sites/default/files/omb/
bulletins/2013/b-13-

[[Page 49489]]

01.pdf. We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 
49951 through 49963) for a full discussion of our implementation of the 
new OMB labor market area delineations for the FY 2015 wage index. For 
FY 2016, we are continuing to use the new OMB delineations that we 
adopted beginning with FY 2015 to calculate the area wage indexes, 
including the transition wage indexes, which we discuss below.

B. Worksheet S-3 Wage Data for the FY 2016 Wage Index

    The FY 2016 wage index values are based on the data collected from 
the Medicare cost reports submitted by hospitals for cost reporting 
periods beginning in FY 2012 (the FY 2015 wage indexes were based on 
data from cost reporting periods beginning during FY 2011).
1. Included Categories of Costs
    The FY 2016 wage index includes the following categories of data 
associated with costs paid under the IPPS (as well as outpatient 
costs):
     Salaries and hours from short-term, acute care hospitals 
(including paid lunch hours and hours associated with military leave 
and jury duty);
     Home office costs and hours;
     Certain contract labor costs and hours (which includes 
direct patient care, certain top management, pharmacy, laboratory, and 
nonteaching physician Part A services, and certain contract indirect 
patient care services (as discussed in the FY 2008 final rule with 
comment period (72 FR 47315 through 47318)); and
     Wage-related costs, including pension costs (based on 
policies adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586 
through 51590)) and other deferred compensation costs.
2. Excluded Categories of Costs
    Consistent with the wage index methodology for FY 2015, the wage 
index for FY 2016 also excludes the direct and overhead salaries and 
hours for services not subject to IPPS payment, such as skilled nursing 
facility (SNF) services, home health services, costs related to GME 
(teaching physicians and residents) and certified registered nurse 
anesthetists (CRNAs), and other subprovider components that are not 
paid under the IPPS. The FY 2016 wage index also excludes the salaries, 
hours, and wage-related costs of hospital-based rural health clinics 
(RHCs), and Federally qualified health centers (FQHCs) because Medicare 
pays for these costs outside of the IPPS (68 FR 45395). In addition, 
salaries, hours, and wage-related costs of CAHs are excluded from the 
wage index for the reasons explained in the FY 2004 IPPS final rule (68 
FR 45397 through 45398).
3. Use of Wage Index Data by Suppliers and Providers Other Than Acute 
Care Hospitals Under the IPPS
    Data collected for the IPPS wage index also are currently used to 
calculate wage indexes applicable to suppliers and other providers, 
such as SNFs, home health agencies (HHAs), ambulatory surgical centers 
(ASCs), and hospices. In addition, they are used for prospective 
payments to IRFs, IPFs, and LTCHs, and for hospital outpatient 
services. We note that, in the IPPS rules, we do not address comments 
pertaining to the wage indexes of any supplier or provider except IPPS 
providers and LTCHs. Such comments should be made in response to 
separate proposed rules for those suppliers and providers.

C. Verification of Worksheet S-3 Wage Data

    The wage data for the FY 2016 wage index were obtained from 
Worksheet S-3, Parts II and III of the Medicare cost report (Form CMS-
2552-10) for cost reporting periods beginning on or after October 1, 
2011, and before October 1, 2012. For wage index purposes, we refer to 
cost reports during this period as the ``FY 2012 cost report,'' the 
``FY 2012 wage data,'' or the ``FY 2012 data.'' Instructions for 
completing the wage index sections of Worksheet S-3 are included in the 
Provider Reimbursement Manual (PRM), Part 2 (Pub. No. 15-2), Chapter 
40, Sections 4005.2 through 4005.4. The data file used to construct the 
FY 2016 wage index includes FY 2012 data submitted to us as of June 29, 
2015. As in past years, we performed an extensive review of the wage 
data, mostly through the use of edits designed to identify aberrant 
data.
    We asked our MACs to revise or verify data elements that result in 
specific edit failures. For the proposed FY 2016 wage index, we 
identified and excluded 93 providers with aberrant data that should not 
be included in the wage index. We stated in the FY 2016 IPPS/LTCH PPS 
proposed rule that if data elements for some of these providers with 
aberrant data are corrected, we intended to include data from those 
providers in the final FY 2016 wage index (80 FR 24464). We also 
adjusted certain aberrant data elements within a provider's data and 
included these data in the proposed wage index. For example, in 
situations where a hospital did not have documentable salaries, wages, 
and hours for contract housekeeping and dietary services, we imputed 
estimates, in accordance with established policies as discussed in the 
FY 2015 IPPS/LTCH PPS final rule (79 FR 49965 through 49967). We stated 
that we intended to resolve all unresolved data elements by the date 
the FY 2016 IPPS/LTCH PPS final rule is issued. The revised data are 
reflected in this FY 2016 IPPS/LTCH PPS final rule.
    As a result of further review by the MACs and the April and June 
appeals processes, we received corrected data or improved documentation 
for 34 hospitals, and therefore, we are including these 34 hospitals in 
the final FY 2016 wage index. The hospitals that are excluded from the 
wage index remain excluded for a variety of reasons, such as, but not 
limited to, unresponsiveness to requests for documentation or 
insufficiently documented data, terminated hospitals' failed edits for 
reasonableness, or low Medicare utilization.
    In constructing the proposed FY 2016 wage index, we included the 
wage data for facilities that were IPPS hospitals in FY 2012, inclusive 
of those facilities that have since terminated their participation in 
the program as hospitals, as long as those data did not fail any of our 
edits for reasonableness. We believe that including the wage data for 
these hospitals is, in general, appropriate to reflect the economic 
conditions in the various labor market areas during the relevant past 
period and to ensure that the current wage index represents the labor 
market area's current wages as compared to the national average of 
wages. However, we excluded the wage data for CAHs as discussed in the 
FY 2004 IPPS final rule (68 FR 45397 through 45398). For the FY 2016 
IPPS/LTCH PPS proposed rule, we removed 12 hospitals that converted to 
CAH status on or after February 13, 2014, the cut-off date for CAH 
exclusion from the FY 2015 wage index, and through and including 
February 5, 2015, the cut-off date for CAH exclusion from the FY 2016 
wage index. After issuance of the proposed rule, we learned of one more 
hospital that converted to CAH status on or after February 13, 2014, 
and through and including February 5, 2015. Therefore, for this FY 2016 
IPPS/LTCH PPS final rule, we removed a total of 13 CAHs that converted 
to CAH status on or after February 13, 2014, and through and including 
February 5, 2015. After removing hospitals with aberrant data and 
hospitals that converted to CAH status, we calculated the final FY 2016 
wage index based on 3,362 hospitals.
    For the final FY 2016 wage index, we allotted the wages and hours 
data for a multicampus hospital among the different labor market areas 
where its

[[Page 49490]]

campuses are located in the same manner that we allotted such 
hospitals' data in the FY 2015 wage index (79 FR 49964). Table 2, which 
contains the final FY 2016 wage index associated with this final rule 
(available via the Internet on the CMS Web site), includes separate 
wage data for the campuses of 8 multicampus hospitals. (We note that, 
in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24464), we indicated 
that the proposed Table 2 includes separate wage data for the campuses 
of 7 multicampus hospitals. At the time of the development of the 
proposed rule, we were unaware of one additional multicampus hospital. 
We have included this eighth multicampus hospital in the FY 2016 final 
wage index.)
    Comment: Commenters disagreed with the exclusion of certain 
hospitals' data from the FY 2016 wage index public use files (PUFs) and 
requested that these hospitals be included in the FY 2016 final rule. 
The commenters asked for transparency and disclosure of criteria for 
these hospitals' exclusion. They noted that the number of hospitals 
excluded from the wage index has risen over past years and that it is 
especially important for CMS to make decisions in a reasoned, 
consistent, and transparent manner because the entire CBSAs' average 
hourly wages are impacted by deleting one hospital with a higher 
average hourly wage. The commenters noted that 93 hospitals were 
deleted from the FY 2016 proposed wage index, as compared to only 49 
hospitals that were deleted from the FY 2015 proposed wage index. The 
commenters questioned CMS' statutory authority to exclude data from 
hospitals with higher than average labor costs, and argued that section 
1886(d)(3)(E) of the Act cannot be read to support the agency's 
position that it has the discretion to delete certain hospitals from 
the PUF if they have extremely high labor costs. The commenters 
asserted that removal of these hospitals' data is ``arbitrary and 
capricious'' and an ``abuse of discretion.'' The commenters also 
asserted that CMS should prove that a hospital's costs are abnormal, 
and argued that, without giving hospitals advanced notice or guidance 
through a notice and public comment process as to what would make their 
costs qualify as ``excessive'' or ``unusual,'' hospitals cannot modify 
their practices to avoid such a determination. The commenters further 
reasoned that CMS' decision to exclude certain hospitals' data 
undermines the MAC desk review process, and therefore, it is 
inappropriate to ask hospitals to defend their data post-audit.
    One commenter representing hospitals located in CBSA 46140, where a 
hospital was excluded due to having a very high average hourly wage 
relative to the CBSA, disagreed with the removal of the wage data of 
that hospital from the FY 2015 and FY 2016 wage indexes, and argued 
that ``if CMS were to adopt a policy of excluding the hospital with the 
highest wage data from each CBSA, fairness would require that CMS also 
exclude the hospital with the lowest wage data from each CBSA.'' The 
commenter stated that hospitals are aware of no such CMS policy.
    Commenters asked for improved CMS communication with hospitals, 
including enlisting the MACs to notify hospitals in writing if the 
hospitals are excluded from the PUF, the criteria used to determine 
whether a hospital was excluded, and the procedures that a hospital may 
use to ask for reconsideration. The commenters also suggested that MACs 
be directed to notify State hospital associations not only when 
hospitals do not respond during the desk review, but also when there 
are efforts underway to correct hospitals' aberrant data.
    Response: Section 1886(d)(3)(E) of the Act requires the Secretary 
to adjust the proportion of hospitals' costs attributable to wages and 
wage-related costs for area differences reflecting the relative 
hospital wage level in the geographic area of the hospital compared to 
the national average hospital wage level. We believe that, under this 
section of the Act, we have discretion to exclude aberrant hospital 
data from the wage index PUFs to help ensure that the costs 
attributable to wages and wage-related costs in fact reflect the 
relative hospital wage level in the hospitals' geographic area.
    Since the origin of the IPPS, the wage index has been subject to 
its own annual review process, first by the MACs, and then by CMS. 
Hospitals are aware that both the MACs (via instructions issued by CMS) 
and CMS evaluate the accuracy and reasonableness of hospitals' wage 
index data, and hospitals may appeal to CMS as part of the April and 
June appeals processes. As a standard practice, after each annual desk 
review, CMS reviews the results of the MACs' desk reviews and focuses 
on items flagged during the desk review, requiring that the MACs and, 
if necessary, hospitals provide additional documentation, adjustments, 
or corrections to the data. Each year, in the IPPS proposed rules, we 
discuss the process wherein CMS asks the MACs to ``revise or verify 
data elements that result in specific edit failures'' (80 FR 24464). In 
the FY 2016 IPPS/LTCH PPS proposed rule, similar to the proposed rules 
of prior years, we stated that we included the wage data for facilities 
that were IPPS hospitals in FY 2012, inclusive of those facilities that 
have since terminated their participation in the program as hospitals, 
as long as those data did not fail any of our edits for reasonableness. 
We believe that including the wage data for these hospitals is 
appropriate, in general, to reflect the various labor market areas 
during the relevant past period and to ensure that the current wage 
index represents the labor market area's current wages as compared to 
the national average of wages (80 FR 24464). That is, a hospital is 
included in the wage index if its data are reasonable, regardless of 
whether the hospital is open or whether it has terminated after the 
relevant past period, because the wage index is constructed to 
represent the relative average hourly wage for each labor market area 
in that past period. Thus, reasonableness and relativity to each area's 
average hourly wages have been longstanding tenets of the wage index 
development process that CMS has articulated in rulemaking.
    We disagree with the commenters that removing hospitals from the FY 
2016 wage index PUFs was arbitrary and undermined the MAC desk review 
process because, as discussed above, as a standard part of the 
refinement of the annual wage index, CMS evaluates the wage data for 
both accuracy and reasonableness to ensure that the wage index is a 
relative measure of the labor value provided to a typical hospital in a 
particular labor market area. As part of this evaluation process, it is 
CMS, not the MACs, that makes the decisions to include or exclude a 
hospital's data from the wage index, and it would not be appropriate 
for CMS to make such decisions prior to a desk review being performed. 
The commenters seem to indicate that only hospitals with high average 
hourly wages were removed from the PUFs, noting that 93 hospitals were 
deleted from the FY 2016 proposed wage index, as compared to only 49 
hospitals that were deleted from the FY 2015 proposed wage index. In 
the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24464), we stated that 
``For the proposed FY 2016 wage index, we identified and excluded 93 
providers with aberrant data that should not be included in the 
proposed wage index. If data elements for some of these providers with 
aberrant data are corrected, we intend to include data from those 
providers in the final FY

[[Page 49491]]

2016 wage index'' (emphasis added). We note that we never anticipated 
that the data of all 93 hospitals would be corrected; we only 
anticipated that the data of some of those hospitals would be 
corrected. This is because approximately 50 hospitals were deleted from 
the FY 2016 proposed wage index for reasons that would make their data 
unresolvable, such as, but not limited to, termination (during or since 
the relevant past period), low/no Medicare utilization, being a CAH, or 
not reporting any wage data. Thus, ``aberrant'' hospitals are not 
limited to only hospitals that fail edits for reasonableness, but also 
include hospitals whose data are unresolvable. In fact, the number of 
hospitals deleted from the February or May 2015 PUFs due to having an 
extraordinarily high average hourly wage (and no other significant edit 
failures) was a small percentage of the 93 excluded hospitals (11.8 
percent). Approximately 40 hospitals excluded from the February 2015 
PUF had the potential to improve their data and be included in the May 
2015 PUF and\or the final rule wage index. (In the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 49964), we stated that ``For the proposed FY 2015 
wage index, we stated that we identified and excluded 50 providers with 
aberrant data that should not be included in the wage index, although 
we stated that if data elements are corrected, we intended to include 
data from those providers in the final FY 2015 wage index (79 FR 
28064). We have since determined that we had only removed 49, not 50, 
providers with aberrant data from the proposed wage index.'' In an 
effort to avoid a similar miscounting of deleted hospitals for the FY 
2016 proposed rule, we specified the total universe of deleted 
hospitals (93)--not just the number of hospitals with aberrant data 
which we anticipated would be able to be corrected as we had done for 
FY 2015. Essentially, the group of approximately 40 hospitals that were 
excluded during the development of the FY 2016 wage index and had the 
potential to improve their data is analogous to the 49 hospitals that 
were excluded from the FY 2015 proposed rule). As we stated earlier, we 
received corrected data or improved documentation for 34 hospitals. 
Therefore, we are including these 34 hospitals in the final FY 2016 
wage index. Furthermore, of those hospitals with high average hourly 
wages that did object to their exclusion from the proposed wage index 
by submitting an April appeal or a public comment letter, we have 
determined that only 5 hospitals would remain out of the final FY 2016 
wage index. This demonstrates the effectiveness of our process--
hospitals were included in final wage index because these hospitals 
were responsive to the MACs' and CMS' requests for sufficient 
documentation to improve their data. Consequently, the vast majority of 
hospitals whose data were excluded from the proposed wage index but had 
the potential to improve their data are included in the FY 2016 final 
wage index. We believe the final wage index is all the more accurate as 
a result.
    Regarding the particular hospital in CBSA 46140 to which one 
commenter referred, while the hospital's wage data were properly 
documented, the hospital does not merely have the highest average 
hourly wage in the CBSA; its average hourly wage is extremely and 
unusually high, significantly higher than the next highest average 
hourly wage in that CBSA and in the surrounding areas. We do not 
believe that the average hourly wage of this particular hospital 
accurately reflects the economic conditions in its labor market area 
during the FY 2012 cost reporting period. Therefore, its inclusion in 
the wage index would not ensure that the FY 2016 wage index represents 
the labor market area's current wages as compared to the national 
average of wages. Rather, its inclusion would distort the average 
hourly wage of its labor market area. Accordingly, we have exercised 
our discretion to remove this hospital's wage data from the FY 2016 
wage index.
    Furthermore, just as CMS has excluded certain hospitals from the 
wage index with extraordinarily high average hourly wages relative to 
their labor market areas, CMS also has excluded hospitals with 
extraordinarily low average hourly wages relative to their labor market 
areas. An objective comparison of the hospitals included in the FY 2016 
preliminary PUF to the hospitals included in the February and May 2015 
PUFs demonstrates CMS' ``fairness'' in evaluating the appropriateness 
and relativity of the wage data of hospitals with both extraordinarily 
low and extraordinarily high average hourly wages. While 5 hospitals 
with high extraordinarily high average hourly wages remain excluded 
from the FY 2016 final wage index, 14 hospitals with extraordinarily 
low average hourly wages also remain excluded from the FY 2016 final 
wage index. Therefore, we disagree with commenters' assertions that we 
have been ``arbitrary and capricious'' and have ``abused'' our 
discretion in excluding hospitals from the wage index.
    Regarding the commenters' requests for notification of exclusion 
from the PUFs, such a notification process already exists. Each time a 
PUF is posted, CMS instructs the MACs to send letters to each of their 
hospitals notifying and instructing them to review their wage index 
data that were just posted. Hospitals that review each PUF and observe 
that they are excluded may then submit an April appeal to CMS, and/or 
contact CMS and the MAC to discuss possible ways to revise or verify 
their data for inclusion in the wage index. We believe the established 
annual wage index timetable grants sufficient time for hospitals to 
review, appeal, and/or correct their data. We also welcome State 
hospital associations to be more proactive in the process of urging 
their constituents to be responsive to the MACs' and CMS' requests for 
documentation and to become more involved in resolving issues related 
to aberrant data. We acknowledge the commenters' suggestions for 
increased transparency, disclosure of criteria for hospitals' 
exclusion, and improving awareness both at the State hospital 
association level and the hospital level. We note that it has never 
been CMS' policy to disclose audit protocol. However, in the future, we 
may consider a limited proposal regarding criteria for excluding a 
hospital's data from the wage index due to its overall average hourly 
wage being either too high or too low, as well as utilizing additional 
methods of communicating with stakeholders regarding the adequacy of 
their wage data.

D. Method for Computing the FY 2016 Unadjusted Wage Index

    The method used to compute the FY 2016 wage index without an 
occupational mix adjustment follows the same methodology that we used 
to compute the FY 2012, FY 2013, FY 2014, and FY 2015 final wage 
indexes without an occupational mix adjustment (76 FR 51591 through 
51593, 77 FR 53366 through 53367, 78 FR 50587 through 50588, and 79 FR 
49967, respectively).
    As discussed in the FY 2012 IPPS/LTCH PPS final rule, in ``Step 
5,'' for each hospital, we adjust the total salaries plus wage-related 
costs to a common period to determine total adjusted salaries plus 
wage-related costs. To make the wage adjustment, we estimate the 
percentage change in the employment cost index (ECI) for compensation 
for each 30-day increment from October 14, 2011,

[[Page 49492]]

through April 15, 2013, for private industry hospital workers from the 
BLS' Compensation and Working Conditions. We have consistently used the 
ECI as the data source for our wages and salaries and other price 
proxies in the IPPS market basket, and as we discussed in the proposed 
rule (80 FR 24464 through 24465), we are not making any changes to the 
usage for the FY 2016 wage index in this final rule. The factors used 
to adjust the hospital's data were based on the midpoint of the cost 
reporting period, as indicated in the following table.

                    Midpoint of Cost Reporting Period
------------------------------------------------------------------------
         After                    Before             Adjustment factor
------------------------------------------------------------------------
       10/14/2011               11/15/2011                 1.02167
       11/14/2011               12/15/2011                 1.02029
       12/14/2011               01/15/2012                 1.01893
       01/14/2012               02/15/2012                 1.01756
       02/14/2012               03/15/2012                 1.01620
       03/14/2012               04/15/2012                 1.01484
       04/14/2012               05/15/2012                 1.01348
       05/14/2012               06/15/2012                 1.01213
       06/14/2012               07/15/2012                 1.01080
       07/14/2012               08/15/2012                 1.00951
       08/14/2012               09/15/2012                 1.00825
       09/14/2012               10/15/2012                 1.00699
       10/14/2012               11/15/2012                 1.00568
       11/14/2012               12/15/2012                 1.00433
       12/14/2012               01/15/2013                 1.00292
       01/14/2013               02/15/2013                 1.00148
       02/14/2013               03/15/2013                 1.00000
       03/14/2013               04/15/2013                 0.98259
------------------------------------------------------------------------

    For example, the midpoint of a cost reporting period beginning 
January 1, 2012, and ending December 31, 2012, is June 30, 2012. An 
adjustment factor of 1.01080 would be applied to the wages of a 
hospital with such a cost reporting period.
    Using the data as described above, the FY 2016 national average 
hourly wage (unadjusted for occupational mix) is $40.2911. The FY 2016 
Puerto Rico overall average hourly wage (unadjusted for occupational 
mix) is $16.9153.

E. Occupational Mix Adjustment to the FY 2016 Wage Index

    As stated earlier, section 1886(d)(3)(E) of the Act provides for 
the collection of data every 3 years on the occupational mix of 
employees for each short-term, acute care hospital participating in the 
Medicare program, in order to construct an occupational mix adjustment 
to the wage index, for application beginning October 1, 2004 (the FY 
2005 wage index). The purpose of the occupational mix adjustment is to 
control for the effect of hospitals' employment choices on the wage 
index. For example, hospitals may choose to employ different 
combinations of registered nurses, licensed practical nurses, nursing 
aides, and medical assistants for the purpose of providing nursing care 
to their patients. The varying labor costs associated with these 
choices reflect hospital management decisions rather than geographic 
differences in the costs of labor.
1. Development of Data for the FY 2016 Occupational Mix Adjustment 
Based on the 2013 Medicare Wage Index Occupational Mix Survey
    As provided for under section 1886(d)(3)(E) of the Act, we collect 
data every 3 years on the occupational mix of employees for each short-
term, acute care hospital participating in the Medicare program.
    As discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49967 
through 49968), the occupational mix adjustment to the FY 2015 wage 
index was based on data collected on the 2010 Occupational Mix Survey 
Hospital Reporting Form (CMS-10079 (2010)). For the FY 2016 wage index, 
we proposed to use the occupational mix data collected on the most 
recent 2013 occupational mix survey to compute the occupational mix 
adjustment for FY 2016, as discussed in section II.B.2. of the preamble 
of this final rule.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our policy to use the occupational mix data collected 
on the 2013 survey to compute the occupational mix adjustment for FY 
2016. We are including data for 3,135 hospitals that also have wage 
data included in the FY 2016 wage index.
2. Use of 2013 Occupational Mix Survey for the FY 2016 Wage Index
    Section 304(c) of Public Law 106-554 amended section 1886(d)(3)(E) 
of the Act to require CMS to collect data every 3 years on the 
occupational mix of employees for each short-term, acute care hospital 
participating in the Medicare program. We collected data in 2010 to 
compute the occupational mix adjustment for the FY 2013, FY 2014, and 
FY 2015 wage index. Therefore, we were required to collect data in 2013 
and are using these data to compute the occupational mix adjustment for 
the FY 2016 wage index. We also plan to use the 2013 survey data for 
the FY 2017 and FY 2018 wage indexes. A new measurement of occupational 
mix will be required for FY 2019.
    On December 7, 2012, we published in the Federal Register a notice 
soliciting comments on the proposed 2013 Medicare Wage Index 
Occupational Mix Survey (77 FR 73032 through 73033). The new 2013 
survey (which we note was used for the proposed FY 2016 wage index) 
includes the same data elements and definitions as the 2010 survey and 
provides for the collection of hospital-specific wages and hours data 
for nursing employees for calendar year 2013 (that is, payroll periods 
ending between January 1, 2013 and December 31, 2013). The comment 
period for the notice ended on February 5, 2013. After considering the 
public comments that we received on the December 2012 notice, we made a 
few minor editorial changes and published the 2013 survey in the 
Federal Register on February 28, 2013 (78 FR 13679 through 13680). This 
survey was approved by OMB on May 14, 2013, and is available on the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/wage-index-occupational-mix-survey2013.pdf.
    The 2013 Occupational Mix Survey Hospital Reporting Form CMS-10079 
for the Wage Index Beginning FY 2016 (in Excel format) is available on 
the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/Medicare-Wage-Index-Occupational-Mix-Survey2013.html. Hospitals were required to 
submit their completed 2013 surveys to their MACs by July 1, 2014. The 
preliminary, unaudited 2013 survey data were posted on the CMS Web site 
on July 11, 2014.
    As with the Worksheet S-3, Parts II and III cost report wage data, 
we asked our MACs to revise or verify data elements in hospitals' 
occupational mix surveys that result in certain edit failures. In the 
FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24465), we stated that 
certain surveys with aberrant data elements were excluded from the 
proposed FY 2016 wage index, but any data elements resolved and revised 
in time to be included in the final wage index would be reflected in 
the FY 2016 IPPS/LTCH PPS final rule.
3. Calculation of the Occupational Mix Adjustment for FY 2016
    For FY 2016, we proposed to calculate the occupational mix 
adjustment factor using the same methodology that we used for the FY 
2012, FY 2013, FY 2014, and FY 2015 wage indexes (76 FR 51582 through 
51586, 77 FR 53367 through 53368, 78 FR 50588 through 50589, and 79 FR 
49968, respectively). Because the statute requires that the Secretary 
measure the earnings and paid hours of employment by occupational 
category not less than once every 3 years, all

[[Page 49493]]

hospitals that are subject to payments under the IPPS, or any hospital 
that would be subject to the IPPS if not granted a waiver, must 
complete the occupational mix survey, unless the hospital has no 
associated cost report wage data that are included in the FY 2016 wage 
index. For the FY 2016 wage index, because we are using the Worksheet 
S-3, Parts II and III wage data of 3,362 hospitals, and we are using 
the occupational mix surveys of 3,135 hospitals for which we also have 
Worksheet S-3 wage data, that represents a ``response'' rate of 93.2 
percent (3,135/3,362). In the FY 2016 wage index established in this 
final rule, we applied proxy data for noncompliant hospitals, new 
hospitals, or hospitals that submitted erroneous or aberrant data in 
the same manner that we applied proxy data for such hospitals in the FY 
2012 wage index occupational mix adjustment (76 FR 51586).
    In the FY 2011 IPPS/LTCH PPS proposed rule and final rule (75 FR 
23943 and 75 FR 50167, respectively), we stated that, in order to gain 
a better understanding of why some hospitals are not submitting the 
occupational mix data, we will require hospitals that do not submit 
occupational mix data to provide an explanation for not complying. This 
requirement was effective for the 2013 occupational mix survey as well 
as the 2010 occupational mix survey. We instructed MACs to continue 
gathering this information as part of the FY 2016 wage index desk 
review process. We stated that we would review these data for future 
analysis and consideration of potential penalties for noncompliant 
hospitals.
    Comment: One commenter stated that all hospitals should be 
obligated to submit the occupational mix survey because failure to 
complete the survey jeopardizes the accuracy of the wage index. The 
commenter added that a penalty should be instituted for nonsubmitters. 
The same commenter also requested that, pending CMS' analysis of the 
Commuting Based Wage Index and given the Institute of Medicine's study 
on geographic variation in hospital wage costs, CMS eliminate the 
occupational mix survey and the significant reporting burden it 
creates.
    Response: We appreciate the commenter's concern for the accuracy of 
the wage index. We have continually requested that all hospitals 
complete and submit the occupational mix surveys. We did not propose a 
particular penalty for hospitals that did not submit the 2013 
occupational mix survey, but we are continuing to consider for future 
rulemaking various options for ensuring full compliance. Regarding the 
commenter's request that CMS eliminate the survey due to the burden it 
creates, section 1886(d)(3)(E) of the Act requires us to measure the 
earnings and paid hours of employment by occupational category. As long 
as this statutory requirement remains in place, there may be some 
amount of administrative burden involved in reporting these data.
    After consideration of public comments we received, we are 
calculating the occupational mix adjustment factor using the same 
methodology that we used for the FY 2012, FY 2013, FY 2014, and FY 2015 
wage indexes. As a result of applying this methodology, the FY 2016 
occupational mix adjusted national average hourly wage is $40.2555. The 
FY 2016 occupational mix adjusted Puerto Rico-specific average hourly 
wage is $16.8711.

F. Analysis and Implementation of the Occupational Mix Adjustment and 
the FY 2016 Occupational Mix Adjusted Wage Index

    As discussed in section III.E. of the preamble of this final rule, 
for FY 2016, we apply the occupational mix adjustment to 100 percent of 
the FY 2016 wage index. We calculated the occupational mix adjustment 
using data from the 2013 occupational mix survey data, using the 
methodology described in the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51582 through 51586).
    Using the occupational mix survey data and applying the 
occupational mix adjustment to 100 percent of the FY 2016 wage index 
results in a national average hourly wage of $40.2555 and a Puerto-Rico 
specific average hourly wage of $16.8711. After excluding data of 
hospitals that either submitted aberrant data that failed critical 
edits or that did not have FY 2012 Worksheet S-3, Parts II and III, 
cost report data for use in calculating the FY 2016 wage index, we 
calculated the FY 2016 wage index using the occupational mix survey 
data from 3,135 hospitals. For the FY 2016 wage index, we are using the 
Worksheet S-3, Parts II and III wage data of 3,362 hospitals, and we 
are using the occupational mix survey data of 3,135 hospitals for which 
we also have Worksheet S-3 wage data. The FY 2016 national average 
hourly wages for each occupational mix nursing subcategory as 
calculated in Step 2 of the occupational mix calculation are as 
follows:

------------------------------------------------------------------------
                                                         Average hourly
         Occupational mix nursing subcategory                 wage
------------------------------------------------------------------------
National RN..........................................       38.823902202
National LPN and Surgical Technician.................       22.767361175
National Nurse Aide, Orderly, and Attendant..........       15.955866208
National Medical Assistant...........................       18.006207097
National Nurse Category..............................       32.875956041
------------------------------------------------------------------------

    The national average hourly wage for the entire nurse category as 
computed in Step 5 of the occupational mix calculation is 
$32.875956041. Hospitals with a nurse category average hourly wage (as 
calculated in Step 4 of the occupational mix calculation) of greater 
than the national nurse category average hourly wage receive an 
occupational mix adjustment factor (as calculated in Step 6 of the 
occupational mix calculation) of less than 1.0. Hospitals with a nurse 
category average hourly wage (as calculated in Step 4 of the 
occupational mix calculation) of less than the national nurse category 
average hourly wage receive an occupational mix adjustment factor (as 
calculated in Step 6 of the occupational mix calculation) of greater 
than 1.0.
    Based on the 2013 occupational mix survey data, we determined (in 
Step 7 of the occupational mix calculation) that the national 
percentage of hospital employees in the nurse category is 42.62 
percent, and the national percentage of hospital employees in the all 
other occupations category is 57.38 percent. At the CBSA level, the 
percentage of hospital employees in the nurse category ranged from a 
low of 25.65 percent in one CBSA to a high of 73.52 percent in another 
CBSA.
    The FY 2016 Puerto Rico-specific average hourly wages for each 
occupational mix nursing subcategory as calculated in Step 2 of the 
occupational mix calculation are as follows:

[[Page 49494]]



------------------------------------------------------------------------
                                                          Puerto Rico
         Occupational mix nursing subcategory           average  hourly
                                                              wage
------------------------------------------------------------------------
Puerto Rico RN.......................................       16.686558980
Puerto Rico LPN and Surgical Technician..............       10.308310116
Puerto Rico Nurse Aide, Orderly, and Attendant.......        9.695410146
Puerto Rico Medical Assistant........................       21.962356196
Puerto Rico Nurse Category...........................       14.491916770
------------------------------------------------------------------------

    Based on the 2013 occupational mix survey data, we determined (in 
Step 7 of the occupational mix calculation) that the Puerto Rico 
percentage of hospital employees in the nurse category is 50.97 
percent, and the Puerto Rico percentage of hospital employees in the 
all other occupations category is 49.03 percent.
    We also compared the FY 2016 wage data adjusted for occupational 
mix from the 2013 survey to the FY 2016 wage data adjusted for 
occupational mix from the 2010 survey. This analysis illustrates the 
effect on area wage indexes of using the 2013 survey data compared to 
the 2010 survey data; that is, it shows whether hospitals' wage indexes 
will increase or decrease under the 2013 survey data as compared to the 
prior 2010 survey data. Of the 407 urban CBSAs and 47 rural CBSAs, our 
analysis shows that the FY 2016 wage index values for 185 (45.5 
percent) urban areas and 19 (40.4 percent) rural areas will increase. 
Forty-eight (11.8 percent) urban areas will increase by greater than or 
equal to 1 percent but less than 5 percent, and 5 (1.2 percent) urban 
areas will increase by 5 percent or more. Five (10.6 percent) rural 
areas will increase by greater than or equal to 1 percent but less than 
5 percent, and no rural areas will increase by 5 percent or more. 
However, the wage index values for 218 (53.6 percent) urban areas and 
27 (57.4 percent) rural areas will decrease using the 2013 survey data. 
Seventy-four (18.2 percent) urban areas will decrease by greater than 
or equal to 1 percent but less than 5 percent, and one (0.2 percent) 
urban area will decrease by 5 percent or more. Eight (17.0 percent) 
rural areas will decrease by greater than or equal to 1 percent but 
less than 5 percent, and no rural areas will decrease by 5 percent or 
more. The largest positive impacts using the 2013 survey data compared 
to the 2010 survey data are 15.1 percent for an urban area and 3.8 
percent for a rural area. The largest negative impacts are 5.0 percent 
for an urban area and 1.95 percent for two rural areas. Four urban 
areas and one rural area will be unaffected. These results indicate 
that the wage indexes of more CBSAs overall (54.0 percent) will 
decrease due to application of the 2013 occupational mix survey data as 
compared to the 2010 occupational mix survey data to the wage index. 
Further, a larger percentage of urban areas (45.5 percent) will benefit 
from the use of the 2013 occupational mix survey data as compared to 
the 2010 occupational mix survey data than will rural areas (40.4 
percent).
    We compared the FY 2016 occupational mix adjusted wage indexes for 
each CBSA to the unadjusted wage indexes for each CBSA. As a result of 
applying the occupational mix adjustment to the wage data, the wage 
index values for 219 (53.8 percent) urban areas and 24 (51.1 percent) 
rural areas will increase. One hundred three (25.3 percent) urban areas 
will increase by greater than or equal to 1 percent but less than 5 
percent, and 6 (1.5 percent) urban areas will increase by 5 percent or 
more. Nine (19.1 percent) rural areas will increase by greater than or 
equal to 1 percent but less than 5 percent, and no rural areas will 
increase by 5 percent or more. However, the wage index values for 187 
(45.9 percent) urban areas and 23 (48.9 percent) rural areas will 
decrease. Ninety-one (22.4 percent) urban areas will decrease by 
greater than or equal to 1percent but less than 5 percent, and no urban 
areas will decrease by 5 percent or more. Seven (14.9 percent) rural 
areas will decrease by greater than or equal to 1 percent but less than 
5 percent, and no rural areas will decrease by 5 percent or more. The 
largest positive impacts will be 17.4 percent for an urban area and 2.7 
percent for one rural area. The largest negative impacts will be 4.7 
percent for an urban area and 2.1 percent for a rural area. One urban 
area will remain unchanged by application of the occupational mix 
adjustment, and no rural areas will remain unchanged by application of 
the occupational mix adjustment. These results indicate that a larger 
percentage of urban areas (53.8 percent) will benefit from application 
of the occupational mix adjustment than will rural areas (51.1 
percent).

G. Transitional Wage Indexes

1. Background
    As we stated in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24467 through 24469), in the FY 2015 IPPS/LTCH PPS proposed rule and 
final rule (79 FR 28060 and 49957, respectively), we stated that, 
overall, we believed implementing the new OMB labor market area 
delineations would result in wage index values being more 
representative of the actual costs of labor in a given area. However, 
we recognized that some hospitals would experience decreases in wage 
index values as a result of the implementation of these new OMB labor 
market area delineations. We also realized that some hospitals would 
have higher wage index values due to the implementation of the new OMB 
labor market area delineations.
    The FY 2015 IPPS/LTCH PPS final rule (79 FR 49957) explained the 
methodology utilized in implementing prior transition periods when 
adopting changes that have significant payment implications, 
particularly large negative impacts. Specifically, for FY 2005, in the 
FY 2005 IPPS final rule (69 FR 49032 through 49034), we provided 
transitional wage indexes when the OMB definitions were implemented 
after the 2000 Census. The FY 2015 IPPS/LTCH PPS final rule (79 FR 
49957 through 49962) established similar transition methodologies to 
mitigate any negative payment impacts experienced by hospitals due to 
our adoption of the new OMB labor market area delineations for FY 2015.
    As finalized in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49957 
through 49960) and as discussed below, for FY 2016, we are in the 
second year of two 3-year transition periods for wage index: One for 
hospitals that, for FY 2014, were located in an urban county that 
became rural under the new OMB delineations, and had no form of wage 
index reclassification or redesignation in place for FY 2015 (that is, 
MGCRB reclassifications under section 1886(d)(10) of the Act, 
redesignations under section 1886(d)(8)(B) of the Act, or rural 
reclassifications under section 1886(d)(8)(E) of the Act); and one for 
hospitals deemed urban under section 1886(d)(8)(B) of the Act where the 
urban area became rural under the new OMB delineations. In addition, 
the 1-year transition that we applied in FY 2015 for hospitals that 
experienced a decrease

[[Page 49495]]

in wage index under the new OMB delineations expires at the end of FY 
2015 and does not apply in FY 2016.
2. Transition for Hospitals in Urban Areas That Became Rural
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49957 through 
49959), for hospitals that, for FY 2014, were located in an urban 
county that became rural under the new OMB delineations, and had no 
form of wage index reclassification or redesignation in place for FY 
2015 (that is, MGCRB reclassifications under section 1886(d)(10) of the 
Act, redesignations under section 1886(d)(8)(B) of the Act, or rural 
reclassifications under section 1886(d)(8)(E) of the Act), we adopted a 
policy to assign them the urban wage index value of the CBSA in which 
they are physically located for FY 2014 for a period of 3 fiscal years 
(with the rural and imputed floors applied and with the rural floor 
budget neutrality adjustment applied to the area wage index). FY 2016 
will represent the second year of this transition policy, and we did 
not propose any changes to this policy in the FY 2016 IPPS/LTCH PPS 
proposed rule. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49957), 
we stated our belief that it is appropriate to apply a 3-year 
transition period for hospitals located in urban counties that would 
become rural under the new OMB delineations, given the potentially 
significant payment impacts for these hospitals. We continue to believe 
that assigning the wage index of the hospitals' FY 2014 area for a 3-
year transition is the simplest and most effective method for 
mitigating negative payment impacts due to the adoption of the new OMB 
delineations.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR49959), we noted that 
there were situations where a hospital could not be assigned the wage 
index value of the CBSA in which it geographically was located in FY 
2014 because that CBSA split and no longer exists and some or all of 
the constituent counties were added to another urban labor market area 
under the new OMB delineations. If the hospital could not be assigned 
the wage index value of the CBSA in which it was geographically located 
in FY 2014 because that CBSA split apart and no longer exists, and some 
or all of its constituent counties were added to another urban labor 
market area under the new OMB delineations, we established that 
hospitals located in such counties that became rural under the new OMB 
delineations were assigned the wage index of the urban labor market 
area that contains the urban county in their FY 2014 CBSA to which they 
are closest (with the rural and imputed floors applied and with the 
rural floor budget neutrality adjustment applied). Any such assignment 
made in FY 2015 will continue for FYs 2016 and 2017, except as 
discussed below. We continue to believe this approach minimizes the 
negative effects of the change in the OMB delineations.
    Under the policy adopted in the FY 2015 IPPS/LTCH PPS final rule, 
if a hospital for FY 2014 was located in an urban county that became 
rural for FY 2015 under the new OMB delineations and such hospital 
sought and was granted reclassification or redesignation for FY 2015 or 
such hospital seeks and is granted any reclassification or 
redesignation for FY 2016 or FY 2017, the hospital will permanently 
lose its 3-year transitional assigned wage index status, and will not 
be eligible to reinstate it. We established the transition policy to 
assist hospitals if they experience a negative payment impact 
specifically due to the adoption of the new OMB delineations in FY 
2015. If a hospital chooses to forego this transition adjustment by 
obtaining some form of reclassification or redesignation, we do not 
believe reinstatement of this transition adjustment would be 
appropriate. The purpose of the transition adjustment policy is to 
assist hospitals that may be negatively impacted by the new OMB 
delineations in transitioning to a wage index based on these 
delineations. By obtaining a reclassification or redesignation, we 
believe that the hospital has made the determination that the 
transition adjustment is not necessary because it has other viable 
options for mitigating the impact of the transition to the new OMB 
delineations.
    As we did for FY 2015 (79 FR 49959), and as stated in the FY 2016 
IPPS/LTCH PPS proposed rule (80 FR 24468), with respect to the wage 
index computation for FY 2016, we are following our existing policy 
regarding the inclusion of a hospital's wage index data in the CBSA in 
which it is geographically located (we refer readers to Step 6 of the 
method for computing the unadjusted wage index in the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51592)). Accordingly, as we began with FY 2015, 
for FY 2016, the wage data of all hospitals receiving this type of 3-
year transition adjustment were included in the statewide rural area in 
which they are geographically located under the new OMB labor market 
area delineations. After the 3-year transition period, beginning in FY 
2018, these formerly urban hospitals discussed above will receive their 
statewide rural wage index, absent any reclassification or 
redesignation.
    In addition, we established in the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 49959) that the hospitals receiving this 3-year transition 
because they are in counties that were urban under the FY 2014 CBSA 
definitions, but are rural under the new OMB delineations, will not be 
considered urban hospitals. Rather, they will maintain their status as 
rural hospitals for other payment considerations. This is because our 
application of a 3-year transitional wage index for these newly rural 
hospitals only applies for the purpose of calculating the wage index 
under our adoption of the new OMB delineations.
    We did not receive any public comments on these provisions in the 
proposed rule.
3. Transition for Hospitals Deemed Urban Under Section 1886(d)(8)(B) of 
the Act Where the Urban Area Became Rural Under the New OMB 
Delineations
    As stated in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24468), 
and as discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49959 
through 49960), there were some hospitals that, for FY 2014, were 
geographically located in rural areas but were deemed to be urban under 
section 1886(d)(8)(B) of the Act. For FY 2015, some of these hospitals 
redesignated under section 1886(d)(8)(B) of the Act were no longer 
eligible for deemed urban status under the new OMB delineations, as 
discussed in detail in section III.H.3. of the preamble of the FY 2015 
IPPS/LTCH PPS final rule. Similar to the policy implemented in the FY 
2005 IPPS final rule (69 FR 49059), and consistent with the FY 2015 
policy we established for other hospitals in counties that were urban 
and became rural under the new OMB delineations, we finalized a policy 
to apply a 3-year transition to these hospitals redesignated to urban 
areas under section 1886(d)(8)(B) of the Act for FY 2014 that are no 
longer deemed urban under the new OMB delineations and revert to being 
rural.
    For FY 2016, we did not propose any changes to this policy and are 
continuing to the second year of the implementation of our policy to 
provide a 3-year transition adjustment to hospitals that are deemed 
urban under section 1886(d)(8)(B) of the Act under the FY 2014 labor 
market area delineations, but are considered rural under the new OMB 
delineations, assuming no other form of wage index reclassification or 
redesignation is granted. We assign these hospitals the area wage index 
value of hospitals reclassified to the urban CBSA (that is,

[[Page 49496]]

the attaching wage index) to which they were redesignated in FY 2014 
(with the rural and imputed floors applied and with the rural floor 
budget neutrality adjustment applied). If the hospital cannot be 
assigned the reclassified wage index value of the CBSA to which it was 
redesignated in FY 2014 because that CBSA was split apart and no longer 
exists, and some or all of its constituent counties were added to 
another urban labor market area under the new OMB delineations, such 
hospitals are assigned the wage index of the hospitals reclassified to 
the urban labor market area that contains the urban county in their FY 
2014 redesignated CBSA to which they are closest. We assign these 
hospitals the area wage index of hospitals reclassified to a CBSA 
because hospitals deemed urban under section 1886(d)(8)(B) of the Act 
are treated as reclassified under current policy, under which such 
hospitals receive an area wage index that includes wage data of all 
hospitals reclassified to the area. This wage index assignment will be 
forfeited if the hospital obtains any form of wage index 
reclassification or redesignation.
    We did not receive any public comments specific to either of the 3-
year transition policies for hospitals that were located in an urban 
county that became rural under the new OMB delineations or for 
hospitals deemed urban under section 1886(d)(8)(B) of the Act where the 
urban area became rural under the new OMB delineations. Fiscal year 
2016 will be the second year of the 3-year transition period. We also 
remind hospitals that if any affected hospital is approved for any wage 
index reclassification or redesignation in FY 2016 or FY 2017, it will 
no longer be eligible for the remaining years of the transitional wage 
index.
4. Expiring Transition for Hospitals That Experience a Decrease in Wage 
Index Under the New OMB Delineations
    As we indicated in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24468), in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49960 through 
49962), we stated that, while we believe that instituting the latest 
OMB labor market area delineations would create a more accurate wage 
index system, we also recognized that implementing the latest OMB 
delineations may cause some short-term instability in hospital 
payments. Therefore, in addition to the 3-year transition adjustments 
for hospitals being transitioned from urban to rural status as 
discussed earlier, in the FY 2015 IPPS/LTCH PPS final rule, we 
established a 1-year blended wage index for all hospitals that would 
experience any decrease in their actual payment wage index. This 1-year 
blended wage index expires at the end of FY 2015. We did not propose 
any additional transition adjustment for hospitals that experienced a 
decrease in wage index values due to the adoption of the new OMB 
delineations for FY 2015 and, as discussed previously, will continue 
the 3-year transition adjustments for hospitals that changed from urban 
to rural status that we finalized in the FY 2015 IPPS/LTCH PPS final 
rule. We established a longer 3-year transition adjustment for 
hospitals losing urban status because there are significantly fewer 
affected urban-to-rural hospitals, and we believe the negative impacts 
to a hospital shifting from urban to rural status are typically greater 
than other types of transitions. We stated our belief that a transition 
period longer than 1 year to address other impacts of the adoption of 
the new OMB delineations would reduce the accuracy of the overall labor 
market area wage index system because far more hospitals would be 
affected. As we stated in FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24468), the 1-year transition for all negatively affected hospitals in 
FY 2015 provided an opportunity for hospitals to evaluate potential 
reclassification options and mitigated initial negative impacts due to 
labor market assignment changes. We continue to believe that the 
adoption of the latest labor market delineations improve the accuracy 
and integrity of the hospital wage index system. Therefore, we believe 
it is necessary to allow this transition to expire.
    Comment: The majority of commenters expressed appreciation to CMS 
for providing a transitional wage index to mitigate negative effects 
due to the application of the new OMB labor market delineations. They 
also supported CMS' plan to discontinue the 1-year transition in FY 
2016. One commenter requested that the transition period be extended 
for at least one additional fiscal year, with a suggested ``75/25 
percent'' methodology to provide some support for hospitals that will 
continue to be negatively affected by the new OMB delineations.
    Response: We appreciate the commenters' support of the transition 
policies. We continue to believe that the 1-year transition for all 
negatively affected hospitals in FY 2015 provided an ample opportunity 
for hospitals to evaluate potential reclassification options, and 
mitigated initial negative impacts due to labor market assignment 
changes. Therefore, we do not believe that an extension of the 
transition period is warranted. We continue to believe that the 
adoption of the latest labor market delineations improves the accuracy 
and integrity of the hospital wage index system.
    Thus, we are allowing the transition adjustment to expire at the 
end of FY 2015.
5. Budget Neutrality
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50372 through 
50373), for FY 2015, we applied the 3-year transition and 50/50 blended 
wage index adjustments in a budget neutral manner. For FY 2016, in the 
FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24469), we proposed to apply 
the 3-year transition adjustments in a budget neutral manner. We 
proposed to make an adjustment to the standardized amount to ensure 
that the total payments, including the effect of the transition 
provisions, would equal what payments would have been if we were not 
providing for any transitional wage indexes under the new OMB 
delineations. For a complete discussion on the budget neutrality 
adjustment for FY 2016, we refer readers to section II.A.4.b. of the 
Addendum to this final rule, where we also address any public comments 
we received.
    In this final rule, for FY 2016, we are applying the 3-year 
transition adjustments in a budget neutral manner. We are making an 
adjustment to the standardized amount to ensure that the total 
payments, including the effect of the transition provisions, will equal 
what payments would have been if we were not providing for any 
transitional wage indexes under the new OMB delineations.

H. Application of the Rural, Imputed, and Frontier Floors

1. Rural Floor
    Section 4410(a) of Pubic Law 105-33 provides that, for discharges 
on or after October 1, 1997, the area wage index applicable to any 
hospital that is located in an urban area of a State may not be less 
than the area wage index applicable to hospitals located in rural areas 
in that State. This provision is referred to as the ``rural floor.'' 
Section 3141 of Public Law 111-148 also requires that a national budget 
neutrality adjustment be applied in implementing the rural floor. Based 
on the final FY 2016 wage index associated with this final rule and 
available via the Internet on the CMS Web site, we estimated that 346 
hospitals will receive an increase in their FY 2016 wage index due to 
the application of the rural floor.
    Comment: Commenters thanked CMS for providing a State-specific 
analysis of

[[Page 49497]]

the effects of nationwide budget neutrality of the rural floor required 
under section 3141 of the Affordable Care Act and requested additional 
long-term analysis of payment distortions produced by nationwide rural 
floor budget neutrality.
    Response: We appreciate the commenters' continued concern regarding 
rural floor budget neutrality. We are publishing State-specific rural 
floor impacts in Appendix A of this final rule and will consider 
additional analysis in future rulemaking.
2. Imputed Floor for FY 2016
    In the FY 2005 IPPS final rule (69 FR 49109 through 49111), we 
adopted the ``imputed floor'' policy as a temporary 3-year regulatory 
measure to address concerns from hospitals in all-urban States that 
have argued that they are disadvantaged by the absence of rural 
hospitals to set a wage index floor for those States. Since its initial 
implementation, we have extended the imputed floor policy five times, 
the last of which was adopted in the FY 2015 IPPS/LTCH PPS final rule 
and is set to expire on September 30, 2015. (We refer readers to 
further discussions of the imputed floor in the FY 2014 and FY 2015 
IPPS/LTCH PPS final rules (78 FR 50589 through 50590 and 79 FR 49969 
through 49970, respectively) and to the regulations at 42 CFR 
412.64(h)(4).) Currently, there are three all-urban States, Delaware, 
New Jersey, and Rhode Island, with a range of wage indexes assigned to 
hospitals in these States, including through reclassification or 
redesignation (we refer readers to discussions of geographic 
reclassifications and redesignations in section III.J. of the preamble 
of this final rule).
    In computing the imputed floor for an all-urban State under the 
original methodology, which was established beginning in FY 2005, we 
calculated the ratio of the lowest-to-highest CBSA wage index for each 
all-urban State as well as the average of the ratios of lowest-to-
highest CBSA wage indexes of those all-urban States. We then compared 
the State's own ratio to the average ratio for all-urban States and 
whichever is higher is multiplied by the highest CBSA wage index value 
in the State--the product of which established the imputed floor for 
the State. As of FY 2012, there were only two all-urban States, New 
Jersey and Rhode Island, and only New Jersey benefitted under this 
methodology. Under the previous OMB labor market area delineations, 
Rhode Island had only one CBSA (Providence-New Bedford-Fall River, RI-
MA) and New Jersey had 10 CBSAs. Therefore, under the original 
methodology, Rhode Island's own ratio equaled 1.0, and its imputed 
floor was equal to its original CBSA wage index value. However, because 
the average ratio of New Jersey and Rhode Island was higher than New 
Jersey's own ratio, this methodology provided a benefit for New Jersey, 
but not for Rhode Island.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through 
53369), we retained the imputed floor calculated under the original 
methodology as discussed above, and established an alternative 
methodology for computing the imputed floor wage index to address the 
concern that the original imputed floor methodology guaranteed a 
benefit for one all-urban State with multiple wage indexes (New Jersey) 
but could not benefit the other all-urban State (Rhode Island). The 
alternative methodology for calculating the imputed floor was 
established using data from the application of the rural floor policy 
for FY 2013. Under the alternative methodology, we first determined the 
average percentage difference between the post-reclassified, pre-floor 
area wage index and the post-reclassified, rural floor wage index 
(without rural floor budget neutrality applied) for all CBSAs receiving 
the rural floor. (Table 2 (formerly Table 4D) associated with the FY 
2013 IPPS/LTCH PPS final rule, which is available via the Internet on 
the CMS Web site, included the CBSAs receiving a State's rural floor 
wage index.) The lowest post-reclassified wage index assigned to a 
hospital in an all-urban State having a range of such values then is 
increased by this factor, the result of which establishes the State's 
alternative imputed floor. We amended Sec.  412.64(h)(4) of the 
regulations to add new paragraphs to incorporate the finalized 
alternative methodology, and to make reference and date changes. In 
summary, for the FY 2013 wage index, we did not make any changes to the 
original imputed floor methodology at Sec.  412.64(h)(4) and, 
therefore, made no changes to the New Jersey imputed floor computation 
for FY 2013. Instead, for FY 2013, we adopted a second, alternative 
methodology for use in cases where an all-urban State has a range of 
wage indexes assigned to its hospitals, but the State cannot benefit 
under the original methodology.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50589 through 
50590), we extended the imputed floor policy (both the original 
methodology and the alternative methodology) for 1 additional year, 
through September 30, 2014, while we continued to explore potential 
wage index reforms. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 
49969 through 49970), for FY 2015, we adopted a policy to extend the 
imputed floor policy (both the original methodology and alternative 
methodology) for another year, through September 30, 2015, as we 
continued to explore potential wage index reforms. In these final 
rules, we also revised the regulations at Sec.  412.64(h)(4) and 
(h)(4)(vi) to reflect the extension of the imputed floor.
    As discussed in section III.B. of the preamble of that FY 2015 
final rule, we adopted the new OMB labor market area delineations 
beginning in FY 2015. Under the new OMB delineations, Delaware became 
an all-urban State, along with New Jersey and Rhode Island. Under the 
new OMB delineations, Delaware has three CBSAs, New Jersey has seven 
CBSAs, and Rhode Island continues to have only one CBSA (Providence-
Warwick, RI-MA). We refer readers to a detailed discussion of our 
adoption of the new OMB labor market area delineations in section 
III.B. of the preamble of the FY 2015 IPPS/LTCH PPS final rule. 
Therefore, under the adopted new OMB delineations discussed in section 
III.B. of the preamble of the FY 2015 IPPS/LTCH PPS final rule, 
Delaware became an all-urban State and was subject to an imputed floor 
as well for FY 2015.
    For FY 2016, we proposed to extend the imputed floor policy (both 
the original methodology and the alternative methodology) for 1 
additional year, through September 30, 2016, while we continue to 
explore potential wage index reforms (80 FR 24469 through 24470). We 
proposed to revise the regulations at Sec.  412.64(h)(4) and (h)(4)(vi) 
to reflect this proposed additional 1-year extension. We invited public 
comments on the proposed additional 1-year extension of the imputed 
floor through September 30, 2016.
    Comment: Several commenters supported the CMS proposal to extend 
the imputed floor for 1 year, stating that it establishes an approach 
to remedy the competitive disadvantage suffered by all-urban States due 
to several unique factors common to these areas. One commenter who 
supported the proposal recommended that CMS allow public input prior to 
finalizing any decisions regarding the imputed floor. Another commenter 
opposed the proposed 1-year extension, citing CMS' previous assessment 
in the FY 2008 proposed rule that this type of floor should apply only 
when required by statute.
    Response: We appreciate the commenters' support for the proposal to 
extend the imputed floor for 1 year. As we have done every year since 
the

[[Page 49498]]

initial proposal of the imputed floor, we provide and will continue to 
provide the industry with the opportunity to provide input on our 
proposals prior to finalizing any decisions regarding the imputed floor 
policy. We understand the concerns of the commenter who opposed the 
proposal, and will give further consideration to all comments as we 
continue to explore potential wage index reforms. As we stated in the 
FY 2005 IPPS final rule (69 FR 49110), we note that the Secretary has 
broad authority under section 1886(d)(3)(E) of the Act to adjust the 
proportion (as estimated by the Secretary from time to time) of 
hospitals' costs which are attributable to wage and wage-related cost 
of the DRG prospective payment rates for area differences in hospital 
wage levels by a factor (established by the Secretary). Therefore, we 
believe that we do have the discretion to adopt a policy that would 
adjust wage indexes in the stated manner. We adopted the imputed floor 
policy and subsequently extended it through notice-and-comment 
rulemaking to address concerns from hospitals in all-urban States.
    After consideration of the public comments we received, we are 
finalizing our proposal without modification to extend the imputed 
floor policy under both the original methodology and the alternative 
methodology for an additional year, through September 30, 2016. We also 
are adopting as final the proposed revisions to Sec.  412.64(h)(4) and 
(h)(4)(vi) to reflect the 1-year extension of the imputed floor.
    The wage index and impact tables associated with this FY 2016 IPPS/
LTCH PPS final rule (which are available via the Internet on the CMS 
Web site) reflect the continued application of the imputed floor policy 
at Sec.  412.64(h)(4) and a national budget neutrality adjustment for 
the imputed floor for FY 2016. There are 21 hospitals in New Jersey 
that will receive an increase in their FY 2016 wage index due to the 
continued application of the imputed floor policy under the original 
methodology and 4 hospitals in Rhode Island that will benefit under the 
alternative methodology. No hospitals in Delaware will benefit from the 
imputed floor under either methodology because all hospitals in the 
affected labor market areas will receive a higher wage index value due 
to reclassification.
3. State Frontier Floor
    Section 10324 of Public Law 111-148 requires that hospitals in 
frontier States cannot be assigned a wage index of less than 1.0000 (we 
refer readers to regulations at 42 CFR 412.64(m) and to a discussion of 
the implementation of this provision in the FY 2011 IPPS/LTCH PPS final 
rule (75 FR 50160 through 50161)). Forty-eight hospitals will receive 
the frontier floor value of 1.0000 for their FY 2016 wage index in this 
final rule. These hospitals are located in Montana, North Dakota, South 
Dakota, and Wyoming. Although Nevada also is defined as a frontier 
State, its FY 2016 rural floor value of 1.0194 is greater than 1.0000, 
and therefore, no Nevada hospitals will receive a frontier floor value 
for their FY 2016 wage index. We did not propose any changes to the 
frontier floor policy for FY 2016, and we did not receive any public 
comments on the issue.
    The areas affected by the rural, imputed, and frontier floor 
policies for the FY 2016 wage index are identified in Table 2 (formerly 
Table 4D) associated with this final rule, which is available via the 
Internet on the CMS Web site.

I. FY 2016 Wage Index Tables

    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24470), we 
proposed to streamline and consolidate the wage index tables associated 
with the IPPS proposed and final rules for FY 2016 and subsequent 
fiscal years. The wage index tables have consisted of 12 tables (Tables 
2, 3A, 3B, 4A, 4B, 4C, 4D, 4E, 4F, 4J, 9A, and 9C) that are made 
available via the Internet on the CMS Web site. However, with the 
exception of Table 4E, we proposed to streamline and consolidate these 
11 tables into 2 tables. We refer readers to section VI. of the 
Addendum to this final rule for a discussion of the proposed and 
finalized revisions to the wage index tables.

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

1. General Policies and Effects of Reclassification and Redesignation
    Under section 1886(d)(10) of the Act, the MGCRB considers 
applications by hospitals for geographic reclassification for purposes 
of payment under the IPPS. Hospitals must apply to the MGCRB to 
reclassify not later than 13 months prior to the start of the fiscal 
year for which reclassification is sought (generally by September 1). 
Generally, hospitals must be proximate to the labor market area to 
which they are seeking reclassification and must demonstrate 
characteristics similar to hospitals located in that area. The MGCRB 
issues its decisions by the end of February for reclassifications that 
become effective for the following fiscal year (beginning October 1). 
The regulations applicable to reclassifications by the MGCRB are 
located in 42 CFR 412.230 through 412.280. (We refer readers to a 
discussion in the FY 2002 IPPS/LTCH PPS final rule (66 FR 39874 and 
39875) regarding how the MGCRB defines mileage for purposes of the 
proximity requirements.) The general policies for reclassifications and 
redesignations that we proposed for FY 2016 and are finalizing in this 
final rule, and the policies for the effects of hospitals' 
reclassifications and redesignations on the wage index, are the same as 
those discussed in the FY 2012 IPPS/LTCH PPS final rule for the FY 2012 
final wage index (76 FR 51595 and 51596). In addition, in the FY 2012 
IPPS/LTCH PPS final rule, we discussed the effects on the wage index of 
urban hospitals reclassifying to rural areas under 42 CFR 412.103. 
Hospitals that are geographically located in States without any rural 
areas are ineligible to apply for rural reclassification in accordance 
with the provisions of 42 CFR 412.103.
    Comment: A few commenters stated that, in cases where a countywide 
(group) reclassification had been previously approved by the MGCRB, a 
new hospital is not able to obtain the same reclassified wage index as 
the countywide group until the first year that individual hospital's 
wage index data match one of the 3 years' data used by the MGCRB and a 
new 3-year countywide reclassification is requested by the county's 
hospitals (which can be a 4-year delay). The commenters were concerned 
that such a new hospital will have a wage index lower than the 
hospitals with which it competes for skilled labor. The commenters 
suggested that CMS change its policy to allow for a timelier 
competitive wage index for new hospitals. The commenters believed that 
there is a significant disincentive for stable hospitals to acquire 
other nearby facilities that are in financial distress because the 
``new'' hospital would not be immediately eligible to participate in 
reclassification.
    Other commenters suggested that the proximity rule for countywide 
reclassifications for hospitals in an urban county be modified to 
permit adjacent county reclassifications, regardless of whether they 
are in the same CSA or CBSA, or at a minimum, create an exception that 
would allow this in the event that half of the hospitals in the county 
are seeking to reclassify.
    Response: We thank the commenters for their comments. We already 
have established criteria and processes for MGCRB reclassification, 
which are specified in 42 CFR 412.230 et seq., and

[[Page 49499]]

we did not propose any changes to these provisions for FY 2016. 
Consequently, we are not making any changes to address the commenters' 
concerns at this time. We are making a clarification in policy relating 
to the example cited by some commenters regarding hospitals that 
acquire other providers located in different labor market areas with 
current reclassifications, which is addressed in a response to a 
related comment under section III.J.2.a. of the preamble of this final 
rule.
2. FY 2016 MGCRB Reclassifications
a. FY 2016 Reclassification Requirements and Approvals
    Under section 1886(d)(10) of the Act, the MGCRB considers 
applications by hospitals for geographic reclassification for purposes 
of payment under the IPPS. The specific procedures and rules that apply 
to the geographic reclassification process are specified in regulations 
under 42 CFR 412.230 through 412.280.
    At the time this final rule was constructed, the MGCRB had 
completed its review of FY 2016 reclassification requests. Based on 
such reviews, there are 282 hospitals approved for wage index 
reclassifications by the MGCRB starting in FY 2016 that did not 
withdraw or terminate their reclassifications within 45 days of the 
publication of the FY 2016 proposed rule. Because MGCRB wage index 
reclassifications are effective for 3 years, for FY 2016, hospitals 
reclassified beginning in FY 2014 or FY 2015 are eligible to continue 
to be reclassified to a particular labor market area based on such 
prior reclassifications for the remainder of their 3-year period. There 
were 248 hospitals approved for wage index reclassifications in FY 2014 
that continue for FY 2016, and 311 hospitals approved for wage index 
reclassifications in FY 2015 that continue for FY 2016. Of all the 
hospitals approved for reclassification for FY 2014, FY 2015, and FY 
2016, based upon the review at the time of this final rule, 841 
hospitals are in a reclassification status for FY 2016. We note that 
the number of hospitals with active reclassifications changed between 
the proposed rule and the final rule because hospitals have the 
opportunity to withdraw or terminate their reclassification, or 
reinstate previously withdrawn reclassifications, within 45 days of the 
publication of the FY 2016 proposed rule.
    Under the regulations at 42 CFR 412.273, hospitals are permitted to 
withdraw or terminate their MGCRB reclassification within 45 days of 
the publication of a proposed rule. For information about withdrawing, 
terminating, or canceling a previous withdrawal or termination of a 3-
year reclassification for wage index purposes, we refer readers to 42 
CFR 412.273, as well as the FY 2002 IPPS final rule (66 FR 39887 
through 39888) and the FY 2003 IPPS final rule (67 FR 50065 through 
50066). Additional discussion on withdrawals and terminations and 
clarifications regarding reinstating reclassifications and ``fallback'' 
reclassifications were included in the FY 2008 IPPS final rule (72 FR 
47333).
    Changes to the wage index that result from withdrawals of requests 
for reclassification, terminations, wage index corrections, appeals, 
and the Administrator's review process for FY 2016 are incorporated 
into the wage index values published in this FY 2016 IPPS/LTCH PPS 
final rule. These changes affect not only the wage index value for 
specific geographic areas, but also the wage index value that 
redesignated/reclassified hospitals receive; that is, whether they 
receive the wage index that includes the data for both the hospitals 
already in the area and the redesignated/reclassified hospitals. 
Further, the wage index value for the area from which the hospitals are 
redesignated/reclassified may be affected.
    Comment: One commenter stated that CMS' policy that hospitals must 
request to withdraw or terminate MGCRB reclassifications within 45 days 
of the proposed rule is problematic because a hospital could terminate 
a reclassification based on information in the proposed rule, and with 
the publication of the final rule, discover that its original 
reclassified status was more desirable. The commenter stated that 
hospitals cannot make informed decisions concerning their 
reclassification status based on values in a proposed rule that are 
likely to change and, therefore, recommended that CMS revise its 
existing policy to permit hospitals to withdraw or terminate their 
reclassification status within 45 days of the publication of the final 
rule.
    Response: We did not make any proposals to change any of the 
reclassification processes or criteria for FY 2016. Any changes to the 
reclassification processes or criteria would need to be issued through 
notice-and-comment rulemaking. Consequently, we are not making any 
changes to address the commenter's concerns at this time. We maintain 
that information provided in the proposed rule constitutes the best 
available data to assist hospitals in making reclassification 
decisions. The values published in the final rule represent the final 
wage index values reflective of reclassification decisions.
    Comment: One commenter requested clarification of the 
reclassification status in the case of a Connecticut hospital that 
acquired another hospital in a different labor market area. According 
to the commenter, the acquired hospital would become a subordinate 
remote location of the acquiring hospital (that is, a ``multicampus'' 
provider). The commenter stated that the acquired hospital had 
individual reclassification applications approved to begin in FY 2014, 
2015, and 2016, and the hospital had requested termination of the FY 
2016 reclassification and reinstatement of the hospital's FY 2015 
reclassification.
    Response: Our longstanding Medicare policy is to terminate 
reclassification status for a hospital whose CCN is no longer active 
because the MGCRB makes its reclassification decisions based on CCNs. 
We believe this policy results in more accurate reclassifications when 
compiling CBSA labor market wage data, as it is generally the case that 
hospitals that have terminated operations can no longer make timely and 
informed decisions regarding reclassification statuses, which could 
have ramifications for various wage index floors and labor market 
values. However, in this case, the acquiring hospital accepted the 
provider agreement of the acquired hospital located in a different 
market area, and the resulting merged hospital desires that the 
subordinate campus continue to receive previously approved 
reclassification benefits. While the original CCN for the acquired 
hospital would be considered ``tied out'' by CMS, we do believe that 
the acquiring hospital should be able to make determinations regarding 
the reclassification status of the subordinate campus located in a 
different labor market area if it accepted the provider agreement of 
that subordinate campus. Therefore, we are clarifying our wage index 
reclassification policy to address the specific situations where a 
hospital merges with or acquires another hospital located in a 
different labor market area, creating a ``multicampus'' hospital, and 
accepts the provider agreement of the acquired hospital. If the 
acquired campus (that is, the hospital whose CCN will no longer be 
active) has remaining years left on a MGCRB reclassification, this 
reclassification status remains in effect for the subordinate campus 
located in a different market area. This clarification only applies to 
circumstances where the Medicare provider agreement is

[[Page 49500]]

accepted by the acquiring hospital located in a different market area. 
We also wish to clarify that the acquiring hospital is authorized to 
make timely requests to terminate, withdraw, or reinstate any 
reclassification for the subordinate campus for any remaining years of 
the reclassification. We believe this policy results in more accurate 
labor market wage index values, and is consistent with current 
regulations regarding reclassification status of ``multicampus'' 
hospitals at Sec.  412.230(d)(2)(v). Therefore, in response to the 
commenter, the hospital is eligible to terminate the reclassification 
approved to begin in FY 2016 and to reinstate a previously existing 
reclassification. CMS will make the appropriate adjustments to the 
payment systems to ensure the subordinate campus of the acquiring 
hospital is paid under the correct reclassification status.
b. Applications for Reclassifications for FY 2017
    Applications for FY 2017 reclassifications are due to the MGCRB by 
September 1, 2015 (the first working day of September 2015). We note 
that this is also the deadline for canceling a previous wage index 
reclassification withdrawal or termination under 42 CFR 412.273(d). 
Applications and other information about MGCRB reclassifications may be 
obtained via the Internet on the CMS Web site at: http://cms.gov/Regulations-and-Guidance/Review-Boards/MGCRB/index.html, or by calling 
the MGCRB at (410) 786-1174. The mailing address of the MGCRB is: 2520 
Lord Baltimore Drive, Suite L, Baltimore, MD 21244-2670.
3. Redesignation of Hospitals Under Section 1886(d)(8)(B) of the Act
    Section 1886(d)(8)(B)(i) of the Act requires the Secretary to treat 
a hospital located in a rural county adjacent to one or more urban 
areas as being located in the urban metropolitan statistical area to 
which the greatest number of workers in the county commute if certain 
adjacency and commuting criteria are met. The criteria utilize 
standards for designating Metropolitan Statistical Areas published in 
the Federal Register by the Director of the Office of Management and 
Budget (OMB) based on the most recently available decennial population 
data. Effective beginning FY 2015, we used the new OMB delineations 
based on the 2010 Decennial Census data to identify counties in which 
hospitals qualify under section 1886(d)(8)(B) of the Act to receive the 
wage index of the urban area. Hospitals located in these counties are 
referred to as ``Lugar'' hospitals and the counties themselves are 
often referred to as ``Lugar'' counties. The chart for this FY 2016 
IPPS/LTCH PPS final rule which includes the listing of the rural 
counties containing the hospitals designated as urban under section 
1886(d)(8)(B) of the Act is available via the Internet on the CMS Web 
site.
    We did not receive any public comments on this listing that 
accompanied the FY 2016 IPPS/LTCH PPS proposed rule.
4. Waiving Lugar Redesignation for the Out-Migration Adjustment
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through 
51600), we adopted the policy that, beginning with FY 2012, an eligible 
hospital that waives its Lugar status in order to receive the out-
migration adjustment has effectively waived its deemed urban status 
and, thus, is rural for all purposes under the IPPS, including being 
considered rural for the DSH payment adjustment, effective for the 
fiscal year in which the hospital receives the out-migration 
adjustment. (We refer readers to a discussion of DSH payment adjustment 
under section IV.D. of the preamble of this final rule.)
    In addition, we adopted a minor procedural change in that rule that 
allows a Lugar hospital that qualifies for and accepts the out-
migration adjustment (through written notification to CMS within 45 
days from the publication of the proposed rule) to waive its urban 
status for the full 3-year period for which its out-migration 
adjustment is effective. By doing so, such a Lugar hospital would no 
longer be required during the second and third years of eligibility for 
the out-migration adjustment to advise us annually that it prefers to 
continue being treated as rural and receive the out-migration 
adjustment. Therefore, under the procedural change, a Lugar hospital 
that requests to waive its urban status in order to receive the rural 
wage index in addition to the out-migration adjustment would be deemed 
to have accepted the out-migration adjustment and agrees to be treated 
as rural for the duration of its 3-year eligibility period, unless, 
prior to its second or third year of eligibility, the hospital 
explicitly notifies CMS in writing, within the required period 
(generally 45 days from the publication of the proposed rule), that it 
instead elects to return to its deemed urban status and no longer 
wishes to accept the out-migration adjustment. If the hospital does 
notify CMS that it is electing to return to its deemed urban status, it 
would again be treated as urban for all IPPS payment purposes.
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51599 through 51600) for a detailed discussion of the policy and 
process for waiving Lugar status for the out-migration adjustment.
    We did not receive any public comments on the discussion of this 
policy in the FY 2016 IPPS/LTCH PPS proposed rule.

K. Out-Migration Adjustment Based on Commuting Patterns of Hospital 
Employees

1. Background
    In accordance with section 1886(d)(13) of the Act, as added by 
section 505 of Public Law 108-173, beginning with FY 2005, we 
established a process to make adjustments to the hospital wage index 
based on commuting patterns of hospital employees (the ``out-
migration'' adjustment). The process, outlined in the FY 2005 IPPS 
final rule (69 FR 49061), provides for an increase in the wage index 
for hospitals located in certain counties that have a relatively high 
percentage of hospital employees who reside in the county but work in a 
different county (or counties) with a higher wage index.
2. New Data Source for the FY 2016 Out-Migration Adjustment
    When the provision of section 1886(d)(13) of the Act was 
implemented for the FY 2005 wage index, we analyzed commuting data 
compiled by the U.S. Census Bureau which was derived from a special 
tabulation of the 2000 Census journey-to-work data for all industries 
(CMS extracted data applicable to hospitals). These data were compiled 
from responses to the ``long-form'' survey, which the Census Bureau 
used at the time and which contained questions on where residents in 
each county worked (69 FR 49062). However, the 2010 Census was ``short 
form'' only; information on where residents in each county worked was 
not collected as part of the 2010 Census. The Census Bureau worked with 
CMS to provide an alternative dataset based on the latest available 
data on where residents in each county worked in 2010, for use in 
developing a new out-migration adjustment based on new commuting 
patterns using the 2010 Census data beginning with FY 2016. We reviewed 
and analyzed the alternative dataset from the Census Bureau and 
proposed new out-migration adjustments in the FY 2016 IPPS/LTCH PPS 
proposed rule (80 FR 24471

[[Page 49501]]

through 24472), as discussed below (as we indicated we would in the FY 
2015 IPPS/LTCH PPS final rule (79 FR 49984 through 49985).
    As stated in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24471), 
to determine the new out-migration adjustments and applicable counties 
that we proposed for FY 2016, we analyzed commuting data compiled by 
the Census Bureau that were derived from a custom tabulation of the 
American Community Survey (ACS), an official Census Bureau survey, 
utilizing 2008 through 2012 (5-Year) Microdata. The data were compiled 
from responses to the ACS questions regarding the county where workers 
reside and the county to which workers commute. The tabulation was 
specific to hospital military and civilian employees (hospital sector 
Census code 8190/NAICS code 622) who worked in the 50 States, 
Washington, DC, and Puerto Rico and, therefore, provided information 
about commuting patterns of workers at the county level for residents 
of the 50 States, Washington, DC, and Puerto Rico. For the ACS, the 
Census Bureau selects a random sample of addresses where workers reside 
to be included in the survey, and the sample is designed to ensure good 
geographic coverage. The ACS samples approximately 3.54 million 
resident addresses per year. The results of the ACS are used to 
formulate descriptive population estimates, and, as such, the sample on 
which the dataset is based represents the actual figures that would be 
obtained from a complete count.
    We did not receive any public comments on the new data source for 
the FY 2016 out-migration adjustment discussed in the FY 2016 IPPS/LTCH 
PPS proposed rule.
3. FY 2016 Out-Migration Adjustment
    Section 1886(d)(13)(B) of the Act requires the Secretary to use 
data the Secretary determines to be appropriate to establish the 
qualifying counties for the out-migration adjustment. For FY 2016 and 
subsequent years, until such time that CMS finalizes out-migration 
adjustments based on the next Census, we proposed that the out-
migration adjustment be based on the data derived from the custom 
tabulation of the ACS described in section III.K.2. of the preamble of 
the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24471 and 24472) and 
this final rule. As discussed above, we believe that these data are the 
most appropriate to establish qualifying counties because they are the 
most accurate and up-to-date data that are available to us. We proposed 
that the FY 2016 out-migration adjustments continue to be based on the 
same policies, procedures, and computation that were used for the FY 
2012 out-migration adjustment. We have applied these same policies, 
procedures, and computations since FY 2012 and we believe they continue 
to be appropriate for FY 2016. (We refer readers to a full discussion 
of the out-migration adjustment, including rules on deeming hospitals 
reclassified under section 1886(d)(8) or section 1886(d)(10) of the Act 
to have waived the out-migration adjustment, in the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51601 through 51602).) Table 2 (formerly Table 
4J) associated with this final rule (which is available via the 
Internet on the CMS Web site) lists the final out-migration adjustments 
for the FY 2016 wage index.
    Comment: Several commenters supported the CMS proposed wage index 
updates for the out-migration adjustment for FY 2016.
    Response: We appreciate the commenters' support.
    Therefore, we are finalizing the FY 2016 update to the out-
migration data as proposed. The FY 2016 out-migration adjustment is 
based on the data derived from the custom tabulation of the ACS. The FY 
2016 out-migration adjustments continue to be based on the same 
policies, procedures, and computation that were used for the FY 2012 
out-migration adjustment.
4. Use of Out-Migration Adjustment Data Applied for FY 2014 or FY 2015 
for 3 Years
    Section 1886(d)(13)(F) of the Act states that a wage index increase 
under this paragraph shall be effective for a period of 3 fiscal years, 
except that the Secretary shall establish procedures under which a 
subsection (d) hospital may elect to waive the application of such wage 
index increase. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49984 
through 49985), we stated that even if we proposed to adopt new out-
migration adjustment data for FY 2016, hospitals that are already 
receiving an out-migration adjustment beginning with a fiscal year 
prior to FY 2016 would still receive their out-migration adjustment 
based on the data used prior to FY 2016 for the years that remain of 
their 3-year qualification period in FY 2016 and after. Therefore, for 
FY 2016, hospitals that qualified in FY 2014 or FY 2015 to receive the 
out-migration adjustment based on the commuting data and the CBSA 
delineations used for FY 2014 will continue to receive the same out-
migration adjustment for the remainder of their 3-year qualification 
period. For example, if a hospital qualified for the out-migration 
adjustment in FY 2014, but also will qualify in FY 2016 under the new 
commuting patterns and the new OMB labor market area delineations for 
FY 2016, this hospital will still receive the out-migration adjustment 
based on the commuting data and the CBSA delineations used for FY 2014, 
regardless of whether the FY 2016 adjustment is higher or lower than 
the adjustment based on FY 2014 data. If the hospital qualifies in FY 
2017 (after the expiration of the 3-year qualifying period for the out-
migration adjustment, which began in FY 2014) to receive the out-
migration adjustment based on the new commuting data and OMB 
delineations in effect in FY 2017, it could receive the out-migration 
adjustment based on the new data for FYs 2017, 2018, and 2019. 
Conversely, for example, if a hospital qualified for the out-migration 
adjustment in FY 2014, but would not qualify in FY 2016 under the new 
commuting patterns and the new OMB delineations for FY 2016, this 
hospital will still receive the out-migration adjustment based on the 
commuting data and the CBSA delineations used for FY 2014.
    Based on the new out-migration adjustment data used for this FY 
2016 IPPS/LTCH final rule, 336 hospitals will receive the out-migration 
adjustment for FY 2016. Of hospitals that were eligible for the out-
migration adjustment for FY 2015 but whose 3-year qualifying period for 
the out-migration adjustment expired, 6 hospitals are no longer 
eligible for the out-migration adjustment under the new data (3 
hospitals in Alabama, 1 hospital in Missouri, and 2 hospital in 
Tennessee). Of the 336 hospitals, the out-migration adjustment of 248 
hospitals will be unaffected, as these hospitals will receive the same 
out-migration adjustment because they are still within an existing 3-
year eligibility period under the previous out-migration adjustment 
data. Of the 336 hospitals, 12 hospitals would have received a higher 
out-migration adjustment using the new data (1 hospital in Alabama; 2 
hospitals in Massachusetts; 1 hospital in Michigan; 4 hospitals in 
Pennsylvania; 2 hospitals in Tennessee; and 2 hospitals in Wisconsin) 
and 4 hospitals would have received a lower out-migration adjustment 
using the new data (1 hospital in Idaho, 2 hospitals in Oregon, and 1 
hospital in South Carolina). Seventy-five hospitals are newly eligible 
for the out-migration adjustment in FY 2016 using the new data. The 
following table shows the States and Territory in

[[Page 49502]]

which the 75 affected hospitals are located:

------------------------------------------------------------------------
                                                           Number of
                                                         hospitals that
                                                           are newly
                        State                            eligible under
                                                            the new
                                                       outmigration data
                                                          for FY 2016
------------------------------------------------------------------------
ALABAMA..............................................                  2
ARKANSAS.............................................                  3
CALIFORNIA...........................................                  6
FLORIDA..............................................                  4
GEORGIA..............................................                  8
IDAHO................................................                  1
ILLINOIS.............................................                  1
INDIANA..............................................                  3
KANSAS...............................................                  1
LOUISIANA............................................                  5
MAINE................................................                  1
MICHIGAN.............................................                  2
MINNESOTA............................................                  1
MISSISSIPPI..........................................                  3
MISSOURI.............................................                  1
NORTH CAROLINA.......................................                  4
OHIO.................................................                  3
OKLAHOMA.............................................                  2
PENNSYLVANIA.........................................                  3
PUERTO RICO..........................................                  5
SOUTH CAROLINA.......................................                  1
TENNESSEE............................................                  3
TEXAS................................................                  6
VERMONT..............................................                  1
WEST VIRGINIA........................................                  4
WISCONSIN............................................                  1
                                                      ------------------
    Total............................................                 75
------------------------------------------------------------------------

L. Process for Requests for Wage Index Data Corrections

    The preliminary, unaudited Worksheet S-3 wage data files for the 
proposed FY 2016 wage index were made available on May 23, 2014, and 
the preliminary CY 2013 occupational mix data files on July 11, 2014, 
through the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY-2016-Wage-Index-Home-Page.html.
    In the interest of meeting the data needs of the public, beginning 
with the proposed FY 2009 wage index, we post an additional public use 
file on our Web site that reflects the actual data that are used in 
computing the proposed wage index. The release of this file does not 
alter the current wage index process or schedule. We notify the 
hospital community of the availability of these data as we do with the 
current public use wage data files through our Hospital Open Door 
Forum. We encourage hospitals to sign up for automatic notifications of 
information about hospital issues and about the dates of the Hospital 
Open Door Forums at the CMS Web site at: http://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/index.html.
    In a memorandum dated April 7, 2014, we instructed all MACs to 
inform the IPPS hospitals they service of the availability of the wage 
index data files and the process and timeframe for requesting revisions 
(including the specific deadlines listed below). We also instructed the 
MACs to advise hospitals that these data were also made available 
directly through their representative hospital organizations.
    If a hospital wished to request a change to its data as shown in 
the May 23, 2014 wage data files and July 11, 2014 occupational mix 
data files, the hospital was to submit corrections along with complete, 
detailed supporting documentation to its MAC by October 6, 2014. 
Hospitals were notified of this deadline and of all other deadlines and 
requirements, including the requirement to review and verify their data 
as posted in the preliminary wage index data files on the Internet, 
through the April 7, 2014 memorandum referenced above.
    The MACs notified the hospitals by mid-February 2015 of any changes 
to the wage index data as a result of the desk reviews and the 
resolution of the hospitals' early-October revision requests. The MACs 
also submitted the revised data to CMS by December 16, 2014. CMS 
published the proposed wage index public use files that included 
hospitals' revised wage index data on February 13, 2015. Hospitals had 
until March 2, 2015, to submit requests to the MACs for reconsideration 
of adjustments made by the MACs as a result of the desk review, and to 
correct errors due to CMS' or the MAC's mishandling of the wage index 
data. Hospitals also were required to submit sufficient documentation 
to support their requests.
    After reviewing requested changes submitted by hospitals, MACs were 
required to transmit to CMS any additional revisions resulting from the 
hospitals' reconsideration requests by April 8, 2015. The deadline for 
a hospital to request CMS intervention in cases where the hospital 
disagreed with the MAC's policy interpretations was April 15, 2015. We 
note that, as we did for the FY 2015 wage index, for the FY 2016 wage 
index, in accordance with the FY 2016 wage index timeline posted on the 
CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FY2016-WI-Time-Table-Final.pdf, the 
April appeals had to be sent via mail and email. We refer readers to 
the wage index timeline for complete details.
    Hospitals were given the opportunity to examine Table 2, which was 
listed in section VI. of the Addendum to the proposed rule and 
available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY-2016-Wage-Index-Home-Page.html. Table 2 associated with 
the proposed rule contained each hospital's proposed adjusted average 
hourly wage used to construct the wage index values for the past 3 
years, including the FY 2012 data used to construct the proposed FY 
2016 wage index. We noted that the proposed hospital average hourly 
wages shown in Table 2 only reflect changes made to a hospital's data 
that were transmitted to CMS by February 27, 2015.
    We posted the final wage index data public use files on May 1, 2015 
on the Internet at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY-2016-Wage-Index-Home-Page.html. The May 2015 public use files were made available 
solely for the limited purpose of identifying any potential errors made 
by CMS or the MAC in the entry of the final wage index data that 
resulted from the correction process described above (revisions 
submitted to CMS by the MACs by April 8, 2015).
    After the release of the May 2015 wage index data files, changes to 
the wage and occupational mix data could only be made in those very 
limited situations involving an error by the MAC or CMS that the 
hospital could not have known about before its review of the final wage 
index data files. Specifically, neither the MAC nor CMS will approve 
the following types of requests:
     Requests for wage index data corrections that were 
submitted too late to be included in the data transmitted to CMS by the 
MACs on or before April 8, 2015.
     Requests for correction of errors that were not, but could 
have been, identified during the hospital's review of the February 13, 
2015 wage index public use files.
     Requests to revisit factual determinations or policy 
interpretations made by the MAC or CMS during the wage index data 
correction process.
    If, after reviewing the May 2015 final public use files, a hospital 
believed that its wage or occupational mix data were incorrect due to a 
MAC or CMS error in the entry or tabulation of the final data, the 
hospital was given the opportunity to notify both its MAC and CMS 
regarding why the hospital believed an

[[Page 49503]]

error exists and provide all supporting information, including relevant 
dates (for example, when it first became aware of the error). The 
hospital was required to send its request to CMS and to the MAC no 
later than June 1, 2015. Similar to the April appeals, beginning with 
the FY 2015 wage index, in accordance with the FY 2016 wage index 
timeline posted on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FY2016-WI-Time-Table-Final.pdf, the June appeals were required to be sent via 
mail and email to CMS and the MACs. We refer readers to the wage index 
timeline for complete details.
    Verified corrections to the wage index data received timely by CMS 
and the MACs (that is, by June 1, 2015) were incorporated into the 
final wage index in this FY 2016 IPPS/LTCH PPS final rule, which will 
be effective October 1, 2015.
    We created the processes described above to resolve all substantive 
wage index data correction disputes before we finalize the wage and 
occupational mix data for the FY 2016 payment rates. Accordingly, 
hospitals that did not meet the procedural deadlines set forth above 
will not be afforded a later opportunity to submit wage index data 
corrections or to dispute the MAC's decision with respect to requested 
changes. Specifically, our policy is that hospitals that do not meet 
the procedural deadlines set forth above will not be permitted to 
challenge later, before the PRRB, the failure of CMS to make a 
requested data revision. We refer readers also to the FY 2000 IPPS 
final rule (64 FR 41513) for a discussion of the parameters for appeals 
to the PRRB for wage index data corrections.
    Again, we believe the wage index data correction process described 
above provides hospitals with sufficient opportunity to bring errors in 
their wage and occupational mix data to the MAC's attention. Moreover, 
because hospitals had access to the final wage index data by May 1, 
2015, they had the opportunity to detect any data entry or tabulation 
errors made by the MAC or CMS before the development and publication of 
the final FY 2016 wage index by August 2015, and the implementation of 
the FY 2016 wage index on October 1, 2015. Given these processes, the 
wage index implemented on October 1 should be accurate. Nevertheless, 
in the event that errors are identified by hospitals and brought to our 
attention after June 1, 2015, we retain the right to make midyear 
changes to the wage index under very limited circumstances.
    Specifically, in accordance with 42 CFR 412.64(k)(1) of our 
regulations, we make midyear corrections to the wage index for an area 
only if a hospital can show that: (1) The MAC or CMS made an error in 
tabulating its data; and (2) the requesting hospital could not have 
known about the error or did not have an opportunity to correct the 
error, before the beginning of the fiscal year. For purposes of this 
provision, ``before the beginning of the fiscal year'' means by the 
June deadline for making corrections to the wage data for the following 
fiscal year's wage index (for example, June 1, 2015, for the FY 2016 
wage index). This provision is not available to a hospital seeking to 
revise another hospital's data that may be affecting the requesting 
hospital's wage index for the labor market area. As indicated earlier, 
because CMS makes the wage index data available to hospitals on the CMS 
Web site prior to publishing both the proposed and final IPPS rules, 
and the MACs notify hospitals directly of any wage index data changes 
after completing their desk reviews, we do not expect that midyear 
corrections will be necessary. However, under our current policy, if 
the correction of a data error changes the wage index value for an 
area, the revised wage index value will be effective prospectively from 
the date the correction is made.
    In the FY 2006 IPPS final rule (70 FR 47385 through 47387 and 
47485), we revised 42 CFR 412.64(k)(2) to specify that, effective on 
October 1, 2005, that is, beginning with the FY 2006 wage index, a 
change to the wage index can be made retroactive to the beginning of 
the Federal fiscal year only when CMS determines all of the following: 
(1) The MAC or CMS made an error in tabulating data used for the wage 
index calculation; (2) the hospital knew about the error and requested 
that the MAC and CMS correct the error using the established process 
and within the established schedule for requesting corrections to the 
wage index data, before the beginning of the fiscal year for the 
applicable IPPS update (that is, by the June 1, 2015 deadline for the 
FY 2016 wage index); and (3) CMS agreed before October 1 that the MAC 
or CMS made an error in tabulating the hospital's wage index data and 
the wage index should be corrected.
    In those circumstances where a hospital requested a correction to 
its wage index data before CMS calculated the final wage index (that 
is, by the June 1, 2015 deadline for the FY 2016 wage index), and CMS 
acknowledges that the error in the hospital's wage index data was 
caused by CMS' or the MAC's mishandling of the data, we believe that 
the hospital should not be penalized by our delay in publishing or 
implementing the correction. As with our current policy, we indicated 
that the provision is not available to a hospital seeking to revise 
another hospital's data. In addition, the provision cannot be used to 
correct prior years' wage index data; and it can only be used for the 
current Federal fiscal year. In situations where our policies would 
allow midyear corrections other than those specified in 42 CFR 
412.64(k)(2)(ii), we continue to believe that it is appropriate to make 
prospective-only corrections to the wage index.
    We note that, as with prospective changes to the wage index, the 
final retroactive correction will be made irrespective of whether the 
change increases or decreases a hospital's payment rate. In addition, 
we note that the policy of retroactive adjustment will still apply in 
those instances where a final judicial decision reverses a CMS denial 
of a hospital's wage index data revision request.

M. Labor-Related Share for the FY 2016 Wage Index

    Section 1886(d)(3)(E) of the Act directs the Secretary to adjust 
the proportion of the national prospective payment system base payment 
rates that are attributable to wages and wage-related costs by a factor 
that reflects the relative differences in labor costs among geographic 
areas. It also directs the Secretary to estimate from time to time the 
proportion of hospital costs that are labor-related and to adjust the 
proportion (as estimated by the Secretary from time to time) of 
hospitals' costs which are attributable to wages and wage-related costs 
of the DRG prospective payment rates. We refer to the portion of 
hospital costs attributable to wages and wage-related costs as the 
labor-related share. The labor-related share of the prospective payment 
rate is adjusted by an index of relative labor costs, which is referred 
to as the wage index.
    Section 403 of Public Law 108-173 amended section 1886(d)(3)(E) of 
the Act to provide that the Secretary must employ 62 percent as the 
labor-related share unless this would result in lower payments to a 
hospital than would otherwise be made. However, this provision of 
Public Law 108-173 did not change the legal requirement that the 
Secretary estimate from time to time the proportion of hospitals' costs 
that are attributable to wages and wage-related costs. Thus, hospitals 
receive payment based on either a 62-percent labor-related share, or 
the labor-related

[[Page 49504]]

share estimated from time to time by the Secretary, depending on which 
labor-related share resulted in a higher payment.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50596 through 
50607), we rebased and revised the hospital market basket. We 
established a FY 2010-based IPPS hospital market basket to replace the 
FY 2006-based IPPS hospital market basket, effective October 1, 2013. 
In that final rule, we presented our analysis and conclusions regarding 
the frequency and methodology for updating the labor-related share for 
FY 2014. Using the FY 2010-based IPPS market basket, we finalized a 
labor-related share for FY 2014 and for FY 2015 of 69.6 percent. In 
addition, we implemented this revised and rebased labor-related share 
in a budget neutral manner. However, consistent with section 
1886(d)(3)(E) of the Act, we did not take into account the additional 
payments that would be made as a result of hospitals with a wage index 
less than or equal to 1.0000 being paid using a labor-related share 
lower than the labor-related share of hospitals with a wage index 
greater than 1.0000.
    The labor-related share is used to determine the proportion of the 
national IPPS base payment rate to which the area wage index is 
applied. In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24474 
through 24475), for FY 2016, we did not propose to make any further 
changes to the national average proportion of operating costs that are 
attributable to wages and salaries, employee benefits, contract labor, 
the labor-related portion of professional fees, administrative and 
facilities support services, and all other labor-related services. 
Therefore, for FY 2016, we proposed to continue to use a labor-related 
share of 69.6 percent for discharges occurring on or after October 1, 
2015.
    Tables 1A and 1B, which were published in section VI. of the 
Addendum to the FY 2016 IPPS/LTCH PPS proposed rule and available via 
the Internet on the CMS Web site, reflected the proposed labor-related 
share. For FY 2016, for all IPPS hospitals whose wage indexes are less 
than or equal to 1.0000, we proposed to apply the wage index to a 
labor-related share of 62 percent of the national standardized amount. 
For all IPPS hospitals whose wage indexes are greater than 1.000, for 
FY 2016, we proposed to apply the wage index to a proposed labor-
related share of 69.6 percent of the national standardized amount. In 
the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24474 through 24475), we 
noted that, for Puerto Rico hospitals, the national labor-related share 
is 62 percent because the national wage index for all Puerto Rico 
hospitals is less than 1.0000.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50601 through 
50603), we also rebased and revised the labor-related share for the 
Puerto Rico-specific standardized amounts using FY 2010 as a base year. 
We finalized a labor-related share for the Puerto Rico-specific 
standardized amounts for FY 2014 of 63.2 percent. In the FY 2015 IPPS/
LTCH PPS final rule (79 FR 49990), for FY 2015, we did not make any 
further changes to the Puerto Rico-specific average proportion of 
operating costs that are attributable to wages and salaries, employee 
benefits, contract labor, the labor-related portion of professional 
fees, administrative and facilities support services, and all other 
labor-related services. For FY 2015, we continued to use a labor-
related share for the Puerto Rico-specific standardized amounts of 63.2 
percent for discharges occurring on or after October 1, 2014.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24475), for FY 
2016, we proposed to continue to use a labor-related share for the 
Puerto Rico-specific standardized amounts of 63.2 percent for 
discharges occurring on or after October 1, 2015. Puerto Rico hospitals 
are paid based on 75 percent of the national standardized amounts and 
25 percent of the Puerto Rico-specific standardized amounts. For FY 
2016, we proposed that the labor-related share of a hospital's Puerto 
Rico-specific rate would be either the Puerto Rico-specific labor-
related share of 63.2 percent or 62 percent, depending on which results 
in higher payments to the hospital. If the hospital has a Puerto Rico-
specific wage index greater than 1.000 for FY 2016, we proposed to set 
the hospital's rates using a labor-related share of 63.2 percent for 
the 25 percent portion of the hospital's payment determined by the 
Puerto Rico standardized amounts because this amount would result in 
higher payments. Conversely, a hospital with a Puerto Rico-specific 
wage index of less than or equal to 1.000 for FY 2016 would be paid 
using the Puerto Rico-specific labor-related share of 62 percent of the 
Puerto Rico-specific rates because the lower labor-related share would 
result in higher payments.
    Comment: One commenter recommended that CMS compute an alternative 
labor and nonlabor-related share percentage under the national 
standardized amount for hospitals in Puerto Rico. The commenter 
explained that the current labor-related share percentage of 62 percent 
under the national standardized amounts meets the statutory definition 
in section 1886(d)(3)(E) of the Act, resulting in lower payments for 
providers in Puerto Rico. Therefore, the commenter believed that CMS 
should calculate an alternative national labor-related share percentage 
for hospitals in Puerto Rico that is lower than 62 percent. The 
commenter further stated that CMS does not have empirical data that 
demonstrate why a lower labor share is justified. The commenter also 
provided the following data that shows nonlabor costs are higher in 
Puerto Rico. Based on data from the Council for Community and Economic 
Research (available on the internet at http://www.coli.org), the 
composite cost-of-living index for the MSA of San Juan, Puerto Rico out 
of 200 MSAs is 112.9 (where 100 is the average composite index). The 
commenter also noted that the measure for nonlabor items in Puerto Rico 
such as utilities and supermarket were 185.1 and 122.7, respectively.
    Response: As we responded in the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 49990 through 49991), current law requires that the labor-
related share for the national standardized amount be set at 62 percent 
for hospitals with a wage index less than or equal to 1.0000. 
Specifically, as discussed above, section 403 of Public Law 108-173 
amended section 1886(d)(3)(E) of the Act to provide that the Secretary 
must employ 62 percent as the labor-related share unless this would 
result in lower payments to a hospital than would otherwise be made.
    In addition, sections 1886(d)(9)(A) and (d)(9)(E)(iv) of the Act 
require that Puerto Rico hospitals are paid a blended rate for their 
inpatient operating costs based on 75 percent of the national 
standardized amount and 25 percent of the Puerto Rico-specific 
standardized amount. Therefore, for the portion of payment determined 
under the national standardized amount, Puerto Rico hospitals must 
follow section 1886(d)(3)(E) of the Act which requires the Secretary to 
use 62 percent as the labor-related share unless this would result in 
lower payments to a hospital than would otherwise be made. For Puerto 
Rico, the national labor-related share is 62 percent because the 
national wage index for all Puerto Rico hospitals is less than 1.0000. 
Therefore, we are unable to change the labor-related share of 62 
percent.
    After consideration of public comments received, we are finalizing 
our proposals without modification. For FY 2016, we are continuing to 
use a labor-related share for the national standardized amount of 69.6 
percent for

[[Page 49505]]

discharges occurring on or after October 1, 2015. Tables 1A and 1B, 
which are published in section VI. of the Addendum to this FY 2016 
IPPS/LTCH PPS final rule and available via the Internet on the CMS Web 
site, reflect this labor-related share. For FY 2016, for all IPPS 
hospitals whose wage indexes are less than or equal to 1.0000, we are 
applying the wage index to a labor-related share of 62 percent of the 
national standardized amount. For all IPPS hospitals whose wage indexes 
are greater than 1.0000, for FY 2016, we are applying the wage index to 
a labor-related share of 69.6 percent of the national standardized 
amount.
    Puerto Rico hospitals are paid based on 75 percent of the national 
standardized amounts and 25 percent of the Puerto Rico-specific 
standardized amounts. For Puerto Rico hospitals, the national labor-
related share is 62 percent because the national wage index for all 
Puerto Rico hospitals is less than 1.0000. For FY 2016, we are 
continuing to use a labor-related share for Puerto Rico-specific 
standardized amounts of 63.2 percent for discharges occurring on or 
after October 1, 2015. We also are finalizing our proposal that the 
labor-related share of a hospital's Puerto Rico-specific rate for FY 
2016 is either the Puerto Rico-specific labor-related share of 63.2 
percent or 62 percent, depending on which results in higher payments to 
the hospital. The final FY 2016 Puerto Rico specific labor-related 
share of 63.2 percent or 62 percent is reflected in Table 1C, which is 
published in section VI. of the Addendum to this FY 2016 IPPS/LTCH PPS 
final rule and available via the Internet on the CMS Web site.

N. Changes to 3-Year Average Pension Policy and Changes to the Wage 
Index Timetable Regarding Pension Costs for FY 2017 and Subsequent 
Years

    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586 through 
51590), we revised our policy for reporting costs of qualified defined 
benefit pension plans for the Medicare wage index. Under that revised 
policy, the pension costs that are to be included in the wage index 
equal a hospital's average cash contributions deposited to its defined 
benefit pension plan over a 3-year period or, if less than a 3-year 
period, the number of years that the hospital has sponsored a defined 
benefit plan. The 3-year average is centered on the base cost reporting 
period for the wage index. For example, the FY 2016 wage index is based 
on Medicare cost reporting periods beginning during Federal FY 2012, 
and reflects the average pension contributions made in a hospital's 
cost reporting period that began during Federal FYs 2011, 2012, and 
2013. As stated in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51587), 
we centered the 3-year average on the base cost reporting period for 
the wage index in order to ensure that the average annual pension cost 
reflected in the wage index is consistent with the cost reporting 
period applicable to all other costs included in the index. We also 
stated that we did not anticipate that the use of contributions made in 
the period immediately following the base cost reporting period (for 
example, using Federal FY 2013 as one of the 3-year periods for FY 
2016) would create an administrative burden because by the time the MAC 
would be reviewing a hospital's base cost reporting period wage data 
for inclusion in the subsequent year's wage index, trust account 
statements and general ledger reports to support the contributions 
should be readily available. We refer readers to the FY 2012 IPPS/LTCH 
PPS final rule for a complete discussion of this policy.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49987 through 
49990), we finalized changes to the FY 2017 wage index timeline. We 
stated that we believed the timeline changes would not only improve the 
accuracy of the February public use file (PUF), but also would reduce 
the number of hospital appeals based on the February PUF. Among these 
changes to the wage index timeline for FY 2017 is a requirement that 
hospitals must request revisions to the preliminary PUF by the first 
week of September 2015. In response to our FY 2015 proposal to change 
the wage index timeline for FY 2017, a public commenter stated that the 
proposed FY 2017 deadline of early August 2015 did not provide enough 
time for hospitals to incorporate their pension data into the desk 
review process because the Internal Revenue Service (IRS) Form 5500 
(used as the basis for reporting pension contributions for defined 
benefit plans) is due 7 months after the end of the plan year (July 
31), with possible extensions through mid-September. In response to 
that comment, in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49989), we 
provided for a general deadline of early September to submit revisions 
to the wage index data posted in the May 2015 preliminary PUF, but 
provided a limited exception for submission of pension data for certain 
hospitals. Specifically, starting with the FY 2017 wage index, we will 
allow an extension for a hospital with a fiscal year begin date on or 
after August 15 of a year to submit its initial pension data by mid-
October 2015, which would revise the preliminary PUF. We stated that we 
believed the majority of hospitals, which do have fiscal year begin 
dates prior to August 15 of a year, would be able to submit their 
pension data, along with the remainder of their wage index 
documentation, to their MACs by the beginning of September of each 
year, in time for the beginning of the annual wage index desk review 
process. We also stated that, in future rulemaking, we may consider 
revisions to the 3-year average pension policy that would allow all 
hospitals to submit their pension data at the same time. We refer 
readers to the FY 2015 IPPS/LTCH PPS final rule for a complete 
discussion of the changes to the FY 2017 wage index timeline (79 FR 
49987 through 49990).
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24475), we stated 
that we have now reconsidered the changes made to the FY 2017 wage 
index timeline in light of our experience to date with the 
administrative aspects of the 3-year average pension policy as 
explained above and in the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51586 through 51590). Based on our findings, we believe that a revision 
of the 3-year average pension policy is warranted, beginning with the 
FY 2017 wage index.
    Specifically, in the FY 2016 IPPS/LTCH PPS proposed rule, instead 
of the 3-year average being centered on the base cost reporting period 
for the wage index, we proposed that, for the FY 2017 wage index and 
all subsequent fiscal year wage indexes, the 3-year average would be 
based on pension contributions made during the base cost reporting 
period plus the prior 2 cost reporting years. For example, the FY 2017 
wage index would be based on Medicare cost reporting periods beginning 
during Federal FY 2013. Therefore, the FY 2017 wage index would reflect 
the average pension contributions made in hospitals' cost reporting 
periods beginning during Federal FYs 2011, 2012, and 2013 (rather than 
Federal FYs 2012, 2013, and 2014 under the FY 2015 policy). Our 
proposed change in the 3-year averaging period would produce a 1-year 
lag in reporting pension costs relative to reporting all other costs 
included in the wage index and, for most hospitals, would result in the 
same 3-year average pension costs for both the FY 2016 and FY 2017 wage 
index. That is, for FY 2016, the 3-year average consists of Federal FYs 
2011, 2012, and 2013, and under our proposal, the 3-year average for FY 
2017 also would consist of Federal FYs 2011, 2012, and 2013. Under our 
proposal, the 3-year

[[Page 49506]]

average for FY 2018 would consist of Federal FYs 2012, 2013, and 2014.
    Comment: Several commenters supported the proposed change in the 3-
year averaging period for pension costs.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal without modification that, instead of the 3-
year average being centered on the base cost reporting period for the 
wage index, for the FY 2017 wage index and all subsequent fiscal year 
wage indexes, the 3-year average will be based on pension contributions 
made during the base cost reporting period plus the prior 2 cost 
reporting years.
    For FY 2017 only, we proposed that all hospitals submit requests to 
revise their previously submitted pension data by early October to mid-
October (instead of the first week of September, as stated in the FY 
2015 IPPS/LTCH PPS final rule (79 FR 49989)). We had anticipated 
proposing an early September deadline for all hospitals to submit 
revisions on all data in the preliminary PUF, including pension data. 
However, we realized that such a deadline would involve requiring 
hospitals to submit all of the revisions to pension data prior to the 
effective date of the final rule. Therefore, we proposed this deadline 
change of early October to mid-October so that all hospitals would 
submit revisions to their pension data by the same deadline, which 
should simplify the deadline for submitting those data as well as 
provide more time to most hospitals to submit these data. Because the 
pension data for FY 2017 would be the same pension data already used in 
FY 2016 (as mentioned above), we would expect minimal revisions to the 
pension data for FY 2017. Because we proposed an extension until early 
to mid-October for all hospitals to revise their pension data for FY 
2017, we proposed to eliminate the limited exception and extension for 
hospitals with a fiscal year begin date of on or after August 15, as 
set forth in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49989). The 
exception is no longer necessary, given the proposed use of data from 
older cost reports for the 3-year averaging of pension costs and the 
proposed extension of time for submission of revisions of pension data 
for all hospitals for FY 2017. For FY 2018 and subsequent fiscal years, 
we proposed to require that all hospitals request revisions to the 
preliminary PUF for all wage index issues, including submission and/or 
revisions of pension data, by the first week of September. The 
September deadline for FY 2018 and subsequent fiscal years is 
consistent with the deadline established in the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 49989) for the FY 2017 wage index data. Specifically, 
in that final rule, in response to commenters, we established the early 
September deadline as a feasible deadline for hospitals to request 
revisions to their preliminary wage and occupational mix data. In 
addition, we also stated that a deadline in early September would be 
manageable for hospitals, while also providing the MACs with the most 
amount of time possible to complete their desk reviews.
    This proposal also would allow for a single deadline for all 
hospitals to submit revisions to their wage data, including their 
pension costs (as stated above). A single deadline is preferable 
because it would result in less confusion and would be easier to 
administer for all hospitals. In addition, the limited exception for 
hospitals with a fiscal year begin date of on or after August 15 would 
have provided administrative relief only to a minority of hospitals. 
Furthermore, in many cases, hospitals that participate in a systemwide 
pension plan or State-run retirement system have been unable to obtain 
timely documentation to support their allocated share of total plan 
contributions. We believe that a shift in the 3-year average to the 
base cost reporting period plus the prior 2 cost reporting years would 
provide all hospitals sufficient time to collect and submit their 
pension data by the proposed September deadline, and allow MACs to 
complete their desk reviews on schedule, thereby improving the accuracy 
of the February PUF.
    The chart below includes the FY 2017 wage index timetable published 
in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49989), except for the 
mid-October deadline under the limited exception and extension for 
submitting pension data to the MACs for hospitals with fiscal year 
begin dates on or after August 15, which we are eliminating in this 
final rule. It also includes our final policy for FY 2017 for all 
hospitals to request revisions to their pension data by mid-October 
2015 (rather than early October as published in the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 49989)).

    FY 2017 Wage Index Timetable With Deadline for Pension Revisions
------------------------------------------------------------------------
                  Actions                             Deadlines
------------------------------------------------------------------------
Posting of Preliminary PUF on CMS Web site.  Mid-May 2015.
Deadline for Hospitals to Request Revisions  First week of September
 to Preliminary PUF.                          2015.
Deadline for Hospitals to Request Revisions  Early October 2015 to
 to Pension Data.                             Mid[dash]October 2015.
Deadline for MACs to Complete Desk Reviews.  Mid-November 2015.
Posting of January PUF on CMS Web site       Late January 2016.
 (formerly ``February'' PUF).
Deadline Following Posting of January PUF    Mid-February 2016.
 for Hospitals to Request Revisions.
Completion of Appeals by MACs and            Mid to Late March 2016.
 Transmission of Final Wage Data to CMS.
Deadline for Hospitals to Appeal in April..  Early April 2016.
Posting of Final PUF.......................  Late April 2016.
Deadline for Hospitals to Appeal in May....  Late May 2016.
Expected Issuance of IPPS Final Rule.......  August 1, 2016.
------------------------------------------------------------------------

    For FY 2018 and subsequent fiscal years, we proposed the same 
timetable as in FY 2017 (adjusted for the years), except there would no 
longer be a separate deadline in October for submitting and/or revising 
pension data. Rather, all requests to submit and/or revise pension data 
(as well as any other requests for revisions to the preliminary PUF) 
for FY 2018 and subsequent fiscal years would be required to be 
submitted by hospitals to MACs in the first week of September each 
year.
    Comment: Several commenters generally supported the proposed 
modification of the wage index timetable. Some commenters specifically 
supported a single deadline for revisions to preliminary wage index 
data, although these commenters disagreed with the September deadline 
for requesting revisions to the preliminary May PUF. These commenters 
preferred an October

[[Page 49507]]

deadline to allow hospitals more time to review their data.
    Response: We appreciate the commenters' general support for the 
wage index timetable. For only FY 2017, we proposed that all hospitals 
submit requests to revise their previously submitted pension data by 
early to mid-October 2015, instead of the previous early September 2015 
deadline for pension revisions finalized in the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 49989). This deadline of mid-October 2015 for 
hospitals to submit pension data revisions will simplify the deadline 
for submitting those data as well as provide more time to most 
hospitals to submit those data. We note that, on May 15, 2015, when we 
posted the FY 2017 preliminary PUF on the CMS Web site, we included a 
tentative FY 2017 timetable which included a tentative deadline of 
October 15, 2015, for all hospitals to request revisions to pension 
data and to provide documentation to support the request. This 
tentative FY 2017 Wage Index Development Timetable stated the 
following: October 15, 2015--``Per the proposed pension policy in the 
FY 2016 IPPS/LTCH proposed rule, deadline for all hospitals to request 
revisions to pension data and to provide documentation to support the 
request. MACs must receive the revision requests and supporting 
documentation by this date. In addition, this date of October 15, 2015 
only applies to pension plans that are classified as defined benefit 
pension plans. Requests to revise data of all other types of pension 
plans (such as defined contribution plans) must be received by the MACs 
no later than September 2, 2015.'' We refer readers to the CMS Web site 
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2017-Wage-Index-Home-Page.html.
    Furthermore, because we proposed an extension until early to mid-
October for all hospitals to revise their pension data for FY 2017, we 
proposed to eliminate the limited exception and extension for hospitals 
with a fiscal year begin date of on or after August 15, as set forth in 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 49989). The exception is no 
longer necessary, given the use of data from older cost reports for the 
3-year averaging of pension costs and the proposed extension of time 
for submission of revisions of pension data for all hospitals for FY 
2017. Therefore, we are finalizing a mid-October 2015 deadline by 
which, for FY 2017 only, hospitals must request revisions to their 
pension data for pension plans that are classified as defined benefit 
pension plans. Requests to revise data of all other types of pension 
plans (such as defined contribution plans) must be received by the MACs 
no later than the first week of September 2015. The final FY 2017 Wage 
Index Development Timetable will be posted on the following CMS Web 
site after issuance of this FY 2016 final rule: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2017-Wage-Index-Home-Page.html.
    In addition, we proposed that, for FY 2018 and subsequent fiscal 
years, all hospitals are required to request revisions to the 
preliminary PUF for all wage index issues, including submission and/or 
revisions of pension data, by the first week of September. We further 
proposed that the remainder of the timetable for FY 2017 would apply 
for FY 2018 and subsequent fiscal years (adjusted for the years). The 
September deadline, consistent with the deadline established in the FY 
2015 IPPS/LTCH PPS final rule for the FY 2017 and subsequent year's 
wage index data (79 FR 49989), is the earliest feasible deadline for 
hospitals to request revisions to their preliminary wage and 
occupational mix data. This deadline in early September is manageable 
for hospitals, while it also provides the MACs with the most amount of 
time possible to complete their desk reviews. As such, we are 
finalizing that, for FY 2018 and subsequent fiscal years, all hospitals 
are required to request revisions to the preliminary PUF for all wage 
index issues, including submission and/or revisions of pension data, by 
the first week of September. Further, we are finalizing that the 
remainder of the timetable for FY 2017 will apply for FY 2018 and 
subsequent fiscal years (adjusted for the years).
    After consideration of the public comments we received, for FY 2017 
only, we are finalizing our proposals without modification that all 
hospitals submit requests to revise their previously submitted defined 
benefit pension data by early October to mid-October and eliminating 
the limited exception and extension for hospitals with a fiscal year 
begin date of on or after August 15 to submit their pension data by 
mid-October. We also are finalizing our proposals without modification 
to require that all hospitals request revisions to the preliminary PUF 
for all wage index issues, including submission and/or revisions of 
pension data, by the first week of September for FY 2018 and subsequent 
fiscal years, and to apply the remainder of the timetable for FY 2017 
to FY 2018 and subsequent fiscal years (adjusted for the years).
    The chart below summarizes the wage index timetables for FY 2018 
and subsequent fiscal years.

                          Wage Index Timetable
------------------------------------------------------------------------
                Actions                             Deadlines
------------------------------------------------------------------------
Posting of Preliminary PUF on CMS Web    Mid-May (about 16 months prior
 site.                                    to the effective date of wage
                                          index).
Deadline for Hospitals to Request        First week of September (about
 Revisions to Preliminary PUF             13 months prior to the
 (including revision requests for all     effective date of wage index).
 pension data).
Deadline for MACs to Complete Desk       Mid-November (about 11 months
 Reviews.                                 prior to the effective date of
                                          wage index).
Posting of January PUF on CMS Web site   Late January (about 9 months
 (formerly ``February'' PUF).             prior to the effective date of
                                          wage index).
Deadline Following Posting of January    Mid-February (about 8 months
 PUF for Hospitals to Request Revisions.  prior to the effective date of
                                          wage index).
Completion of Appeals by MACs and        Mid to Late March (about 7
 Transmission of Final Wage Data to CMS.  months prior to the effective
                                          date of wage index).
Deadline for Hospitals to Appeal in      Early April (about 6 months
 April.                                   prior to the effective date of
                                          wage index).
Posting of Final PUF...................  Late April (about 6 months
                                          prior to the effective date of
                                          wage index).
Deadline for Hospitals to Appeal in May  Late May (about 5 months prior
                                          to the effective date of wage
                                          index).
Expected Issuance of IPPS Final Rule...  August 1 (2 months prior to the
                                          effective date of wage index).
Effective date of the wage index.......  October 1, beginning of the
                                          fiscal year.
------------------------------------------------------------------------


[[Page 49508]]

O. Clarification of Allocation of Pension Costs for the Wage Index

    As discussed in section III.N. of the preamble of this final rule, 
the pension cost to be included in the Medicare wage index equals a 
hospital's average cash contributions deposited to its defined benefit 
pension plan over a 3-year period. Since implementing this policy, we 
have become aware of some confusion with respect to how hospitals are 
to compute the 3-year average when allocating their pension costs on 
the Medicare cost report if a hospital participates in a pension plan 
or retirement system that also covers other entities. In the FY 2016 
IPPS/LTCH PPS proposed rule (80 FR 24477), we clarified that if a 
hospital participates in a pension plan or retirement system that also 
covers other entities, the hospital must report its respective 3-year 
average pension cost (or prefunding balance) reflecting only the 
hospital's allocated share of total plan contributions, and not 
including any share of pension costs of other entities. For each 
hospital, this is accomplished by first determining the hospital's 
allocated portion of pension contribution for each year of the 3-year 
average, and then computing the 3-year average for that hospital based 
only on that hospital's respective allocated pension contributions. 
This is consistent with the regulations at 42 CFR 413.24(a), which 
state, in pertinent part, that providers must provide adequate cost 
data based on their financial and statistical records. Therefore, a 
provider may not claim as an allowable cost the costs of services 
associated with another entity. It is not appropriate to compute the 3-
year average (or prefunding balance) based on the total contributions 
made to the plan by all participating entities and then determine a 
hospital's allocated portion of the 3-year average cost (or prefunding 
balance) because there are instances in which the 3-year average could 
be skewed because a hospital may be including pension costs from 
another entity in its 3-year average. Specifically, if the allocated 
percentage of total plan contributions for one or more of the 
participating entities changes during the 3-year average, the average 
will be skewed. The allocated percentage to each entity can change due 
to mergers, changes in plan coverage, or other factors. We also note 
that the allocation of contributions between the various entities 
participating in a pension plan or pension system should agree with the 
methodology used for plan reporting purposes and/or financial statement 
purposes, and the methodology used should be applied consistently over 
time. Furthermore, if wage index reporting is required for two or more 
hospitals covered under the same pension plan or retirement system, 
those hospitals should ensure that the allocation of plan contributions 
for each reporting period is determined on a consistent basis to avoid 
duplicate reporting of costs.
    We did not received any public comments on this clarification that 
was included the FY 2016 IPPS/LTCH PPS proposed rule.

IV. Other Decisions and Changes to the IPPS for Operating Costs and 
Indirect Medical Education (IME) Costs

A. Changes in the Inpatient Hospital Update for FY 2016 (Sec.  
412.64(d))

1. FY 2016 Inpatient Hospital Update
    In accordance with section 1886(b)(3)(B)(i) of the Act, each year 
we update the national standardized amount for inpatient operating 
costs by a factor called the ``applicable percentage increase.'' For FY 
2016, we are setting the applicable percentage increase by applying the 
adjustments listed below in the same sequence as we did for FY 2015. 
Specifically, consistent with section 1886(b)(3)(B) of the Act, as 
amended by sections 3401(a) and 10319(a) of the Affordable Care Act, we 
are setting the applicable percentage increase by applying the 
following adjustments in the following sequence. The applicable 
percentage increase under the IPPS is equal to the rate-of-increase in 
the hospital market basket for IPPS hospitals in all areas, subject to 
(1) a reduction of one-quarter of the applicable percentage increase 
(prior to the application of other statutory adjustments; also referred 
to as the market basket update or rate-of-increase (with no 
adjustments)) for hospitals that fail to submit quality information 
under rules established by the Secretary in accordance with section 
1886(b)(3)(B)(viii) of the Act; (2) a 66\2/3\ percent reduction to 
three-quarters of the applicable percentage increase (prior to the 
application of other statutory adjustments; also referred to as the 
market basket update or rate-of-increase (with no adjustments)) for 
hospitals not considered to be meaningful EHR users in accordance with 
section 1886(b)(3)(B)(ix) of the Act; (3) an adjustment based on 
changes in economy-wide productivity (the multifactor productivity 
(MFP) adjustment); and (4) an additional reduction of 0.2 percentage 
point as required by section 1886(b)(3)(B)(xii) of the Act. Sections 
1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as added by section 
3401(a) of the Affordable Care Act, state that application of the MFP 
adjustment and the additional FY 2016 adjustment of 0.2 percentage 
point may result in the applicable percentage increase being less than 
zero. Under section 1886(b)(3)(B)(ix) of the Act, the reduction to 
three-quarters of the applicable percentage increase for those 
hospitals that are not meaningful EHR users will increase to 100 
percent for FY 2017 and subsequent fiscal years.
    We note that, in compliance with section 404 of the MMA, in the FY 
2014 IPPS/LTCH PPS final rule, we replaced the FY 2006-based IPPS 
operating and capital market baskets with the revised and rebased FY 
2010-based IPPS operating and capital market baskets for FY 2014. In 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 49993 through 49996), we 
continued to use the FY 2010-based IPPS operating and capital market 
baskets for FY 2015 and the labor-related share of 69.6 percent, which 
is based on the FY 2010-based IPPS market basket. For FY 2016, in the 
FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24477), we proposed to 
continue using the FY 2010-based IPPS operating and capital market 
baskets and the labor-related share of 69.6 percent, which is based on 
the FY 2010-based IPPS market basket. We did not receive any public 
comments on this proposal and, therefore, for FY 2016, will continue to 
use the FY 2010-based IPPS operating and capital market baskets and the 
labor-related share of 69.6 percent.
    Based on the most recent data available for the FY 2016 proposed 
rule, in accordance with section 1886(b)(3)(B) of the Act, we proposed 
in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24477) to base the FY 
2016 market basket update used to determine the applicable percentage 
increase for the IPPS on IHS Global Insight, Inc.'s (IGI's) first 
quarter 2015 forecast of the FY 2010-based IPPS market basket rate-of-
increase with historical data through fourth quarter 2014, which was 
estimated to be 2.7 percent. We proposed that if more recent data 
became subsequently available (for example, a more recent estimate of 
the market basket and the MFP adjustment), we would use such data, if 
appropriate, to determine the FY 2016 market basket update and the MFP 
adjustment in this final rule.
    Based on updated data for this FY 2016 IPPS/LTCH PPS final rule, 
that is, the IGI's second quarter 2015 forecast of the FY 2010-based 
IPPS market basket rate-of-increase with historical data through first 
quarter 2015, we estimate that the FY 2016 market basket update used to 
determine the applicable

[[Page 49509]]

percentage increase for the IPPS is 2.4 percent.
    For FY 2016, depending on whether a hospital submits quality data 
under the rules established in accordance with section 
1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital 
that submits quality data) and is a meaningful EHR user under section 
1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that 
is a meaningful EHR user), we discussed in the FY 2016 IPPS/LTCH PPS 
proposed rule (80 FR 24477 through 24478) that there are four possible 
applicable percentage increases that can be applied to the standardized 
amount. Based on more recent data described above, we determined final 
applicable percentage increases to the standardized amount for FY 2016, 
as specified in the table below.
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 
51692), we finalized our methodology for calculating and applying the 
MFP adjustment. As we explained in that rule, section 
1886(b)(3)(B)(xi)(II) of the Act, as added by section 3401(a) of the 
Affordable Care Act, defines this productivity adjustment as equal to 
the 10-year moving average of changes in annual economy-wide, private 
nonfarm business MFP (as projected by the Secretary for the 10-year 
period ending with the applicable fiscal year, calendar year, cost 
reporting period, or other annual period). The Bureau of Labor 
Statistics (BLS) publishes the official measure of private nonfarm 
business MFP. We refer readers to the BLS 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 
input growth from output growth. The projections of the components of 
MFP are currently produced by IGI, a nationally recognized economic 
forecasting firm with which CMS contracts to forecast the components of 
the market baskets and MFP. As described in the FY 2012 IPPS/LTCH PPS 
final rule, 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 IPPS/LTCH 
PPS final 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, as discussed in the FY 
2016 IPPS/LTCH PPS proposed rule (80 FR 24478), 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 the FY 2016 IPPS/
LTCH PPS proposed rule and 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.
    For FY 2016, we proposed an MFP adjustment of 0.6 percentage point 
(80 FR 24478). Similar to the market basket update, for the proposed 
rule, we used the most recent data available to compute the MFP 
adjustment. As noted above, we proposed that if more recent data became 
subsequently available, we would use such data, if appropriate, to 
determine the FY 2016 market basket update and MFP adjustment in this 
FY 2016 IPPS/LTCH PPS final rule.
    Based on the most recent data available for this final rule, which 
is IGI's second quarter 2015 forecast (with historical data through 
first quarter 2015), the MFP adjustment is 0.5 percentage point for FY 
2016.
    Comment: One commenter supported the proposed FY 2016 IPPS market 
basket increase of 1.1 percent, after applicable adjustments, to update 
the IPPS payments for FY 2016 based upon the most current data 
available. The commenter urged CMS to conduct regular payment impact 
analysis to ensure appropriate payment levels for inpatient services.
    Response: We appreciate the commenter's support of the FY 2016 
market basket update under the IPPS. As noted, for this final rule, we 
are using updated data to estimate the FY 2016 market basket update and 
MFP adjustment used to determine the applicable percentage increase for 
the IPPS. We also note that, in each proposed and final rule, we 
include a payment impact analysis.
    Comment: One commenter recognized that some of the proposed 
adjustments of the annual Medicare inpatient rate update are statutory 
requirements but, nevertheless, expressed disappointment in the small 
proposed increase of 0.3 percent after the various adjustments. The 
commenter further stated that, from the perspective of providers, 
Medicare is continually asking them to do more, such as report more 
data, provide care in different ways, and invest in more health care 
information technology. The commenter believed the continual small 
increases in Medicare payments suggest that Medicare is not interested 
in helping to pay for any of these improvements. The commenter stated 
that urban safety-net hospitals are continually stepping up to meet 
these challenges and urged CMS to join them in stepping up by showing a 
greater willingness to share the cost of doing so.
    Response: We acknowledge the commenter's concern regarding the 
increased reporting requirements coupled with the MFP adjustment under 
section 1886(b)(3)(B)(xi) of the Act and the 0.2 percentage point 
statutory adjustment under section 1886(b)(3)(B)(xii) of the Act. 
However, as the commenter mentioned, we are required to determine the 
applicable percentage increase based on the statutory requirements 
discussed above.
    Comment: One commenter stated that the increase to the operating 
inpatient rates of 1.1 percent omits the 2-percent automatic reductions 
or sequester required by the Budget Control Act of 2011 (Pub. L. 112-
25). The commenter stated the real payment update to acute care 
hospitals when all of the quality adjustments are considered is 
approximately -1.0 percent. The commenter further stated that hospitals 
will be receiving less for the same services in FY 2016 when compared 
to payment rates in FY 2015. The commenter recommended that the 2-
percent sequester reduction be included in the calculation of the 
annual percentage update because it is a real line item reduction to 
hospital IPPS payments. The commenter believed that the inclusion of 
the sequestration would lead to an accurate portrayal of the annual 
Medicare payment update to hospitals.
    Response: We appreciate the commenter's concerns. However, the 
sequestration reduction is not a statutory reduction to the applicable 
percentage increase (it is a 2-percent reduction to overall payments) 
and, therefore, is not included in the calculation of the applicable 
percentage increase.

[[Page 49510]]

    As stated in the proposed rule, we proposed to use more recently 
available data to determine the final market basket update and the 
multifactor productivity adjustment. We did not receive any public 
comments on this proposal. Therefore, for this final rule, we are 
finalizing a market basket update of 2.4 percent and an MFP adjustment 
of 0.5 percentage point based on more recently available data.
    Based on the most recent data available for this final rule as 
described above, we have determined four final applicable percentage 
increases to the standardized amount for FY 2016, as specified in the 
table below.

                           Final FY 2016 Applicable Percentage Increases for the IPPS
----------------------------------------------------------------------------------------------------------------
                                                     Hospital        Hospital      Hospital did    Hospital did
                                                     submitted       submitted      NOT submit      NOT submit
                                                   quality data    quality data    quality data    quality data
                     FY 2016                         and is a      and is NOT a      and is a      and is NOT a
                                                  meaningful EHR  meaningful EHR  meaningful EHR  meaningful EHR
                                                       user            user            user            user
----------------------------------------------------------------------------------------------------------------
Market Basket Rate[dash]of[dash]Increase........             2.4             2.4             2.4             2.4
Adjustment for Failure to Submit Quality Data                0.0             0.0            -0.6            -0.6
 under Section 1886(b)(3)(B)(viii) of the Act...
Adjustment for Failure to be a Meaningful EHR                0.0            -1.2             0.0            -1.2
 User under Section 1886(b)(3)(B)(ix) of the Act
MFP Adjustment under Section 1886(b)(3)(B)(xi)              -0.5            -0.5            -0.5            -0.5
 of the Act.....................................
Statutory Adjustment under Section                          -0.2            -0.2            -0.2            -0.2
 1886(b)(3)(B)(xii) of the Act..................
Final Applicable Percentage Increase Applied to              1.7             0.5             1.1            -0.1
 Standardized Amount............................
----------------------------------------------------------------------------------------------------------------

    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24478), we 
proposed to revise the existing regulations at 42 CFR 412.64(d) to 
reflect the current law for the FY 2016 update. Specifically, in 
accordance with section 1886(b)(3)(B) of the Act, we proposed to modify 
paragraph (vi) of Sec.  412.64(d)(1) to include the applicable 
percentage increase to the FY 2016 operating standardized amount. We 
did not receive any public comments on this proposal. Therefore, we are 
finalizing our proposed revisions to the regulations at Sec.  
412.64(d).
    Section 1886(b)(3)(B)(iv) of the Act provides that the applicable 
percentage increase to the hospital-specific rates for SCHs and MDHs 
equals the applicable percentage increase set forth in section 
1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all 
other hospitals subject to the IPPS). Therefore, the update to the 
hospital-specific rates for SCHs and MDHs also is subject to section 
1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and 
10319(a) of the Affordable Care Act. We note that section 205 of the 
Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 
114-10, enacted on April 16, 2015) extended the MDH program (which, 
under previous law, was to be in effect for discharges on or before 
March 31, 2015 only) for discharges occurring on or after April 1, 
2015, through FY 2017 (that is, for discharges occurring on or before 
September 30, 2017).
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24478), for FY 
2016, we proposed the following updates to the hospital-specific rates 
applicable to SCHs: An update of 1.9 percent for a hospital that 
submits quality data and is a meaningful EHR user; an update of 1.225 
percent for a hospital that fails to submit quality data and is a 
meaningful EHR user; an update of 0.55 percent for a hospital that 
submits quality data and is not a meaningful EHR user; and an update of 
-0.125 percent for a hospital that fails to submit quality data and is 
not a meaningful EHR user. We note that at the time of the development 
of the FY 2016 IPPS/LTCH PPS proposed rule, the MACRA had yet to be 
signed into law and therefore we did not explicitly address the update 
of the hospital-specific rates for FY 2016 for MDHs. However, as noted, 
under section 1886(b)(3)(B)(iv) of the Act, the update to the hospital-
specific rates is the same for both MDHs and SCHs and is equal to the 
applicable percentage increase set forth in section 1886(b)(3)(B)(i) of 
the Act (that is, the same update factor as for all other hospitals 
subject to the IPPS). As mentioned above, for the FY 2016 proposed 
rule, we used IGI's first quarter 2015 forecast (with historical data 
through fourth quarter 2014) of the FY 2010-based IPPS market basket 
update. Similarly, we used IGI's first quarter 2015 forecast of the MFP 
adjustment. In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24478), 
we proposed that if more recent data became subsequently available (for 
example, a more recent estimate of the market basket and the MFP 
adjustment), we would use such data, if appropriate, to determine the 
update for SCHs in this final rule. We did not receive any public 
comments with regard to this proposal and, therefore, are finalizing 
the proposal to determine the update to the hospital-specific rates for 
SCHs and MDHs in this final rule using the most recent data available.
    As discussed above, based on more recent data for IGI's second 
quarter 2015 forecast of the FY 2010-based IPPS market basket update 
with historical data through first quarter 2015, we estimate that the 
FY 2016 market basket update used to determine the update factor for 
this final rule for the hospital-specific rates of SCHs and MDHs is 2.4 
percent. Similarly, for this final rule, we used IGI's second quarter 
2015 forecast of the MFP adjustment, which is estimated at 0.5 
percentage point for FY 2016. Accordingly, we are finalizing the 
following updates to the hospital-specific rates applicable to SCHs and 
MDHs: An update of 1.7 percent for a hospital that submits quality data 
and is a meaningful EHR user; an update of 1.1 percent for a hospital 
that fails to submit quality data and is a meaningful EHR user; an 
update of 0.5 percent for a hospital that submits quality data and is 
not a meaningful EHR user; and an update of -0.1 percent for a hospital 
that fails to submit quality data and is not a meaningful EHR user.
2. FY 2016 Puerto Rico Hospital Update
    Puerto Rico hospitals are paid a blended rate for their inpatient 
operating costs based on 75 percent of the national standardized amount 
and 25 percent of the Puerto Rico-specific standardized amount. Section 
1886(d)(9)(C)(i) of the Act is the basis for determining the applicable 
percentage increase applied to the Puerto Rico-specific standardized 
amount. Section 401(c) of Public Law 108-173 amended section

[[Page 49511]]

1886(d)(9)(C)(i) of the Act, which states that, for discharges 
occurring in a fiscal year (beginning with FY 2004), the Secretary 
shall compute an average standardized amount for hospitals located in 
any area of Puerto Rico that is equal to the average standardized 
amount computed under subclause (I) for fiscal year 2003 for hospitals 
in a large urban area (or, beginning with FY 2005, for all hospitals in 
the previous fiscal year) increased by the applicable percentage 
increase under subsection (b)(3)(B) for the fiscal year involved. 
Therefore, the update to the Puerto Rico-specific operating 
standardized amount equals the applicable percentage increase set forth 
in section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) 
and 10319(a) of the Affordable Care Act (that is, the same update 
factor as for all other hospitals subject to the IPPS). Accordingly, in 
the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24479), we proposed an 
applicable percentage increase to the Puerto Rico-specific operating 
standardized amount of 1.9 percent for FY 2016. For the proposed rule, 
we used the first quarter 2015 forecast of the FY 2010-based IPPS 
market basket update with historical data through fourth quarter 2014. 
We proposed that if more recent data became subsequently available, we 
would use such data, if appropriate, to determine the final FY 2016 
applicable percentage increase for this final rule. We note that the 
provisions of section 1886(b)(3)(B)(viii) of the Act, which specify the 
adjustments to the applicable percentage increase for ``subsection 
(d)'' hospitals that do not submit quality data under the rules 
established by the Secretary, and the provisions of section 
1886(b)(3)(B)(ix) of the Act, which specify the adjustments to the 
applicable percentage increase for ``subsection (d)'' hospitals that 
are not meaningful EHR users, are not applicable to hospitals located 
in Puerto Rico.
    Similarly, in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24479), we used IGI's first quarter 2015 forecast of the MFP 
adjustment. We proposed that if more recent data became subsequently 
available, we would use such data, if appropriate, to determine the MFP 
adjustment for the final rule.
    We did not receive any public comments concerning our proposal. 
Therefore, using the most recent data available, for FY 2016, we are 
finalizing an applicable percentage increase to the Puerto Rico-
specific operating amount of 1.7 percent (which reflects a FY 2016 
estimate of the FY 2010-based IPPS market basket rate-of-increase of 
2.4 percent, less an MFP adjustment of 0.5 percentage point and less an 
additional reduction of 0.2 percentage point as required by section 
1886(b)(3)(B)(xii) of the Act). As we noted above, for the proposed 
rule, we used the first quarter 2015 forecast of the FY 2010-based IPPS 
market basket update and MFP with historical data through fourth 
quarter 2014. For this final rule, we used the most recent data 
available, which is IGI's second quarter 2015 forecast (with historical 
data through first quarter 2015).

B. Rural Referral Centers (RRCs): Annual Updates to Case-Mix Index and 
Discharge Criteria (Sec.  412.96)

    Under the authority of section 1886(d)(5)(C)(i) of the Act, the 
regulations at Sec.  412.96 set forth the criteria that a hospital must 
meet in order to qualify under the IPPS as a rural referral center 
(RRC). RRCs receive some special treatment under both the DSH payment 
adjustment and the criteria for geographic reclassification.
    Section 402 of Public Law 108-173 raised the DSH payment adjustment 
for RRCs such that they are not subject to the 12-percent cap on DSH 
payments that is applicable to other rural hospitals. RRCs also are not 
subject to the proximity criteria when applying for geographic 
reclassification. In addition, they do not have to meet the requirement 
that a hospital's average hourly wage must exceed, by a certain 
percentage, the average hourly wage of the labor market area in which 
the hospital is located.
    Section 4202(b) of Public Law 105-33 states, in part, that any 
hospital classified as an RRC by the Secretary for FY 1991 shall be 
classified as such an RRC for FY 1998 and each subsequent fiscal year. 
In the August 29, 1997 IPPS final rule with comment period (62 FR 
45999), CMS reinstated RRC status for all hospitals that lost that 
status due to triennial review or MGCRB reclassification. However, CMS 
did not reinstate the status of hospitals that lost RRC status because 
they were now urban for all purposes because of the OMB designation of 
their geographic area as urban. Subsequently, in the August 1, 2000 
IPPS final rule (65 FR 47089), we indicated that we were revisiting 
that decision. Specifically, we stated that we would permit hospitals 
that previously qualified as an RRC and lost their status due to OMB 
redesignation of the county in which they are located from rural to 
urban, to be reinstated as an RRC. Otherwise, a hospital seeking RRC 
status must satisfy all of the other applicable criteria. We use the 
definitions of ``urban'' and ``rural'' specified in Subpart D of 42 CFR 
part 412. One of the criteria under which a hospital may qualify as an 
RRC is to have 275 or more beds available for use (Sec.  
412.96(b)(1)(ii)). A rural hospital that does not meet the bed size 
requirement can qualify as an RRC if the hospital meets two mandatory 
prerequisites (a minimum case-mix index (CMI) and a minimum number of 
discharges), and at least one of three optional criteria (relating to 
specialty composition of medical staff, source of inpatients, or 
referral volume). (We refer readers to Sec.  412.96(c)(1) through 
(c)(5) and the September 30, 1988 Federal Register (53 FR 38513) for 
additional discussion.) With respect to the two mandatory 
prerequisites, a hospital may be classified as an RRC if--
     The hospital's CMI is at least equal to the lower of the 
median CMI for urban hospitals in its census region, excluding 
hospitals with approved teaching programs, or the median CMI for all 
urban hospitals nationally; and
     The hospital's number of discharges is at least 5,000 per 
year, or, if fewer, the median number of discharges for urban hospitals 
in the census region in which the hospital is located. The number of 
discharges criterion for an osteopathic hospital is at least 3,000 
discharges per year, as specified in section 1886(d)(5)(C)(i) of the 
Act.
1. Case-Mix Index (CMI)
    Section 412.96(c)(1) provides that CMS establish updated national 
and regional CMI values in each year's annual notice of prospective 
payment rates for purposes of determining RRC status. The methodology 
we used to determine the national and regional CMI values is set forth 
in the regulations at Sec.  412.96(c)(1)(ii). The national median CMI 
value for FY 2016 is based on the CMI values of all urban hospitals 
nationwide, and the regional median CMI values for FY 2016 are based on 
the CMI values of all urban hospitals within each census region, 
excluding those hospitals with approved teaching programs (that is, 
those hospitals that train residents in an approved GME program as 
provided in Sec.  413.75). These values are based on discharges 
occurring during FY 2014 (October 1, 2013 through September 30, 2014), 
and include bills posted to CMS' records through March 2015.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24479), we 
proposed that, in addition to meeting other criteria, if rural 
hospitals with fewer than 275 beds are to qualify for initial RRC 
status for cost reporting periods beginning on or after October 1,

[[Page 49512]]

2015, they must have a CMI value for FY 2014 that is at least--
     1.6075; or
     The median CMI value (not transfer-adjusted) for urban 
hospitals (excluding hospitals with approved teaching programs as 
identified in Sec.  413.75) calculated by CMS for the census region in 
which the hospital is located. (We refer readers to the table set forth 
in the FY 2016 IPPS/LTCH PPS proposed rule at 80 FR 24480.)
    The final CMI values for FY 2016 are based on the latest available 
data (FY 2014 bills received through March 2015). In addition to 
meeting other criteria, if rural hospitals with fewer than 275 beds are 
to qualify for initial RRC status for cost reporting periods beginning 
on or after October 1, 2015, they must have a CMI value for FY 2014 
that is at least--
     1.6082; or
     The median CMI value (not transfer-adjusted) for urban 
hospitals (excluding hospitals with approved teaching programs as 
identified in Sec.  413.75) calculated by CMS for the census region in 
which the hospital is located.
    The final median CMI values by region are set forth in the 
following table.

------------------------------------------------------------------------
                                                               Case-mix
                           Region                            index value
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)....................       1.3737
2. Middle Atlantic (PA, NJ, NY)............................       1.4500
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).....       1.5035
4. East North Central (IL, IN, MI, OH, WI).................       1.5104
5. East South Central (AL, KY, MS, TN).....................       1.4184
6. West North Central (IA, KS, MN, MO, NE, ND, SD).........       1.5855
7. West South Central (AR, LA, OK, TX).....................       1.6276
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)...............       1.7075
9. Pacific (AK, CA, HI, OR, WA)............................       1.6168
------------------------------------------------------------------------

    A hospital seeking to qualify as an RRC should obtain its hospital-
specific CMI value (not transfer-adjusted) from its MAC. Data are 
available on the Provider Statistical and Reimbursement (PS&R) System. 
In keeping with our policy on discharges, the CMI values are computed 
based on all Medicare patient discharges subject to the IPPS MS-DRG-
based payment.
2. Discharges
    Section 412.96(c)(2)(i) provides that CMS set forth the national 
and regional numbers of discharges criteria in each year's annual 
notice of prospective payment rates for purposes of determining RRC 
status. As specified in section 1886(d)(5)(C)(ii) of the Act, the 
national standard is set at 5,000 discharges. In the FY 2016 IPPS/LTCH 
PPS proposed rule (80 FR 24480), for FY 2016, we proposed to update the 
regional standards based on discharges for urban hospitals' cost 
reporting periods that began during FY 2013 (that is, October 1, 2012 
through September 30, 2013), which are the latest cost report data 
available at the time the proposed rule was developed.
    We proposed that, in addition to meeting other criteria, a 
hospital, if it is to qualify for initial RRC status for cost reporting 
periods beginning on or after October 1, 2015, must have, as the number 
of discharges for its cost reporting period that began during FY 2013, 
at least--
     5,000 (3,000 for an osteopathic hospital); or
     The median number of discharges for urban hospitals in the 
census region in which the hospital is located. (We refer readers to 
the table set forth in the FY 2016 IPPS/LTCH PPS proposed rule at 80 FR 
24480.)
    Based on the latest discharge data available at this time (that is, 
based on FY 2013 cost report data), the final median number of 
discharges for urban hospitals by census region are set forth in the 
following table.

------------------------------------------------------------------------
                                                              Number of
                           Region                             discharges
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)....................        7,462
2. Middle Atlantic (PA, NJ, NY)............................       10,594
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).....       10,233
4. East North Central (IL, IN, MI, OH, WI).................        7,992
5. East South Central (AL, KY, MS, TN).....................        7,672
6. West North Central (IA, KS, MN, MO, NE, ND, SD).........        7,857
7. West South Central (AR, LA, OK, TX).....................        5,490
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)...............        8,046
9. Pacific (AK, CA, HI, OR, WA)............................        8,797
------------------------------------------------------------------------

    We note that the median number of discharges for hospitals in each 
census region is greater than the national standard of 5,000 
discharges. Therefore, under this final rule, 5,000 discharges is the 
minimum criterion for all hospitals, except for osteopathic hospitals 
for which the minimum criterion is 3,000 discharges.

C. Indirect Medical Education (IME) Payment Adjustment Factor for FY 
2016 (Sec.  412.105)

    Under the IPPS, an additional payment amount is made to hospitals 
with residents in an approved graduate medical education (GME) program 
in order to reflect the higher indirect patient care costs of teaching 
hospitals relative to nonteaching hospitals. The payment amount is 
determined by use of a statutorily specified adjustment factor. The 
regulations regarding the calculation of this additional payment, known 
as the IME adjustment, are located at Sec.  412.105. We refer readers 
to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51680) for a full 
discussion of the IME adjustment and IME adjustment factor. Section 
1886(d)(5)(B)(ii)(XII) of the Act provides that, for discharges 
occurring during FY 2008 and fiscal years thereafter, the IME formula 
multiplier is 1.35. Accordingly, for discharges occurring during FY 
2016, the formula multiplier is 1.35. We estimate that application of 
this formula multiplier for the FY 2016 IME adjustment will result in 
an increase in IPPS payment of 5.5 percent for every approximately 10 
percent increase in the hospital's resident to bed ratio.
    We did not receive any public comments on this provision. As noted 
above, the IME formula multiplier is specified in statute and is 1.35 
for FY 2016.

D. FY 2016 Payment Adjustment for Medicare Disproportionate Share 
Hospitals (DSHs) (Sec.  412.106)

1. Background
    Section 1886(d)(5)(F) of the Act provides for additional Medicare 
payments to subsection (d) hospitals that serve a significantly 
disproportionate number of low-income patients. The Act specifies two 
methods by which a hospital may qualify for the Medicare 
disproportionate share hospital (DSH) adjustment. Under the first 
method, hospitals that are located in an urban area and have 100 or 
more beds may receive a Medicare DSH payment adjustment if the hospital 
can demonstrate that, during its cost reporting period, more than 30 
percent of its net inpatient care revenues are derived from State and 
local government payments for care furnished to needy patients with low 
incomes. This method is commonly referred to as the ``Pickle method.'' 
The second method for qualifying for the DSH payment adjustment, which 
is the most common, is based on a complex statutory formula under which 
the DSH payment adjustment is based on the

[[Page 49513]]

hospital's geographic designation, the number of beds in the hospital, 
and the level of the hospital's disproportionate patient percentage 
(DPP). A hospital's DPP is the sum of two fractions: The ``Medicare 
fraction'' and the ``Medicaid fraction.'' The Medicare fraction (also 
known as the ``SSI fraction'' or ``SSI ratio'') is computed by dividing 
the number of the hospital's inpatient days that are furnished to 
patients who were entitled to both Medicare Part A and Supplemental 
Security Income (SSI) benefits by the hospital's total number of 
patient days furnished to patients entitled to benefits under Medicare 
Part A. The Medicaid fraction is computed by dividing the hospital's 
number of inpatient days furnished to patients who, for such days, were 
eligible for Medicaid, but were not entitled to benefits under Medicare 
Part A, by the hospital's total number of inpatient days in the same 
period.
    Because the DSH payment adjustment is part of the IPPS, the DSH 
statutory references (under section 1886(d)(5)(F) of the Act) to 
``days'' apply only to hospital acute care inpatient days. Regulations 
located at Sec.  412.106 govern the Medicare DSH payment adjustment and 
specify how the DPP is calculated as well as how beds and patient days 
are counted in determining the Medicare DSH payment adjustment. Under 
Sec.  412.106(a)(1)(i), the number of beds for the Medicare DSH payment 
adjustment is determined in accordance with bed counting rules for the 
IME adjustment under Sec.  412.105(b).
2. Impact on Medicare DSH Payment Adjustment of the Continued 
Implementation of New OMB Labor Market Area Delineations
    As discussed in section III.G. of the preamble of this final rule, 
in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951) we implemented 
the revised OMB labor market area delineations (which are based on 2010 
Decennial Census data) for the FY 2015 wage index. (In this final rule, 
we refer to these revised OMB labor market area delineations as the 
``new OMB delineations.'') We stated that this implementation would 
have an impact on the calculation of Medicare DSH payments to certain 
hospitals. Hospitals that are designated as rural with less than 500 
beds and that are not rural referral centers (RRCs) are subject to a 
maximum DSH payment adjustment of 12 percent. Accordingly, hospitals 
with less than 500 beds that were in urban counties that became rural 
when we adopted the new OMB delineations, and that did not become RRCs, 
are subject to a maximum DSH payment adjustment of 12 percent. (We note 
that urban hospitals are only subject to a maximum DSH payment 
adjustment of 12 percent if they have less than 100 beds.)
    Under the regulation at 42 CFR 412.102, a hospital located in an 
area that is reclassified from urban to rural, as defined in the 
regulations, may receive an adjustment to its rural Federal payment 
amount for operating costs for 2 successive fiscal years. Specifically, 
the regulations state that, in the first year after a hospital loses 
urban status, the hospital will receive an additional payment that 
equals two-thirds of the difference between the DSH payments as 
applicable to the hospital before its redesignation from urban to rural 
and the DSH payments applicable to the hospital subsequent to its 
redesignation from urban to rural. In the second year after a hospital 
loses urban status, the hospital will receive an additional payment 
that equals one-third of the difference between the DSH payments 
applicable to the hospital before its redesignation from urban to rural 
and the DSH payments otherwise applicable to the hospital subsequent to 
its redesignation from urban to rural.
    For the purposes of ratesetting, calculating budget neutrality, and 
modeling payment impacts for this FY 2016 final rule, for any hospital 
that was previously urban but changed to rural status in FY 2015 as a 
result of the adoption of the new OMB labor market area delineations, 
in the FY 2016 IPPS/LTCH PPS proposed rule, we proposed to model its 
DSH payments such that the payment equals the amount of the rural DSH 
payments plus one-third of the difference between the urban DSH 
payments and the rural DSH payments.
    We did not receive any public comments on our proposal.
3. Payment Adjustment Methodology for Medicare Disproportionate Share 
Hospitals (DSHs) Under Section 3133 of the Affordable Care Act
a. General Discussion
    Section 3133 of the Patient Protection and Affordable Care Act, as 
amended by section 10316 of the same Act and section 1104 of the Health 
Care and Education Reconciliation Act (Pub. L. 111-152), added a new 
section 1886(r) to the Act that modifies the methodology for computing 
the Medicare DSH payment adjustment beginning in FY 2014. For purposes 
of this final rule, we refer to these provisions collectively as 
section 3133 of the Affordable Care Act.
    Medicare DSH payments are calculated under a statutory formula that 
considers the hospital's Medicare utilization attributable to 
beneficiaries who also receive Supplemental Security Income (SSI) 
benefits, and the hospital's Medicaid utilization. Beginning with 
discharges in FY 2014, hospitals that qualify for Medicare DSH payments 
under section 1886(d)(5)(F) of the Act receive 25 percent of the amount 
they previously would have received under the statutory formula for 
Medicare DSH payments. This provision applies equally to hospitals that 
qualify for DSH payments under section 1886(d)(5)(F)(i)(I) of the Act 
and those hospitals that qualify under the Pickle method under section 
1886(d)(5)(F)(i)(II) of the Act.
    The remaining amount, equal to an estimate of 75 percent of what 
otherwise would have been paid as Medicare DSH payments, reduced to 
reflect changes in the percentage of individuals under age 65 who are 
uninsured, is available to make additional payments to each hospital 
that qualifies for Medicare DSH payments and that has uncompensated 
care. The payments to each hospital for a fiscal year are based on the 
hospital's amount of uncompensated care for a given time period 
relative to the total amount of uncompensated care for that same time 
period reported by all hospitals that receive Medicare DSH payments for 
that fiscal year.
    As provided by section 3133 of the Affordable Care Act, section 
1886(r) of the Act requires that, for FY 2014 and each subsequent 
fiscal year, a subsection (d) hospital that would otherwise receive a 
disproportionate share hospital payment made under section 
1886(d)(5)(F) of the Act receives two separately calculated payments. 
Specifically, section 1886(r)(1) of the Act provides that the Secretary 
shall pay to such a subsection (d) hospital (including a Pickle 
hospital) 25 percent of the amount the hospital would have received 
under section 1886(d)(5)(F) of the Act for DSH payments, which 
represents the empirically justified amount for such payment, as 
determined by the Medicare Payment Advisory Commission in its March 
2007 Report to the Congress. We refer to this payment as the 
``empirically justified Medicare DSH payment.''
    In addition to this empirically justified Medicare DSH payment, 
section 1886(r)(2) of the Act provides that, for FY 2014 and each 
subsequent fiscal year, the Secretary shall pay to such subsection (d) 
hospital an additional amount equal to the product of three factors. 
The first factor is the difference between the aggregate amount of 
payments that would be made to subsection (d) hospitals under section 
1886(d)(5)(F) of the Act if

[[Page 49514]]

subsection (r) did not apply and the aggregate amount of payments that 
are made to subsection (d) hospitals under section 1886(r)(1) of the 
Act for each fiscal year. Therefore, this factor amounts to 75 percent 
of the payments that would otherwise be made under section 
1886(d)(5)(F) of the Act.
    The second factor is, for FYs 2014 through 2017, 1 minus the 
percent change in the percent of individuals under the age of 65 who 
are uninsured, determined by comparing the percent of such individuals 
who are uninsured in 2013, the last year before coverage expansion 
under the Affordable Care Act (as calculated by the Secretary based on 
the most recent estimates available from the Director of the 
Congressional Budget Office before a vote in either House on the Health 
Care and Education Reconciliation Act of 2010 that, if determined in 
the affirmative, would clear such Act for enrollment), minus 0.1 
percentage point for FY 2014, and minus 0.2 percentage point for FYs 
2015 through 2017. For FYs 2014 through 2017, the baseline for the 
estimate of the change in uninsurance is fixed by the most recent 
estimate of the Congressional Budget Office before the final vote on 
the Health Care and Education Reconciliation Act of 2010, which is 
contained in a March 20, 2010 letter from the Director of the 
Congressional Budget Office to the Speaker of the House. (The March 20, 
2010 letter is available for viewing on the following Web site: http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/113xx/doc11379/amendreconprop.pdf.)
    For FY 2018 and subsequent years, the second factor is 1 minus the 
percent change in the percent of individuals who are uninsured, as 
determined by comparing the percent of individuals who are uninsured in 
2013 (as estimated by the Secretary, based on data from the Census 
Bureau or other sources the Secretary determines appropriate, and 
certified by the Chief Actuary of CMS), and the percent of individuals 
who are uninsured in the most recent period for which data are 
available (as so estimated and certified), minus 0.2 percentage point 
for FYs 2018 and 2019. Therefore, for FY 2018 and subsequent years, the 
statute provides some greater flexibility in the choice of the data 
sources to be used for the estimate of the change in the percent of 
uninsured individuals.
    The third factor is a percent that, for each subsection (d) 
hospital, represents the quotient of the amount of uncompensated care 
for such hospital for a period selected by the Secretary (as estimated 
by the Secretary, based on appropriate data), including the use of 
alternative data where the Secretary determines that alternative data 
is available which is a better proxy for the costs of subsection (d) 
hospitals for treating the uninsured, and the aggregate amount of 
uncompensated care for all subsection (d) hospitals that receive a 
payment under section 1886(r) of the Act. Therefore, this third factor 
represents a hospital's uncompensated care amount for a given time 
period relative to the uncompensated care amount for that same time 
period for all hospitals that receive Medicare DSH payments in that 
fiscal year, expressed as a percent.
    For each hospital, the product of these three factors represents 
its additional payment for uncompensated care for the applicable fiscal 
year. We refer to the additional payment determined by these factors as 
the ``uncompensated care payment.''
    Section 1886(r) of the Act applies to FY 2014 and each subsequent 
fiscal year. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50620 
through 50647) and the FY 2014 IPPS interim final rule with comment 
period (78 FR 61191 through 61197), we set forth our policies for 
implementing the required changes to the DSH payment methodology made 
by section 3133 of the Affordable Care Act for FY 2014. In those rules, 
we noted that, because section 1886(r) of the Act modifies the payment 
required under section 1886(d)(5)(F) of the Act, it affects only the 
DSH payment under the operating IPPS. It does not revise or replace the 
capital IPPS DSH payment provided under the regulations at 42 CFR part 
412, subpart M, which were established through the exercise of the 
Secretary's discretion in implementing the capital IPPS under section 
1886(g)(1)(A) of the Act.
    Finally, section 1886(r)(3) of the Act provides that there shall be 
no administrative or judicial review under section 1869, section 1878, 
or otherwise of any estimate of the Secretary for purposes of 
determining the factors described in section 1886(r)(2) of the Act or 
of any period selected by the Secretary for the purpose of determining 
those factors. Therefore, there is no administrative or judicial review 
of the estimates developed for purposes of applying the three factors 
used to determine uncompensated care payments, or the periods selected 
in order to develop such estimates.
b. Eligibility for Empirically Justified Medicare DSH Payments and 
Uncompensated Care Payments
    As indicated earlier, the payment methodology under section 3133 of 
the Affordable Care Act applies to ``subsection (d) hospitals'' that 
would otherwise receive a DSH payment made under section 1886(d)(5)(F) 
of the Act. Therefore, hospitals must receive empirically justified 
Medicare DSH payments in a fiscal year in order to receive an 
additional Medicare uncompensated care payment for that year. 
Specifically, section 1886(r)(2) of the Act states that, in addition to 
the payment made to a subsection (d) hospital under section 1886(r)(1) 
of the Act, the Secretary shall pay to such subsection (d) hospitals an 
additional amount. Because section 1886(r)(1) of the Act refers to 
empirically justified Medicare DSH payments, the additional payment 
under section 1886(r)(2) of the Act is limited to hospitals that 
receive empirically justified Medicare DSH payments in accordance with 
section 1886(r)(1) of the Act for the applicable fiscal year.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY 
2014 IPPS interim final rule with comment period (78 FR 61193), we 
provided that hospitals that are not eligible to receive empirically 
justified Medicare DSH payments in a fiscal year will not receive 
uncompensated care payments for that year. We also specified that we 
would make a determination concerning eligibility for interim 
uncompensated care payments based on each hospital's estimated DSH 
status for the applicable fiscal year (using the most recent data that 
are available). We indicated that our final determination on the 
hospital's eligibility for uncompensated care payments would be based 
on the hospital's actual DSH status at cost report settlement for that 
payment year.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50006), we specified our policies 
for several specific classes of hospitals within the scope of section 
1886(r) of the Act. We refer readers to those two final rules for a 
detailed discussion of our policies. In summary, we specified the 
following:
     Subsection (d) Puerto Rico hospitals that are eligible for 
DSH payments also are eligible to receive empirically justified 
Medicare DSH payments and uncompensated care payments under the new 
payment methodology (78 FR 50623 and 79 FR 50006).
     Maryland hospitals are not eligible to receive empirically 
justified Medicare DSH payments and uncompensated care payments under 
the payment methodology of section 1886(r) of the Act because they are 
not paid under the IPPS. As discussed in the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 50007),

[[Page 49515]]

effective January 1, 2014, the State of Maryland elected to no longer 
have Medicare pay Maryland hospitals in accordance with section 
1814(b)(3) of the Act and entered into an agreement with CMS that 
Maryland hospitals will be paid under the Maryland All-Payer Model. 
However, under the Maryland All-Payer Model, Maryland hospitals still 
are not paid under the IPPS. Therefore, they remain ineligible to 
receive empirically justified Medicare DSH payments or uncompensated 
care payments under section 1886(r) of the Act.
     SCHs that are paid under their hospital-specified rate are 
not eligible for Medicare DSH payments. SCHs that are paid under the 
IPPS Federal rate receive interim payments based on what we estimate 
and project their DSH status to be prior to the beginning of the 
Federal fiscal year (based on the best available data at that time) 
subject to settlement through the cost report, and if they receive 
interim empirically justified Medicare DSH payments in a fiscal year, 
they also will receive interim uncompensated care payments for that 
fiscal year on a per discharge basis, subject as well to settlement 
through the cost report. Final eligibility determinations will be made 
at the end of the cost reporting period at settlement, and both interim 
empirically justified Medicare DSH payments and uncompensated care 
payments will be adjusted accordingly (78 FR 50624 and 79 FR 50007).
     MDHs are paid based on the IPPS Federal rate or, if 
higher, the IPPS Federal rate plus 75 percent of the amount by which 
the Federal rate is exceeded by the updated hospital-specific rate from 
certain specified base years (76 FR 51684). The IPPS Federal rate used 
in the MDH payment methodology is the same IPPS Federal rate that is 
used in the SCH payment methodology. We note that at the time of the 
development of the FY 2016 IPPS/LTCH PPS proposed rule, the MDH Program 
was to be in effect for discharges on or before March 31, 2015, only. 
Section 205 of the Medicare Access and CHIP Reauthorization Act of 2015 
(MACRA), Public Law 114-10, enacted April 16, 2015, extended the MDH 
program for discharges on or after April 1, 2015, through September 30, 
2017. (We refer readers to the interim final rule with comment period 
at section IV.L.3. of the preamble of this document for a full 
discussion of the extension of the MDH Program.) Because MDHs are paid 
based on the IPPS Federal rate, for FY 2016, MDHs will continue to be 
eligible to receive Medicare DSH payments and uncompensated care 
payments if their disproportionate patient percentage is at least 15 
percent. We will apply the same process to determine MDH eligibility 
for Medicare DSH and uncompensated care payments, as we do for all 
other IPPS hospitals, through September 30, 2017. Moreover, we will 
continue to make a determination concerning eligibility for interim 
uncompensated care payments based on each hospital's estimated DSH 
status for the applicable fiscal year (using the most recent data that 
are available). Our final determination on the hospital's eligibility 
for uncompensated care payments will be based on the hospital's actual 
DSH status at cost report settlement for that payment year. In 
addition, as we do for all IPPS hospitals, we calculate a numerator for 
Factor 3 for all MDHs, regardless of whether they are projected to be 
eligible for Medicare DSH payments during the fiscal year, but the 
denominator for Factor 3 will be based on the uncompensated care data 
from the hospitals that we have projected to be eligible for Medicare 
DSH payments during the fiscal year.
     IPPS hospitals that have elected to participate in the 
Bundled Payments for Care Improvement initiative continue to be paid 
under the IPPS (77 FR 53342) and, therefore, are eligible to receive 
empirically justified Medicare DSH payments and uncompensated care 
payments (78 FR 50625 and 79 FR 50008).
     Hospitals participating in the Rural Community Hospital 
Demonstration Program under section 410A of the Medicare Modernization 
Act do not receive DSH payments and, therefore, are excluded from 
receiving empirically justified Medicare DSH payments and uncompensated 
care payments under the new DSH payment methodology (78 FR 50625 and 79 
FR 50008). There are 17 hospitals currently participating in the 
demonstration.
c. Empirically Justified Medicare DSH Payments
    As we have discussed earlier, section 1886(r)(1) of the Act 
requires the Secretary to pay 25 percent of the amount of the DSH 
payment that would otherwise be made under section 1886(d)(5)(F) of the 
Act to a subsection (d) hospital. Because section 1886(r)(1) of the Act 
merely requires the program to pay a designated percentage of these 
payments, without revising the criteria governing eligibility for DSH 
payments or the underlying payment methodology, we stated in the FY 
2014 IPPS/LTCH PPS final rule that we did not believe that it was 
necessary to develop any new operational mechanisms for making such 
payments. Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50626), we implemented this provision by advising MACs to simply adjust 
the interim claim payments to the requisite 25 percent of what would 
have otherwise been paid. We also made corresponding changes to the 
hospital cost report so that these empirically justified Medicare DSH 
payments can be settled at the appropriate level at the time of cost 
report settlement. We provided more detailed operational instructions 
and cost report instructions following issuance of the FY 2014 IPPS/
LTCH PPS final rule that are available on the CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2014-Transmittals-Items/R5P240.html.
d. Uncompensated Care Payments
    As we have discussed earlier, section 1886(r)(2) of the Act 
provides that, for each eligible hospital in FY 2014 and subsequent 
years, the uncompensated care payment is the product of three factors. 
These three factors represent our estimate of 75 percent of the amount 
of Medicare DSH payments that would otherwise have been paid, an 
adjustment to this amount for the percent change in the national rate 
of uninsurance compared to the rate of uninsurance in 2013, and each 
eligible hospital's estimated uncompensated care amount relative to the 
estimated uncompensated care amount for all eligible hospitals. Below 
we discuss the data sources and methodologies for computing each of 
these factors, our final policies for FY 2014 and FY 2015, and our 
proposed and final policies for FY 2016.
(1) Calculation of Factor 1 for FY 2016
    Section 1886(r)(2)(A) of the Act establishes Factor 1 in the 
calculation of the uncompensated care payment. Section 1886(r)(2)(A) of 
the Act states that it is a factor equal to the difference between (i) 
the aggregate amount of payments that would be made to subsection (d) 
hospitals under section 1886(d)(5)(F) if this section did not apply for 
such fiscal year (as estimated by the Secretary); and (ii) the 
aggregate amount of payments that are made to subsection (d) hospitals 
under section 1886(r)(1) of the Act for such fiscal year (as so 
estimated). Therefore, section 1886(r)(2)(A)(i) of the Act represents 
the estimated Medicare DSH payment that would have been made under 
section 1886(d)(5)(F) of the Act if section 1886(r) of the Act did not 
apply for such fiscal year. Under a prospective payment system, we 
would not know

[[Page 49516]]

the precise aggregate Medicare DSH payment amount that would be paid 
for a Federal fiscal year until cost report settlement for all IPPS 
hospitals is completed, which occurs several years after the end of the 
Federal fiscal year. Therefore, section 1886(r)(2)(A)(i) of the Act 
provides authority to estimate this amount, by specifying that, for 
each fiscal year to which the provision applies, such amount is to be 
``estimated by the Secretary.'' Similarly, section 1886(r)(2)(A)(ii) of 
the Act represents the estimated empirically justified Medicare DSH 
payments to be made in a fiscal year, as prescribed under section 
1886(r)(1) of the Act. Again, section 1886(r)(2)(A)(ii) of the Act 
provides authority to estimate this amount.
    Therefore, Factor 1 is the difference between our estimates of: (1) 
The amount that would have been paid in Medicare DSH payments for the 
fiscal year, in the absence of the new payment provision; and (2) the 
amount of empirically justified Medicare DSH payments that are made for 
the fiscal year, which takes into account the requirement to pay 25 
percent of what would have otherwise been paid under section 
1886(d)(5)(F) of the Act. In other words, this factor represents our 
estimate of 75 percent (100 percent minus 25 percent) of our estimate 
of Medicare DSH payments that would otherwise be made, in the absence 
of section 1886(r) of the Act, for the fiscal year.
    As we did for FY 2015, in order to determine Factor 1 in the 
uncompensated care payment formula for FY 2016, in the FY 2016 IPPS/
LTCH PPS proposed rule (80 FR 24484), we proposed to continue the 
policy established in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50628 
through 50630) and in the FY 2014 IPPS interim final rule with comment 
period (78 FR 61194). Under this policy, Factor 1 is determined by 
developing estimates of both the aggregate amount of Medicare DSH 
payments that would be made in the absence of section 1886(r)(1) of the 
Act and the aggregate amount of empirically justified Medicare DSH 
payments to hospitals under section 1886(r)(1) of the Act through 
rulemaking. These estimates will not be revised or updated after we 
know the final Medicare DSH payments for FY 2016.
    Therefore, in order to determine the two elements of Factor 1 
(Medicare DSH payments prior to the application of section 1886(r)(1) 
of the Act, and empirically justified Medicare DSH payments after 
application of section 1886(r)(1) of the Act), in FYs 2014 and 2015, we 
used the most recently available projections of Medicare DSH payments 
for the applicable fiscal year, as calculated by CMS' Office of the 
Actuary using the most recently filed Medicare hospital cost report 
with Medicare DSH payment information and the most recent Medicare DSH 
patient percentages and Medicare DSH payment adjustments provided in 
the IPPS Impact File.
    For purposes of calculating Factor 1 and modeling the impact of 
this provision for the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24484), we used the Office of the Actuary's February 2015 Medicare DSH 
estimates, which are based on data from the December 2014 update of the 
Medicare Hospital Cost Report Information System (HCRIS), 2012 cost 
report data provided to CMS by IHS hospitals, and the FY 2015 IPPS/LTCH 
PPS final rule IPPS Impact File, published in conjunction with the 
publication of the FY 2015 IPPS/LTCH PPS final rule. Because SCHs that 
are projected to be paid under their hospital-specific rate are not 
subject to the provisions of section 1886(r) of the Act, these 
hospitals were excluded from the February 2015 Medicare DSH estimates. 
Furthermore, because section 1886(r) of the Act specifies that the 
uncompensated care payment is in addition to the empirically justified 
DSH payment (or 25 percent of DSH payments that would be made without 
regard to section 1886(r)), Maryland hospitals participating in the 
Maryland All-Payer Model and hospitals participating in the Rural 
Community Hospital Demonstration that do not receive DSH payments also 
are excluded from the Office of the Actuary's Medicare DSH estimates.
    Using the data sources discussed above, the Office of the Actuary 
applies inflation updates and assumptions for future changes in 
utilization and case-mix to estimate Medicare DSH payments for the 
upcoming fiscal year. The February 2015 Office of the Actuary estimate 
for proposed Medicare DSH payments for FY 2016, without regard to the 
application of section 1886(r)(1) of the Act, was approximately $13.338 
billion. Therefore, based on the February 2015 estimate, the estimate 
for empirically justified Medicare DSH payments for FY 2016, with the 
application of section 1886(r)(1) of the Act, was $3.335 billion (25 
percent of the total amount estimated). Under Sec.  412.106(g)(1)(i) of 
the regulations, Factor 1 is the difference between these two estimates 
of the Office of the Actuary. Therefore, in the proposed rule, we 
proposed that Factor 1 for FY 2016 would be $10,003,425,327.39 
($13,337,900,436.52 minus $3,334,475,109.13). We invited public 
comments on our proposed calculation of Factor 1 for FY 2016.
    Comment: A number of commenters supported CMS' methodology for 
determining Factor 1 and the proposed Factor 1 for FY 2016.
    Response: We appreciate the commenters' support.
    Comment: A number of commenters asked for greater transparency 
around the methodology used by the Office of the Actuary to estimate 
aggregate DSH payments that would have been paid absent implementation 
of the Affordable Care Act, particularly transparency in the 
calculation of estimated DSH payments for purposes of Factor 1. The 
commenters urged CMS to clarify the methodology used to make these 
projections and to provide additional information related to them. The 
commenters also requested that this information be provided in advance 
of publication of the IPPS final rule and, in the future, in proposed 
rules each year. The commenters stated that hospitals do not have 
sufficient information to understand or replicate the relevant 
projections and estimates for Factor 1.
    Many commenters highlighted that one of the assumptions (the 
assumption shown in ``Other'' column) used in determining the proposed 
Factor 1 for FY 2016 has a substantial negative effect on hospitals, 
and requested more explanation for that assumption as well as a 
reassessment of the assumption. They pointed out that this assumption 
had previously, according to CMS, included the impact of only IPPS 
discharges and the impact of DSH payments increasing or decreasing at a 
different rate than other IPPS payments. The commenters expressed 
concern that the ``Other'' column changed from 1.0355 in the FY 2015 
IPPS/LTCH PPS final rule to 0.9993 in the FY 2016 IPPS/LTCH PPS 
proposed rule. The commenters noted that the explanation offered in the 
FY 2015 IPPS/LTCH PPS final rule discussed Medicaid enrollment and 
utilization patterns and that this did not appear to explain the change 
in the variable in the FY 2016 IPPS/LTCH PPS proposed rule. Some 
commenters pointed out that, to some extent, the ``Other'' assumption 
is affected by the ``Discharge'' assumption, and that they believed 
discharges are decreasing faster than what was taken into consideration 
in the FY 2015 IPPS/LTCH PPS final rule. In other words, they believed 
that the trend information used to determine the ``Discharge'' 
assumption may be resulting in a lower number for the ``Other'' 
assumption.

[[Page 49517]]

One commenter stated that CMS does not disclose how discharge data are 
adjusted by a completion factor. One commenter also pointed out that 
the values for the assumptions regarding discharges and case-mix across 
FY 2014, FY 2015, and FY 2016 are relatively similar, while the value 
for the ``Other'' assumption has changed. The commenters requested that 
CMS also share detailed calculations of the discharge and case-mix 
values.
    Several commenters believed that the ``Other'' assumption should 
reflect the changes in DSH payments that would result from the Medicaid 
and CHIP expansion. Other commenters asked CMS to explain how the 
Medicaid and CHIP expansion is accounted for in the Factor 1 estimate. 
The commenters stated that the additional Medicaid and CHIP enrollment 
estimated for 2014 through 2016 by CBO in a February 2014 report 
represents a 32-percent increase in this population. The commenters 
stated that they had reviewed other data, including the ASPE Issue 
Brief entitled ``Impact of Insurance Expansion on Hospital 
Uncompensated Care Costs in 2014,'' that indicate that Medicaid 
enrollment and utilization have increased. The commenters believed that 
Factor 1 is too low because it does not take this increase into 
consideration appropriately. They noted that CMS has responded to 
similar comments in prior rulemaking by stating that ``the increase due 
to Medicaid expansion is not as large as commenters contended due to 
the actuarial assumption that the new enrollees are healthier than the 
average Medicaid recipient, and, therefore, use fewer hospital 
services.'' However, the commenters asserted that CMS provided no 
support for this contention and that CMS should have enrollment and/or 
utilization information from Medicaid expansion programs. Furthermore, 
the commenters stated that they believed CMS did not take into 
consideration any one-time increase in utilization resulting from the 
new Medicaid enrollment and the previously unmet health care needs of 
that population. These commenters believed that, in the early years of 
Medicaid expansion, such an increase in utilization would be more 
logical than CMS' assertion that new Medicaid enrollees would use fewer 
hospital services.
    Several commenters believed that it would be appropriate to adjust 
the ``Other'' assumption in a manner that supports safety-net hospitals 
in order to reflect the growing number of hospitals that are becoming 
eligible for DSH. Based on this belief, the commenters expressed 
concern about the sustainability of continued reductions to aggregate 
uncompensated care payments. The commenters noted that, as insurance 
coverage increases, the aggregate amount available for uncompensated 
care payments will decline and thus reduce the amount of payments to be 
distributed to help cover the cost of uncompensated care. The 
commenters further noted that hospitals in States that have not 
expanded Medicaid are not experiencing a decrease in uncompensated care 
costs and that reductions in Medicare DSH payments are detrimental to 
these hospitals. Some commenters noted the reductions in payments they 
would experience due to CMS' uncompensated care proposal in totality.
    Several commenters believed there was incomplete information in the 
FY 2016 IPPS/LTCH PPS proposed rule regarding the ``completion factor'' 
and requested further detail. One commenter believed that the growth 
rates in DSH payments are higher than the current data indicate because 
the completion factor for the cost reports in HCRIS for 2012 and 2013 
is low. Specifically, the commenter shared an analysis that showed that 
approximately one-half of the 2012 cost reports contained adjusted 
Medicaid days data and approximately one-fifth of the 2013 cost reports 
contained adjusted Medicaid days data. The commenter showed the results 
of a longitudinal analysis between December 2012 and March 2015 using 
HCRIS data that demonstrated that Medicaid days increased between when 
2010, 2011, and 2012 cost reports were filed and March 2015, regardless 
of the status of the cost report settlement process (for example, 
amended, reopened, settled without audit, or settled with audit). The 
range of increase shown by the commenter's analysis was between 0.3 
percent and 3.7 percent. The commenter stated that in its longitudinal 
analysis of HCRIS data between December 2012 and March 2015, it further 
examined DSH payments reported in HCRIS and found that payments 
increased on average 1.1 percent over the 2-year period.
    One commenter requested that CMS use the most recent 2012 cost 
report data in its estimate of Factor 1. The commenter stated that 
problems in obtaining accurate data for Medicaid days can lead to 
underreporting in the initial submission of the Medicare cost report 
and that this delay can also affect the DSH payment calculated in the 
cost report. Therefore, the commenter requested that CMS revise its 
estimate of the 2012 DSH payments in the final rule using the latest 
available update of the 2012 Medicare cost report data.
    Commenters wanted to better understand the changes in the estimate 
of aggregate DSH payments that would have been paid absent 
implementation of the Affordable Care Act over time and wanted to be 
able to replicate the figures. The commenters believed that 
transparency is critical because the statute precludes judicial review 
of the estimates for purposes of determining the three factors used in 
computing uncompensated care payments and because they understand that 
these estimates will not be revised or updated after the final rule.
    Response: Factor 1 is not estimated in isolation. The Factor 1 
estimates for proposed rules are generally consistent with the economic 
assumptions and actuarial analysis used to develop the President's 
Budget estimates under current law, and the Factor 1 estimates for the 
final rule are generally consistent with those used for the Mid-Session 
Review of the President's Budget. For additional information on the 
development of the President's Budget, we refer readers to the Office 
of Management and Budget Web site at: https://www.whitehouse.gov/omb/budget. For additional information on the specific economic assumptions 
used in the Midsession Review of the President's FY 2016 Budget, we 
refer readers to the ``Midsession Review of the President's FY 2016 
Budget'' available on the Office of Management and Budget Web site at: 
https://www.whitehouse.gov/sites/default/files/omb/budget/fy2016/assets/16msr.pdf, under ``Economic Assumptions''. For a general 
overview of the principal steps involved in projecting future inpatient 
costs and utilization, we refer readers to the ``2014 Annual Report of 
the Boards of Trustees of the Federal Hospital Insurance and Federal 
Supplementary Medical Insurance Trust Funds'' available on the CMS Web 
site at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/downloads/tr2014.pdf 
under ``Actuarial Methodology and Principal Assumptions for Cost 
Estimates''.
    As we did in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50010), 
later in this section we provide additional information regarding the 
data sources, methods, and assumptions employed by the actuaries in 
determining the Office of the Actuary's updated estimate of Factor 1 
for FY 2016. We believe that this discussion addresses the 
methodological concerns raised by commenters regarding the various 
assumptions used in the estimate, including the ``Other'' and 
``Discharges'' assumptions and also provides

[[Page 49518]]

additional information regarding how we address the Medicaid and CHIP 
expansion. However, we note that, with regard to the commenters' 
questions and concerns on the completion factor for 2012 and 2013 cost 
reports in HCRIS, the Office of the Actuary assumed a discharge 
completion factor of 99 percent for FY 2013 and 98 percent for FY 2014. 
Similarly, the Office of the Actuary assumed that case-mix was 
stabilized at the time of the estimate and no additional completion 
factor adjustment was needed. These assumptions are consistent with 
historical patterns. Regarding the commenters' assertion that Medicaid 
expansion is not adequately accounted for in the ``Other'' column, we 
note that the Office of the Actuary assumed per capita spending for 
Medicaid beneficiaries who enrolled due to the expansion is 50 percent 
of the average per capita of the pre-expansion Medicaid beneficiary due 
to the better health of these beneficiaries. We have found this 
assumption to be consistent with recent internal estimates of Medicaid 
per capita spending pre-expansion and post-expansion.
    In response to the commenters who requested that we adjust the 
``Other'' assumption to reflect the growing number of DSH hospitals in 
a manner that supports safety-net hospitals, particularly in States 
that do not have a Medicaid or CHIP expansion, we note that our 
proposed methodology includes assumptions regarding how DSH payments 
will increase in aggregate, regardless of how many hospitals qualify 
for DSH payments. Furthermore, we believe that, while the statute 
provides the Secretary with discretion to make an estimate, the statute 
is clear that the computation of Factor 1 begins with an aggregate 
amount of payments that would be made to subsection (d) hospitals under 
section 1886(d)(5)(F) if this section did not apply for such fiscal 
year. In our view, the most appropriate way to do so is to project to 
the best of our abilities how payments will actually change in 
aggregate, based on the programs and policies that will be in effect 
during the fiscal year.
    We agree with the commenters that CMS should use the most recent 
update of the 2012 Medicare cost report data available to us and note 
that the Office of the Actuary has done so in using the March 2015 
extract of 2012 cost reports in HCRIS for this final rule.
    Comment: Some commenters requested that, in light of their concerns 
about the data sources and methods used to estimate Factor 1, CMS adopt 
a process of reconciling the initial estimates of Factor 1 with actual 
data for the payment year in conjunction with the final settlement of 
hospital cost reports for the applicable year. Specifically, the 
commenters asserted that later data that become available after the end 
of a Federal fiscal year but before final DSH payment determinations 
are made in notices of program reimbursement would result in Factor 1 
estimates that are more accurate than estimates made before the start 
of a Federal fiscal year. The commenters believed that a ``true-up 
approach'' would resolve most of what they characterize as 
``discrepancies between estimates and reality.'' The commenters stated 
that generalized concerns about administrative ease and finality are 
not justifications for the use of advance estimates that are inaccurate 
due to ``inherent uncertainties'' in making projections of DSH payments 
in an ``early, post-ACA environment.'' As an example of a way by which 
this ``true-up'' could occur, one commenter requested the CMS update 
the calculation of the discharge factor used to calculate Factor 1 in 
an interim final rule.
    Response: We continue to believe that applying our best estimates 
prospectively is most conducive to administrative efficiency, finality, 
and predictability in payments (78 FR 50628; 79 FR 50010). As we noted 
in the FY 2014 IPPS/LTCH PPS final rule, we do not know the aggregate 
Medicare DSH payment amount that would be paid for each Federal fiscal 
year until the time of cost report settlements, which occur several 
years after the end of the fiscal year. Furthermore, the statute 
provides that Factor 1 shall be determined based on estimates of the 
aggregate amount of DSH payments that would be made in the absence of 
section 1886(r) of the Act and the aggregate amount of empirically 
justified DSH payments that are made under section 1886(r)(1) of the 
Act. We believe that, in affording the Secretary the discretion to 
estimate the amount of these payments and by including a prohibition 
against administrative and judicial review of those estimates in 
section 1886(r)(3) of the Act, Congress recognized the importance of 
finality and predictability in payments and sought to avoid a situation 
in which the uncompensated care payments would be subject to change 
over a period of a number of years. Accordingly, we do not agree with 
the commenters that we should establish a process for reconciling our 
estimates of Factor 1. We note that, in reviewing the Office of the 
Actuary's prior estimates for DSH payments compared to actual 
experience, from FY 2005 to FY 2016, the original estimates have been 
higher than actual experience for 8 of the 12 years and lower than 
actual experience in only 4 years.
    Comment: Some commenters indicated that the estimated DSH payments 
do not account for the impact of the decision in Allina v. Sebelius, by 
excluding Medicare Advantage days from the SSI ratio and including dual 
eligible Medicare Advantage days in the Medicaid fraction, thus 
understating the estimate of Factor 1.
    Response: We do not believe the Allina decision has any bearing on 
our estimate of Factor 1 for FY 2016. The holding in Allina addresses 
traditional DSH payments made to a group of providers between 2004 and 
2010. Moreover, the decision did not address the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50614 through 50620) in which we readopted the policy 
of counting Medicare Advantage days in the SSI ratio for FY 2014 and 
all subsequent fiscal years. In its estimate of Factor 1 for FY 2016 
for the FY 2016 IPPS/LTCH PPS proposed rule, the Office of the Actuary 
was making an estimate of difference between the aggregate amount of 
DSH payments that would be made under section 1886(d)(5)(F) of the Act 
in FY 2016 if section 1886(r) of the Act did not apply and the 
aggregate amount of empirically justified DSH payments that will be 
made to hospitals in FY 2016 under section 1886(r)(1) of the Act. Thus, 
although the Office of the Actuary used 2012 cost report data in making 
this estimate, it also applied inflation adjustments and assumptions in 
order to estimate Medicare DSH payments for FY 2016. Accordingly, 
consistent with Sec.  412.106(b)(2), as readopted in the FY 2014 IPPS/
LTCH PPS final rule, in estimating DSH payments for FY 2016, the Office 
of the Actuary did not remove patients enrolled in Medicare Advantage 
plans from SSI ratios or make any other adjustments to the hospital 
cost report data for 2012 included in the HCRIS database. We believe 
this methodology is consistent with the statute and regulations.
    After consideration of the public comments we received, we are 
finalizing, as proposed, the methodology for calculating Factor 1 for 
FY 2016. Using this methodology, below we discuss the resulting Factor 
1 amount for FY 2016.
    To determine Factor 1 and to model the impact of this provision for 
FY 2016, we used the Office of the Actuary's July 2015 Medicare DSH 
estimates based on data from the March 2015 update of 2012 cost report 
data included in HCRIS, 2012 cost report data provided

[[Page 49519]]

to CMS by IHS hospitals, and the FY 2015 IPPS/LTCH PPS final rule IPPS 
Impact File, published in conjunction with the publication of the FY 
2015 IPPS/LTCH PPS final rule. Because SCHs that are projected to be 
paid under their hospital-specific rate are not subject to the 
provisions of section 1886(r) of the Act, these hospitals were excluded 
from the July 2015 Medicare DSH estimates. Furthermore, because section 
1886(r) of the Act specifies that the uncompensated care payment is in 
addition to the empirically justified DSH payment (or 25 percent of DSH 
payments that would be made without regard to section 1886(r)), 
Maryland hospitals participating in the Maryland All-Payer Model and 
hospitals participating in the Rural Community Hospital Demonstration 
that do not receive DSH payments also are excluded from the Office of 
the Actuary's Medicare DSH estimates.
    Using the data sources discussed above, the Office of the Actuary 
applied inflation updates and assumptions for future changes in 
utilization and case-mix to estimate Medicare DSH payments for the 
upcoming fiscal year. The July 2015 Medicare DSH estimate for FY 2016, 
without regard to the application of section 1886(r)(1) of the Act, is 
$13,411,096,528.05. Based on this estimate, the estimate for 
empirically justified Medicare DSH payments for FY 2016, with the 
application of section 1886(r)(1) of the Act, is $3,352,774,132.01 (25 
percent of the total amount estimated). Under Sec.  412.106(g)(1)(i) of 
the regulations, Factor 1 is the difference between these two estimates 
of the Office of the Actuary. Therefore, for this final rule, Factor 1 
for FY 2016 is $10,058,322,396.04 ($13,411,096,528.05 minus 
$3,352,774,132.01). Below we provide additional detail regarding the 
development of this estimate.
    The Office of the Actuary's estimates for FY 2016 begin with a 
baseline of $11.637 billion in Medicare DSH expenditures for FY 2012. 
The following table shows the factors applied to update this baseline 
through the current estimate for FY 2016.

                        Factors Applied for FY 2013 Through FY 2016 To Estimate Medicare DSH Expenditures Using FY 2012 Baseline
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                         Estimated DSH
                  FY                          Update           Discharge           Case-mix            Other              Total          payments  (in
                                                                                                                                            billion)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2013..................................              1.028             0.9844              1.014             1.0137           1.040189            $12.105
2014..................................              1.009             0.9634              1.015             0.9993           0.985961             11.935
2015..................................              1.014             0.9893              1.005             1.0512           1.059784             12.648
2016..................................              1.009             1.0006              1.005              1.045           1.060313             13.411
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In this table, the discharge column shows the increase in the 
number of Medicare fee-for-service (FFS) inpatient hospital discharges. 
The figures for FYs 2013 and 2014 are based on Medicare claims data 
that have been adjusted by a completion factor. The discharge figure 
for FY 2015 is based on preliminary data for 2015. The discharge figure 
for FY 2016 is an assumption based on recent trends recovering back to 
the long-term trend and assumptions related to how many beneficiaries 
will be enrolled in Medicare FFS and also MA plans. The case-mix column 
shows the increase in case-mix for IPPS hospitals. The case-mix figures 
for FYs 2013 and 2014 are based on actual data adjusted by a completion 
factor. The FY 2015 and FY 2016 increases are based on the 
recommendation of the 2010-2011 Medicare Technical Review Panel. The 
``Other'' column shows the increase in other factors that contribute to 
the Medicare DSH estimates. These factors include the difference 
between the total inpatient hospital discharges and the IPPS 
discharges, various adjustments to the payment rates that have been 
included over the years but are not reflected in the other columns 
(such as the increase in rates for the Cape Cod litigation and the 
reduction in rates for the 2-midnight stay policy). In addition, the 
``Other'' column includes a factor for the Medicaid expansion due to 
the Affordable Care Act.
    The table below shows the factors that are included in the 
``Update'' column of the above table.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                    Documentation and
                                                             Market basket     Affordable care      Multifactor           coding          Total update
                            FY                                 percentage        act payment        productivity        percentage         percentage
                                                                                  reductions         adjustment         adjustment
--------------------------------------------------------------------------------------------------------------------------------------------------------
2013.....................................................                2.6               -0.1               -0.7               +1.0                2.8
2014.....................................................                2.5               -0.3               -0.5               -0.8                0.9
2015.....................................................                2.9               -0.2               -0.5               -0.8                1.4
2016.....................................................                2.4               -0.2               -0.5               -0.8                0.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: All numbers are based on the Midsession Review of FY 2016 Budget projections.

(2) Calculation of Factor 2 for FY 2016
    Section 1886(r)(2)(B) of the Act establishes Factor 2 in the 
calculation of the uncompensated care payment. Specifically, section 
1886(r)(2)(B)(i) of the Act provides that, for each of FYs 2014, 2015, 
2016, and 2017, a factor equal to 1 minus the percent change in the 
percent of individuals under the age of 65 who are uninsured, as 
determined by comparing the percent of such individuals (I) who are 
uninsured in 2013, the last year before coverage expansion under the 
Affordable Care Act (as calculated by the Secretary based on the most 
recent estimates available from the Director of the Congressional 
Budget Office before a vote in either House on the Health Care and 
Education Reconciliation Act of 2010 that, if determined in the 
affirmative, would clear such Act for enrollment); and (II) who are 
uninsured in the most recent period for which data are available (as so 
calculated), minus 0.1 percentage point for FY 2014 and minus 0.2 
percentage point for each of FYs 2015, 2016, and 2017.
    Section 1886(r)(2)(B)(i)(I) of the Act further indicates that the 
percent of

[[Page 49520]]

individuals under 65 without insurance in 2013 must be the percent of 
such individuals who are uninsured in 2013, the last year before 
coverage expansion under the Affordable Care Act (as calculated by the 
Secretary based on the most recent estimates available from the 
Director of the Congressional Budget Office before a vote in either 
House on the Health Care and Education Reconciliation Act of 2010 that, 
if determined in the affirmative, would clear such Act for enrollment). 
The Health Care and Education Reconciliation Act (Pub. L. 111-152) was 
enacted on March 30, 2010. It was passed in the House of 
Representatives on March 21, 2010, and by the Senate on March 25, 2010. 
Because the House of Representatives was the first House to vote on the 
Health Care and Education Reconciliation Act of 2010 on March 21, 2010, 
we have determined that the most recent estimate available from the 
Director of the Congressional Budget Office ``before a vote in either 
House on the Health Care and Education Reconciliation Act of 2010 . . 
.'' (emphasis added) appeared in a March 20, 2010 letter from the 
director of the CBO to the Speaker of the House. Therefore, we believe 
that only the estimates in this March 20, 2010 letter meet the 
statutory requirement under section 1886(r)(2)(B)(i)(I) of the Act. (To 
view the March 20, 2010 letter, we refer readers to the Web site at: 
http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/113xx/doc11379/amendreconprop.pdf.)
    In its March 20, 2010 letter to the Speaker of the House of 
Representatives, the CBO provided two estimates of the ``post-policy 
uninsured population.'' The first estimate is of the ``Insured Share of 
the Nonelderly Population Including All Residents'' (82 percent) and 
the second estimate is of the ``Insured Share of the Nonelderly 
Population Excluding Unauthorized Immigrants'' (83 percent). Starting 
in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50631), we used the 
first estimate that includes all residents, including unauthorized 
immigrants. We stated that we believe this estimate is most consistent 
with the statute, which requires us to measure ``the percent of 
individuals under the age of 65 who are uninsured'' and provides no 
exclusions except for individuals over the age of 65. In addition, we 
stated that we believe that this estimate more fully reflects the 
levels of uninsurance in the United States that influence uncompensated 
care for hospitals than the estimate that reflects only legal 
residents. The March 20, 2010 CBO letter reports these figures as the 
estimated percentage of individuals with insurance. However, because 
section 1886(r)(2)(B)(i) of the Act requires that we compare the 
percent of individuals who are uninsured in the applicable year with 
the percent of individuals who were uninsured in 2013, in the FY 2014 
and FY 2015 IPPS/LTCH PPS final rules (78 FR 50631 and 79 FR 50014), we 
used the CBO insurance rate figure and subtracted that amount from 100 
percent (that is, the total population without regard to insurance 
status) to estimate the 2013 baseline percent of individuals without 
insurance. Therefore, for FYs 2014 through 2017, per statute, our 
estimate of the uninsurance percentage for 2013 is 18 percent.
    Section 1886(r)(2)(B)(i) of the Act requires that we compare the 
baseline uninsurance rate to the percent of such individuals who are 
uninsured in the most recent period for which data are available. In 
the FY 2014 and FY 2015 IPPS/LTCH PPS final rules (78 FR 50634 and 79 
FR 50014), we used the same data source, the most recent available CBO 
estimates, to calculate this percent of individuals without insurance. 
In response to public comments, we also agreed that we should normalize 
the CBO estimates, which are based on the calendar year, for the 
Federal fiscal years for which each calculation of Factor 2 is made (78 
FR 50633).
    Consistent with the data used in FY 2014 and FY 2015, in the FY 
2016 IPPS/LTCH PPS proposed rule, we used the CBO's January 2015 
estimates of the effects of the Affordable Care Act on health insurance 
coverage (which are available at http://www.cbo.gov/sites/default/files/cbofiles/attachments/43900-2014-04-ACAtables2.pdf), normalized to 
the Federal fiscal year, to calculate the percent of individuals 
without insurance (80 FR 24486). The CBO's January 2015 estimate of 
individuals under the age of 65 with insurance in CY 2015 was 87 
percent. Therefore, the CBO's most recent estimate of the rate of 
uninsurance in CY 2015 at the time of development of the FY 2016 IPPS/
LTCH PPS proposed rule was 13 percent (that is, 100 percent minus 87 
percent). Similarly, the CBO's January 2015 estimate of individuals 
under the age of 65 with insurance in CY 2016 was 89 percent. 
Therefore, the CBO's most recent estimate of the rate of uninsurance in 
CY 2016 available for the FY 2016 IPPS/LTCH PPS proposed rule was 11 
percent (that is, 100 percent minus 89 percent).
    The proposed calculation of Factor 2 for FY 2016 included in the FY 
2016 IPPS/LTCH proposed rule was as follows:
     CY 2015 rate of insurance coverage (January 2015 CBO 
estimate): 87 percent.
     CY 2016 rate of insurance coverage (January 2015 CBO 
estimate): 89 percent.
     FY 2016 rate of insurance coverage: (87 percent * .25) + 
(89 percent * .75) = 88.5 percent.
     Percent of individuals without insurance for 2013 (March 
2010 CBO estimate): 18 percent
     Percent of individuals without insurance for FY 2016 
(weighted average): 11.5 percent
    1-((0.115-0.18)/0.18) = 1-0.3611 = 0.6389 (63.89 percent) (We note 
that, in the proposed rule, this calculation should have read: 1 - 
[verbarlm][(0.115-0.18)/0.18)][verbarlm] = 1-0.3611 = 0.6389 (63.89 
percent).)
    0.6389 (63.89 percent)-.002 (0.2 percentage points for FY 2016 
under section 1886(r)(2)(B)(i) of the Act) = 0.6369 or 63.69 percent
    0.6369 = Factor 2
    Therefore, we proposed that Factor 2 for FY 2016 would be 63.69 
percent. We indicated that our proposal for Factor 2 was subject to 
change if more recent CBO estimates of the insurance rate became 
available at the time of the preparation of the final rule. We invited 
public comments on our proposed calculation of Factor 2 for FY 2016.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24486), we stated 
that the FY 2016 Proposed Uncompensated Care Amount was 
$10,003,425,327.39 x 0.6369 = $6,371,181,591.01.
    Comment: A number of commenters objected to CMS' proposed 
calculation of Factor 2. The commenters questioned the accuracy of 
CBO's estimates and requested additional information on how the CBO 
calculates its insurance estimates, including the assumptions used in 
its estimates. For example, some commenters questioned the accuracy of 
the CBO's assumptions regarding ``unauthorized immigrants'' and 
provided information from other data sources, such as the Census 
Bureau, Department of Homeland Security Office of Immigration 
Statistics, and the Pew Research Center, to suggest that the total 
uninsured percentage in FY 2016 should be 13 percent rather than 11 
percent as proposed. One commenter requested an explanation of why CBO 
changed its baseline formula for pre-Affordable Care Act coverage and 
how CBO is tracking actual insured and uninsured populations. Some 
commenters believed that the CBO insurance estimates do not take into

[[Page 49521]]

account States that have not expanded their Medicaid programs. Other 
commenters questioned whether CBO accounted for factors that ultimately 
affect the insured population, such as individuals who will disenroll 
from coverage due to their inability to pay premiums or insured 
individuals who are unable to pay for hospital services they receive 
due to high deductibles and coinsurance in employer-sponsored and 
exchange-sponsored plans.
    Response: We note that, in the FY 2014 IPPS/LTCH PPS final rule, we 
finalized a policy to employ the most recent available CBO estimates of 
the rates of uninsurance in the calculation of Factor 2 for FY 2014 and 
subsequent years. As discussed in the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50632), section 1886(r)(2)(B)(i)(I) of the Act refers to the 
percent of uninsured in 2013 as calculated by the Secretary based on 
the CBO data. Similarly, section 1886(r)(2)(B)(i)(II) of the Act 
immediately afterwards refers to the percent of uninsured ``in the most 
recent period for which data is available (as so calculated).'' The 
phrase ``as so calculated'' in the latter section can be reasonably 
interpreted to require the calculation to similarly be based on CBO 
estimates. Furthermore, we continue to believe that the CBO projections 
of insurance coverage are the most reliable and consistent basis on 
which to calculate Factor 2, and that it is preferable from a 
statistical point of view to calculate a percent change in insurance 
over time using a consistent data source.
    We note that CBO's coverage projections for CY 2015 and CY 2016 
reflect changes in the rate of uninsurance arising from participation 
in the health insurance exchanges, Medicaid and CHIP enrollment, and 
changes in employer-sponsored, nongroup, and other insurance coverage. 
Unauthorized immigrants who are not eligible for Medicaid and exchange 
coverage and low-income residents of States not participating in the 
Medicaid expansion are included in the uninsured population. In 
addition, the estimate reflects other individuals who choose to remain 
uninsured, despite being eligible for Medicaid or having access through 
an employer, the exchange, or from an insurer. Therefore, the CBO 
estimates do take into account some uncertainties and risks under the 
Affordable Care Act, including the probabilities of different outcomes 
of Medicaid expansions and changes in insurance coverage status over 
time. More detailed explanations of the methodology and assumptions 
used by CBO can be accessed on the CBO Web site and particularly in the 
Appendix of the March 2015 Updated Budget Projections: 2015-2025 (which 
are available at http://www.cbo.gov/sites/default/files/cbofiles/attachments/49973-UpdatedBudgetProjections.pdf).
    Comment: Commenters requested that CMS update the Factor 2 
estimates with later data, such as through an additional interim final 
rule or by establishing a reconciliation process that uses actual data 
regarding the rate of uninsurance at the time of cost report 
settlements. The commenters indicated that they understood that 
estimates must be used for interim payments, but stated that they 
believed more accurate numbers based on actual experience should be 
available for purposes of determining final payments at the time of 
cost report settlement. One commenter pointed out that CBO continually 
revises its own projected enrollment numbers for changes in insurance 
coverage and thus reconciliation is appropriate because otherwise 
providers would ``absorb the full impact of these errors.'' Another 
commenter objected to the view that Factor 2 should be based solely 
upon estimates as opposed to actual data. The commenter pointed out 
that the DSH statute does not use the word ``estimate'' in connection 
with the computation of the second prong of Factor 2. The commenter 
viewed the omission of the term ``estimate'' as deliberate for the 
period FY 2014 through FY 2017, noting that the statute employs the 
term ``estimate'' elsewhere, such as in the second prong of Factor 2 
for FY 2018 and beyond. This commenter asserted that the statute 
requires that the initial estimates of the percentage of uninsured 
individuals for FY 2016 and FY 2017 be reconciled with actual data when 
those data become available.
    Many commenters believed that the information shared by CMS in the 
FY 2016 IPPS/LTCH PPS proposed rule would be outdated and need to be 
revised in light of the King v. Burwell case. The commenters noted 
that, as of June, no decision had been issued by the Supreme Court and 
that an adverse ruling for the Secretary would lead to a smaller 
reduction in the rate of uninsurance. Some commenters provided 
information regarding two studies that estimated increases in the 
number of uninsured individuals if the Supreme Court were to set aside 
the subsidies in States without State-operated exchanges. The 
commenters stated that, based on their understanding of these studies, 
there could be approximately 8.2 million to 9.8 million more 
individuals uninsured in CY 2016 than previously estimated, which would 
result in a national uninsured rate of 15.1 percent to 18.3 percent. 
Based on this analysis, the commenters estimated that Factor 2 should 
be 0.8036 or 80.36 percent, much higher than the 0.6369 or 63.69 
percent proposed by CMS. The commenters stated that, all else being 
equal, this change to Factor 2 would result in an amount to be 
available for uncompensated care payments of approximately $8.0 million 
compared to the approximately $6.4 million proposed by CMS. The 
commenters stated that CMS could update this estimate in the final rule 
or through an interim final rule. Commenters stated that updating 
Factor 2 for the results of the decision in King v. Burwell would 
reflect CMS policy to use updated data on the rate of uninsurance. One 
commenter requested that CMS use updated enrollment data from the 
exchanges to lower its estimate of the number of insured individuals 
for FY 2016.
    Response: In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50632), we 
finalized a policy to employ the most recent available CBO estimates of 
the rate of uninsurance in the calculation of Factor 2 for FY 2014 and 
subsequent years, and did not adopt any policy for reconciling those 
estimates. In the FY 2014 IPPS/LTCH PPS final rule, we stated that we 
believe that employing actual data to reconcile the projections 
employed to determine Factor 2 would impose an unacceptable delay in 
the final determination of uncompensated care payments. Actual data on 
the rates of insurance and uninsurance do not become available until 
several years after the payment year, and the initial data for a year 
will continue to be adjusted for several years after that as further 
data become available. We continue to believe that determining Factor 2 
prospectively by applying the best estimate of the projected level of 
uninsurance for the applicable fiscal year is most conducive to 
administrative efficiency, finality, and predictability in payments.
    With respect to the commenter's concerns about language used in 
section 1886(r)(2)(B)(i)(II) of the Act, we acknowledge the commenter's 
point that the statute does not explicitly include the word 
``estimate'' in describing the percent of individuals who are uninsured 
in the most recent period for which data are available. However, we 
note that the statute does describe this figure ``as so calculated.'' 
We continue to believe that this reference is intended to instruct the 
Secretary to perform the calculation in the same manner as the 
calculation under section 1886(r)(2)(B)(i)(I) of the Act. Section

[[Page 49522]]

1886(r)(2)(B)(i)(I) of the Act expressly instructs the Secretary to 
calculate the percent of individuals who are uninsured in 2013 ``based 
on the most recent estimates available from the Director of the 
Congressional Budget Office . . . .'' (Emphasis added.) Accordingly, we 
interpret the term ``calculated'' in section 1886(r)(2)(B)(i)(II) of 
the Act to mean calculated based on CBO estimates and disagree that the 
statute requires that we reconcile this figure with actual data.
    With respect to the commenters' concerns regarding the accuracy of 
the Factor 2 estimate in light of the King v. Burwell case, we note 
that the Supreme Court's ruling in the case affirmed that individuals 
who purchase their health insurance on exchanges established by the 
Federal government are eligible for tax subsidies. As a result, we do 
not expect the decision to have any effect on the estimate of the 
percent of individuals that are uninsured in FY 2016. Moreover, we note 
that, because we finalized a policy in the FY 2014 IPPS/LTCH PPS final 
rule to use the most recent available CBO projections of insurance 
coverage in our calculation of Factor 2, any update to the uninsurance 
data used in the computation of Factor 2 must also originate from the 
CBO. The most recent available CBO projection of uninsurance is the 
March 2015 baseline available on the Web site at: https://www.cbo.gov/sites/default/files/cbofiles/attachments/43900-2015-03-ACAtables.pdf, 
and consistent with our policy, we are using this estimate in the 
calculation of Factor 2 for this FY 2016 IPPS/LTCH PPS final rule.
    Comment: Some commenters requested that CMS work with Congress to 
take steps to mitigate the effect of the reduction in Factor 2 on the 
overall amount available to make uncompensated care payments for FY 
2016. Several commenters requested that CMS delay the implementation of 
Factor 2 until all or substantially all of the States implement health 
insurance exchanges and until the level of Medicaid expansion is known 
on a State-by-State basis. The commenters expected that, once these 
events occur, more reliable information sources would be available to 
determine the reduction in the rate of uninsurance. Another commenter 
suggested that, at a minimum, CMS maintain the percentage of uninsured 
it applied in the FY 2015 calculation until a more accurate projection 
can be made. One commenter specifically mentioned using the 
documentation and coding adjustments as a model for phasing in 
reductions to the amount available for uncompensated care payments. 
Another commenter asked CMS to ensure the payment methodology does not 
harm access to care in rural areas.
    Response: We thank the commenters for their alternative 
suggestions. We do not believe there is a statutory basis to delay the 
implementation of Factor 2 or to phase in reductions because the 
statute requires us to implement the uncompensated care payment 
methodology in its entirety for FY 2014 and each subsequent fiscal 
year. The statute also does not provide us with a basis to use the 
percentage of uninsured we applied for FY 2015 because the statute 
requires us to use the data on the percent of individuals who are 
uninsured in the most recent period for which data are available, and 
such data are available for FY 2016. Finally, although we understand 
the commenters' concerns regarding access to care in rural areas, the 
statute does not include any exception in the payment methodology for 
hospitals by geographic location or geographic classification. 
Therefore, hospitals in rural areas are subject to the same reductions 
as hospitals elsewhere in the country.
    After consideration of the public comments we received, we are 
finalizing, as proposed, the calculation of Factor 2 for FY 2016. Using 
this methodology, below we discuss the resulting Factor 2 amount for FY 
2016 and the total uncompensated care amount for FY 2016.
    To determine Factor 2 for FY 2016, we used the CBO's March 2015 
estimates of the effects of the Affordable Care Act on health insurance 
coverage (which are available at http://www.cbo.gov/sites/default/files/cbofiles/attachments/43900-2015-03-ACAtables.pdf). The CBO's 
March 2015 estimate of individuals under the age of 65 with insurance 
in CY 2015 is 87 percent. Therefore, the CBO's most recent estimate of 
the rate of uninsurance in CY 2015 is 13 percent (that is, 100 percent 
minus 87 percent). Similarly, the CBO's March 2015 estimate of 
individuals under the age of 65 with insurance in CY 2016 is 89 
percent. Therefore, the CBO's most recent estimate of the rate of 
uninsurance in CY 2016 available for this final rule is 11 percent 
(that is, 100 percent minus 89 percent).
    The calculation of the final Factor 2 for FY 2016, employing a 
weighted average of the CBO projections for CY 2015 and CY 2016, is as 
follows:
     CY 2015 rate of insurance coverage (March 2015 CBO 
estimate): 87 percent.
     CY 2016 rate of insurance coverage (March 2015 CBO 
estimate): 89 percent.
     FY 2016 rate of insurance coverage: (87 percent * .25) + 
(89 percent * .75) = 88.5 percent.
     Percent of individuals without insurance for 2013 (March 
2010 CBO estimate): 18 percent.
     Percent of individuals without insurance for FY 2016 
(weighted average): 11.5 percent.
    1-[verbarlm][(0.115-0.18)/0.18][verbarlm] = 1-0.3611 = 0.6389 
(63.89 percent)
    0.6389 (63.89 percent) -.002 (0.2 percentage points for FY 2016 
under section 1886(r)(2)(B)(i) of the Act) = 0.6369 or 63.69 percent
    0.6369 = Factor 2
    Therefore, the final Factor 2 for FY 2016 is 63.69 percent.
    The FY 2016 Final Uncompensated Care Amount is: $10,058,322,396.04 
x 0.6369 = $6,406,145,534.04.

 
 
 
FY 2016 Final Uncompensated Care Total  $6,406,145,534.04
 Available.
 

(3) Calculation of Factor 3 for FY 2016
    Section 1886(r)(2)(C) of the Act defines Factor 3 in the 
calculation of the uncompensated care payment. As we have discussed 
earlier, section 1886(r)(2)(C) of the Act states that Factor 3 is equal 
to the percent, for each subsection (d) hospital, that represents the 
quotient of (i) the amount of uncompensated care for such hospital for 
a period selected by the Secretary (as estimated by the Secretary, 
based on appropriate data (including, in the case where the Secretary 
determines alternative data are available that are a better proxy for 
the costs of subsection (d) hospitals for treating the uninsured, the 
use of such alternative data)); and (ii) the aggregate amount of 
uncompensated care for all subsection (d) hospitals that receive a 
payment under section 1886(r) of the Act for such period (as so 
estimated, based on such data).
    Therefore, Factor 3 is a hospital-specific value that expresses the 
proportion of the estimated uncompensated care amount for each 
subsection (d) hospital and each subsection (d) Puerto Rico hospital 
with the potential to receive Medicare DSH payments relative to the 
estimated uncompensated care amount for all hospitals estimated to 
receive Medicare DSH payments in the fiscal year for which the 
uncompensated care payment is to be made. Factor 3 is applied to the 
product of Factor 1 and Factor 2 to determine the amount of the 
uncompensated care payment that each eligible hospital will receive for 
FY 2014 and subsequent fiscal years. In order to implement the 
statutory

[[Page 49523]]

requirements for this factor of the uncompensated care payment formula, 
it was necessary to determine: (1) The definition of uncompensated care 
or, in other words, the specific items that are to be included in the 
numerator (that is, the estimated uncompensated care amount for an 
individual hospital) and the denominator (that is, the estimated 
uncompensated care amount for all hospitals estimated to receive 
Medicare DSH payments in the applicable fiscal year); (2) the data 
source(s) for the estimated uncompensated care amount; and (3) the 
timing and manner of computing the quotient for each hospital estimated 
to receive Medicare DSH payments. The statute instructs the Secretary 
to estimate the amounts of uncompensated care for a period based on 
appropriate data. In addition, we note that the statute permits the 
Secretary to use alternative data in the case where the Secretary 
determines that such alternative data are available that are a better 
proxy for the costs of subsection (d) hospitals for treating 
individuals who are uninsured.
    In the course of considering how to determine Factor 3 during the 
rulemaking process for FY 2014, we considered defining the amount of 
uncompensated care for a hospital as the uncompensated care costs of 
each hospital and determined that Worksheet S-10 of the Medicare cost 
report potentially provides the most complete data regarding 
uncompensated care costs for Medicare hospitals. However, because of 
concerns regarding variations in the data reported on the Worksheet S-
10 and the completeness of these data, we did not propose to use data 
from the Worksheet S-10 to determine the amount of uncompensated care 
for FY 2014, the first year this provision was in effect, or for FY 
2015. We instead employed the utilization of insured low-income 
patients, defined as inpatient days of Medicaid patients plus inpatient 
days of Medicare SSI patients as defined in 42 CFR 412.106(b)(4) and 
412.106(b)(2)(i), respectively, to determine Factor 3. We believed that 
these alternative data, which are currently reported on the Medicare 
cost report, would be a better proxy for the amount of uncompensated 
care provided by hospitals. We also indicated that we were expecting 
reporting on the Worksheet S-10 to improve over time and remained 
convinced that the Worksheet S-10 could ultimately serve as an 
appropriate source of more direct data regarding uncompensated care 
costs for purposes of determining Factor 3.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24487), we stated 
that we believe it remains premature to propose the use of Worksheet S-
10 for purposes of determining Factor 3 for FY 2016 and, therefore, 
proposed to continue to employ the utilization of insured low-income 
patients (defined as inpatient days of Medicaid patients plus inpatient 
days of Medicare SSI patients as defined in Sec.  412.106(b)(4) and 
Sec.  412.106(b)(2)(i), respectively) to determine Factor 3. We 
indicated that we believe that continuing to use this methodology would 
give hospitals more time to learn how to submit accurate and consistent 
data through Worksheet S-10, as well as give CMS more time to continue 
to work with the hospital community and others to develop the 
appropriate clarifications and revisions to Worksheet S-10 to ensure 
standardized and consistent reporting of all data elements. 
Accordingly, we proposed that, for FY 2016, CMS would base its 
estimates of the amount of hospital uncompensated care on utilization 
data for Medicaid and Medicare SSI patients, as determined by CMS in 
accordance with Sec. Sec.  412.106(b)(2)(i) and (b)(4). We stated that 
we still intend to propose through future rulemaking the use of the 
Worksheet S-10 data for purposes of determining Factor 3. We invited 
public comments on this proposal to continue to use insured low-income 
days to determine Factor 3 for FY 2016.
    Comment: Most commenters believed that the Worksheet S-10 data are 
not yet sufficiently consistent and reliable to be employed for 
purposes of determining each hospital's share of uncompensated care 
payments. Many commenters supported the proposal to continue employing 
Medicare SSI days and Medicaid days to determine Factor 3 for FY 2016.
    Some commenters noted that the proxy is appropriate until the 
Worksheet S-10 data become more reliable and accurate for collecting 
uncompensated care costs. One commenter indicated that it had performed 
analyses exploring the relationship between uncompensated care costs 
and Medicaid expansion. Among other results, the commenter indicated 
that its analysis showed that the proportion of Medicaid volumes has 
increased while the proportion of self-pay and charity has decreased in 
States that have expanded their Medicaid programs. The commenter 
concluded that Medicaid and uncompensated care are now inversely 
related in States that have expanded their programs and stated that the 
validity of the insured low-income days proxy will soon be in question 
as newer data become available.
    Commenters who continued to support use of the proxy for FY 2016 in 
order to allow for improved data collection on Worksheet S-10 focused 
on two areas: Changes to Worksheet S-10 and the process to audit 
Worksheet S-10. With regard to changes to Worksheet S-10, the 
commenters stated that the Worksheet S-10 form and instructions should 
be changed in order to improve consistency in reporting across 
providers and overall accuracy. They stated that the current 
instructions are imprecise and lack meaningful guidance from CMS. The 
commenters stated that often stakeholders provide specific 
recommendations for changes to Worksheet S-10 that CMS should consider, 
and encouraged CMS to work expeditiously with a broad range of 
stakeholders to improve Worksheet S-10. Many commenters provided 
detailed suggestions related to reporting requirements for specific 
lines of Worksheet S-10. Summaries that illustrate the breadth of the 
commenters' suggestions as they pertain, in general, to the reporting 
of uncompensated care, charity care, bad debt, and Medicaid costs are 
presented below.
     Commenters requested clarification of whether charity care 
charges should be reported for inpatient hospital services, outpatient 
hospital services, or both. They requested the ability to report these 
charges on separate lines and to apply separate CCRs to these separate 
sets of costs.
     Commenters noted that because Worksheet S-10 is derived 
from data reported on the Medicare cost report, charges and payments 
for physician services are currently excluded. However, the commenters 
stated that hospitals provide physician services to patients with 
little or no access to private physicians. They noted that safety-net 
hospitals in low-income communities particularly provide these 
services. The commenters believed that providers should be encouraged 
to provide these services and that one means to do so is to revise 
Worksheet S-10 to include reporting of uncompensated care related to 
employed physician services and to establish an uncompensated care cost 
methodology that takes these services into account.
     One commenter pointed out that it would be appropriate to 
add a self-pay category to Worksheet S-10 to distinguish this uninsured 
population from others who have some form of third party coverage.
     Commenters requested that the CCR used on Worksheet S-10 
to convert charges to costs be changed so that it includes direct GME 
payments because

[[Page 49524]]

the charges include direct GME payments. To determine costs, that CCR 
is multiplied by the charges reported in column 8 charges, which 
include overhead charges that reflect direct GME. The commenters noted 
that the current source of the CCR on Worksheet S-10 is Worksheet C, 
and therefore the CCR does not include the cost of direct GME.
     Commenters requested that Worksheet S-10, which currently 
collects charity care costs based on dates of service, be changed to 
allow for the reporting of charity care costs based on the date the 
hospital writes off the charity care. The commenters stated that, under 
the current requirement, hospitals must spend significant additional 
time to document charity care write-offs. The commenters also stated 
that they do not believe the current approach is accurate because 
hospitals will not have identified and resolved all of their charity 
care accounts by the time they file their cost reports, which is no 
later than 5 months after the close of a hospital's fiscal year. The 
commenters stated that charity care determinations involve 
complexities, such as changes in specific patient circumstances and 
time involved in obtaining necessary documentation.
     Commenters noted that the current reporting instructions, 
particularly in PRM II, Section 4012, exclude discounts to patients 
from reporting as uncompensated care. They then noted that some States 
mandate such discounts, and that many hospitals provide discounts to 
any uninsured patient. In their view, these instructions could create a 
situation where hospitals are precluded from reporting these costs as 
charity when, in their view, this is uncompensated care.
     Some commenters believed that CMS should be clearer with 
regard to how charges related to indigent care programs are reported. 
The commenters believed that charges for services provided to this 
patient care population should not be considered uncompensated care 
costs. Other commenters disagreed and provided specific examples of the 
types of programs that should be included.
     Commenters requested that CMS define the use of 
presumptive eligibility tools as an acceptable method to identify and 
document charity care charges. The commenters believed that the current 
CMS practice of disallowing charity care based on the finding of 
presumptive eligibility tools is inappropriate because the current 
reporting instructions relate to when Medicare beneficiaries should be 
determined to be indigent and not the application of hospitals' charity 
care policies to other patient populations and these instructions were 
developed before presumptive eligibility tools were widely used by 
hospitals.
     Commenters believed that hospitals should not be required 
to report expected payments in addition to received payments for 
charity care accounts. The commenters noted that the difficulty is that 
the amounts expected from patients for whom there have been partial 
write-offs in accordance with a hospital's charity care policy are 
often not paid in full.
     Commenters believed that Worksheet S-10 understates 
charity care costs for patients who participate in high deductible 
plans. The commenters also believed that charity care for noncontracted 
insurance payers is overstated.
     One commenter suggested that bad debt be reported in three 
categories: Uninsured bad debt from charity patients; uninsured bad 
debt from noncharity patients; and cost-sharing bad debts. The 
commenter suggested that CCRs not be applied to bad debt charges 
related to cost-sharing. The commenter believed this disaggregation 
would yield data that are comparable to the charity care data reported 
on Worksheet S-10.
     Commenters requested that CMS be clear with regard to the 
time period for which bad debt expense should be reported. 
Specifically, the commenters asked that CMS clearly state that the 
instructions mean that a hospital should report bad debt expense as 
reflected on its financial statement. Furthermore, the commenters 
requested that CMS amend the cost reporting instructions to require 
hospitals to report amounts based on Generally Accepted Accounting 
Principles.
     Commenters advised requiring Medicaid DSH payments and 
Medicaid supplemental payment information to be reported on separate 
lines and to offset these payments against Medicaid costs reported on 
Worksheet S-10.
     Some commenters suggested that CMS capture data on the 
number of patients in various government programs so that any future 
formula based on Worksheet S-10 could provide differential weighting to 
hospitals based on their proportion of total inpatient and outpatient 
utilization by patients in these programs or payments from governmental 
payors such as Medicare and Medicaid. The commenters suggested 
collecting patient share information for non-dually eligible FFS 
Medicare beneficiaries, non-dually eligible Medicare Advantage 
beneficiaries, dual-eligible FFS beneficiaries, dual-eligible Medicare 
Advantage beneficiaries, and beneficiaries in the Fully Integrated 
Duals Advantage demonstration.
    Many commenters requested that CMS consider an auditing process, 
ensure that its contractors administer such a process consistently, and 
make the instructions for such an audit public. The commenters did not 
believe that hospitals were purposefully reporting erroneous 
information on their costs reports. However, many of the commenters 
were concerned that unclear reporting instructions on the Worksheet S-
10 would result in inconsistent and inaccurate reporting of data. They 
suggested that CMS look to the process used to audit and review the 
data used for the Medicare wage index annually. Specifically, the 
commenters requested that CMS develop timetables for the cut-off of 
submissions or changes to the data, that MACs be engaged to audit these 
data to ensure validity, consistency and accuracy across hospitals, and 
that CMS develop a public use file that would include Worksheet S-10 
data to be used in that rulemaking cycle and the calculated 
uncompensated care payment distribution to each eligible hospital. The 
commenters also suggested that CMS institute a fatal edit in the cost 
report audit process for negative or zero uncompensated care costs. 
Relatedly, commenters requested that CMS provide hospitals a means to 
appeal adjustments to the Worksheet S-10.
    Many commenters shared observations regarding concerns and 
anomalies they identified in data from Worksheet S-10. A number of 
commenters shared analysis, including analyses that looked at the 
proportion of hospitals that did not report bad debt expenses, that 
reported a higher amount for gross charges on Worksheet S-10 than 
Worksheet C, or reported CCRs that seemed inappropriately high (such as 
for all-inclusive rate facilities). In addition, one commenter 
questioned imputed values for CAHs. Other commenters noted that the 
current requirements result in negative uncompensated care values for 
some hospitals.
    These commenters, as well as commenters who opposed the 
continuation of the proxy, also requested that CMS provide a tentative 
timeline and implementation process for when and how the Worksheet S-10 
would be used for determining Medicare uncompensated care payments. 
Some commenters suggested that CMS delay the use Worksheet S-10 until 
an audit process is established, and suggested a delay of at least 4 
years.

[[Page 49525]]

Some commenters requested a transition from using a Factor 3 based on 
insured low income days to a Factor 3 based on uncompensated care costs 
from another source such as Worksheet S-10. These commenters suggested 
a variety of methods for such a transition, including blending or 
combining the Factor 3 values, and also a variety of lengths for such a 
transition, such as 3 years or 10 years. Some commenters requested that 
CMS implement caps on redistribution, such as a maximum cap of 10 
percent on any redistribution of uncompensated care payments for 5 
years, in the absence of a transition. These commenters expressed 
concern regarding sudden destabilizing losses due a change in their 
uncompensated care payments, noting that providing for a transition 
would prevent financial shocks to hospitals and create an incentive for 
them to more accurately report uncompensated care on Worksheet S-10.
    Some commenters suggested how CMS should define uncompensated care 
using information from Worksheet S-10 and additional information that 
they believed should be collected in order to determine uncompensated 
care. For example, the commenters believed that bad debts and charity 
care should be included in the definition of uncompensated care. Some 
commenters specifically indicated that they believe that CMS should 
treat the uncompensated portion of state or local indigent care 
programs as charity care. The commenters also believed that costs not 
covered by Medicaid payments should be included in the definition of 
uncompensated care because they are not compensated. The commenters 
also noted that this approach would improve consistency across 
hospitals for comparison purposes because some hospitals treat some of 
these costs as charity care costs based on their charity care policies. 
Commenters provided different views with regard to publicly funded 
indigent care programs. Some commenters believed that charges for 
services provided to these patient populations should not be included. 
Other commenters believed that these charges should be included and 
that neither private nor public grant monies should be subtracted from 
them.
    Response: We appreciate the commenters' support for the use of data 
on low-income insured days as a proxy for uncompensated care in 
calculating uncompensated care payments until Worksheet S-10 data 
become more reliable. We expect reporting on Worksheet S-10 to improve 
over time, both in accuracy and consistency, particularly in the area 
of charity care, which is already being used and audited for payment 
determinations related to the EHR Incentive Program. Since the 
publication of the FY 2014 IPPS/LTCH PPS final rule, we have continued 
to evaluate and assess the comments we have received from stakeholders 
about Worksheet S-10 as well as to consider what changes might need to 
be made to the instructions to improve the data submitted by hospitals. 
Although we have not decided upon revisions to the Worksheet S-10 
instructions at this time, we remain committed to making improvements 
to Worksheet S-10 if we find they are warranted. We appreciate the 
specific recommendations from commenters for changing the Worksheet S-
10 form and instructions and will take them into consideration as we 
continue to evaluate reporting on Worksheet S-10.
    We have noted that we expect to proceed with a proposal to use data 
on the Worksheet S-10 to determine uncompensated care costs in the 
future and also have indicated that we will take steps such as revising 
and clarifying cost report instructions, as appropriate. We have stated 
that it is our intention to propose introducing the use of the 
Worksheet S-10 data for purposes of determining Factor 3 within a 
reasonable amount of time. At this time, we are considering a possible 
timeline for using Worksheet S-10 data to calculate Factor 3, and we 
intend to discuss this further in the FY 2017 IPPS proposed rule, which 
is typically released in April of the preceding fiscal year.
    Comment: Several commenters objected to the proposal to calculate 
Factor 3 based on a hospital's share of total Medicaid days and 
Medicare SSI days as a proxy for measuring a hospital's share of 
uncompensated care. Many of these commenters believed that continued 
use of the proxy rewards providers in States where Medicaid has 
expanded. The commenters asserted that CMS should not finalize its 
proposal to use low-income insured days as a proxy for uncompensated 
care costs as proposed and instead supported the use of Worksheet S-10 
data to determine uncompensated care costs for FY 2016. In particular, 
MedPAC disagreed with CMS' statement that the data on utilization for 
insured low-income patients can serve as a reasonable proxy for the 
treatment costs of uninsured patients. MedPAC specifically cited its 
2007 analysis of data from the GAO and data from the American Hospital 
Association (AHA), which suggests that Medicaid days and low-income 
Medicare days are not a good proxy for uncompensated care costs. MedPAC 
also provided additional analyses that found that current Worksheet S-
10 data, compared to Medicaid/Medicare SSI days, are a better proxy for 
predicting audited uncompensated care costs. Specifically, MedPAC 
included an analysis testing whether data from the Worksheet S-10 or 
Medicaid and Medicare SSI days are a better indicator of costs 
associated with caring for the uninsured. The analysis compared 2011 
data from Worksheet S-10 and 2011 Medicaid and Medicare SSI days with 
2009 audited data obtained from the Medicaid and CHIP Payment and 
Access Commission (MACPAC). The analysis found that the correlation 
between audited uncompensated care data and data from the Worksheet S-
10 was over 0.80, whereas the correlation between audited uncompensated 
care data and Medicaid and Medicare SSI days was only about 0.50. 
Moreover, the analysis found that the 2011 S-10 data explained over 60 
percent of the variance in audited uncompensated care costs whereas 
Medicaid days and Medicare SSI days only explain about 25 percent of 
the variance. Therefore, MedPAC believed that using Medicare SSI/
Medicaid days as a proxy for uncompensated care does not appropriately 
target hospitals with the highest burden of uncompensated care costs 
and supported Worksheet S-10 in the Medicare cost report as an 
appropriate measure of uncompensated care that could begin to replace 
the reliance on Medicaid and Medicare SSI day shares. In response to 
concerns about whether the quality of the data reported on Worksheet S-
10 is adequate for use in distributing uncompensated care payments, 
MedPAC argued that these data are already better than using Medicaid 
and Medicare SSI days as a proxy for uncompensated care costs, and that 
the data on Worksheet S-10 will improve over time as the data are 
actually used in making payments.
    Response: As we stated in the FY 2014 and FY 2015 IPPS/LTCH PPS 
final rules, we believe that data on utilization for insured low-income 
patients can be a reasonable proxy for the treatment costs of uninsured 
patients. Moreover, due to the concerns that continue to be expressed 
by commenters regarding the accuracy and consistency of the data 
reported on the Worksheet S-10, we continue to believe that Medicaid 
and Medicare SSI days remain a better proxy at this time for the amount 
of uncompensated care provided by hospitals. However, we remain 
convinced that Worksheet S-10 can ultimately serve as an appropriate 
source of more direct data regarding

[[Page 49526]]

uncompensated care costs for purposes of determining Factor 3. 
Worksheet S-10 was developed specifically to collect information on 
uncompensated care costs in response to interest by MedPAC and other 
stakeholders regarding the topic (for example, MedPAC's March 2007 
Report to Congress), and it is not unreasonable to expect information 
on the cost report to be used for payment purposes. We are continuing 
to review available data on the suitability of the Worksheet S-10 data, 
and are encouraged by MedPAC's analysis showing a high correlation 
between Medicaid audited uncompensated care data and data reported on 
Worksheet S-10. We also are refining our benchmarking analyses in order 
to compare available Worksheet S-10 data to other data sources on 
uncompensated care, such as uncompensated care costs reported to the 
Internal Revenue Service on Form 990 by not-for-profit hospitals.
    As discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50639), 
in using Medicaid and Medicare SSI days as a proxy for uncompensated 
care, we recognize it would be possible for hospitals in States that 
choose to expand Medicaid to receive higher uncompensated care payments 
because they may have more Medicaid patient days than hospitals in a 
State that does not choose to expand Medicaid. Regardless, for the 
reasons discussed above, we believe that data on insured low-income 
days remain the best proxy for uncompensated care costs currently 
available to determine Factor 3.
    Comment: One commenter believed that the current methodology 
utilizing low-income insured days as a proxy for uncompensated care 
does not differentiate between the types of inpatient days or consider 
the degree of acuity for patients with advanced medical conditions. The 
commenter suggested that CMS apply a wage and case-mix adjustment to 
the Medicaid and Medicare SSI days using the hospital area wage index 
and hospital-specific case-mix index. The commenter believed that this 
adjustment was appropriate in order to measure cost variation among 
hospitals.
    Response: We appreciate the commenter's expression of the need to 
wage and case-mix adjust the Medicaid and SSI days, but we continue to 
believe it is not appropriate to apply a wage index or case-mix 
adjustment to low-income days to calculate Factor 3 for FY 2016. 
Although wage index information is readily available, for the reasons 
discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50639) and the 
FY 2015 IPPS/LTCH PPS final rule (79 FR 50017), we continue to believe 
that it is not an accurate measure of the intensity of uncompensated 
care costs and would not serve as an appropriate basis for making 
adjustments to Factor 3. As for case-mix information, as stated in the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 50636), these data continue to 
be unavailable to us.
    Comment: One commenter requested that CMS consider the possibility 
of using a proxy for SSI days in the calculation of Factor 3 and for 
other purposes related to DSH for Puerto Rico. The commenter noted that 
U.S. citizens residing in Puerto Rico are not entitled to SSI benefits, 
and that the reliance upon SSI enrollment in calculating Factor 3 
results in uncompensated care payments that are unintentionally and 
unfairly lower for providers in Puerto Rico.
    Response: As discussed earlier, we are currently using the 
utilization of insured low-income patients, defined as inpatient days 
of Medicaid patients plus inpatient days of Medicare SSI patients, as a 
proxy to estimate a hospital's uncompensated care. When we adopted this 
methodology for distributing uncompensated care payments for FY 2014, 
we estimated Puerto Rico hospitals would receive a 41.3 percent 
increase in Medicare DSH and uncompensated care payments (78 FR 51009). 
While this increase was moderated with a reduction of 7.7 percent in FY 
2015 (79 FR 50412), the methodology used to determine uncompensated 
care payments significantly benefitted Puerto Rico hospitals relative 
to the methodology used to determine DSH payments under section 
1886(d)(5)(F) of the Act. Further, as previously discussed, it is our 
intention to propose introducing the use of Worksheet S-10 of the 
Medicare cost report for purposes of distributing the uncompensated 
care payments within a reasonable amount of time. We note that 
eligibility for SSI days will not be an issue in determining 
uncompensated care payments after the move to Worksheet S-10 because 
Medicare SSI days will no longer be used in the distribution 
methodology. We have encouraged Puerto Rico hospitals to report 
uncompensated care costs on Worksheet S-10 of the Medicare cost report 
completely and accurately so that when we transition to the use of the 
Worksheet S-10, they can continue to receive the share of the 
uncompensated care payments to which they are entitled. If Puerto Rico 
hospitals do not properly report uncompensated care costs on Worksheet 
S-10, they risk a substantial reduction in future payments.
    In the interim, until we are ready move to use of Worksheet S-10 
for distributing the uncompensated care payments, we acknowledge that 
use of SSI Medicare inpatient days in the distribution of uncompensated 
care payments may disadvantage Puerto Rico hospitals. However, as there 
was no proposal to modify the methodology for distributing 
uncompensated care payments to Puerto Rico hospitals in the FY 2016 
IPPS/LTCH PPS proposed rule, we do not believe that there would be 
logical outgrowth to adopt such a change in this FY 2016 IPPS/LTCH PPS 
final rule. Any change to the proxy used to determine uncompensated 
care for Puerto Rico hospitals would need to be adopted through notice-
and-comment rulemaking. We plan to address this issue for inclusion in 
the FY 2017 IPPS/LTCH PPS proposed rule if we also propose to continue 
using inpatient days of Medicare SSI patients as a proxy for 
uncompensated care in FY 2017.
    Comment: Some commenters asserted that the FY 2016 IPPS/LTCH PPS 
proposed rule failed to address the impact of Allina v. Sebelius on the 
Medicare DSH and uncompensated care formulas. The commenters asserted 
that, with regard to Medicaid and Medicare SSI days used in the 
calculation of Factor 3, the FY 2011/2012 cost reports do not 
appropriately reflect dual eligible MA days in conjunction with the 
court's ruling in Allina. In addition, one commenter stated that the 
2013 SSI ratios, which were released by CMS in May 2015, appear to 
include MA days, which is inconsistent with the court's ruling in the 
Allina case.
    Response: We do not believe the Allina decision has any bearing on 
our estimate of Factor 3 for FY 2016. The decision in Allina did not 
address the issue of how patient days should be counted for purposes of 
estimating uncompensated care. Moreover, section 1886(r)(2)(C) of the 
Act provides discretion for the Secretary to determine how to estimate 
uncompensated care costs. We continue to believe that, for purposes of 
determining uncompensated care payments, Medicare SSI days should 
include both MA and FFS SSI days.
    After consideration of the public comments we received, we continue 
to believe that using low-income insured days as a proxy for 
uncompensated care costs provides a reasonable basis to determine 
Factor 3 as we work to improve Worksheet S-10 to accurately and 
consistently capture uncompensated care costs. Accordingly, in this 
final rule, we are finalizing for FY 2016 the policy that we originally 
adopted in the FY 2014 IPPS/LTCH PPS

[[Page 49527]]

final rule, of employing the utilization of insured low-income 
patients, defined as inpatient days of Medicaid patients plus inpatient 
days of Medicare SSI patients as defined in 42 CFR 412.106(b)(4) and 
412.106(b)(2)(i), respectively, to determine Factor 3 for FY 2016. 
Details on the calculation of Factor 3 for FY 2016 follow.
    As we did for the FY 2014 and FY 2015 IPPS/LTCH PPS proposed rules, 
for the FY 2016 IPPS/LTCH PPS proposed rule, we published on the CMS 
Web site a table listing Factor 3 for all hospitals that we estimated 
would receive empirically justified Medicare DSH payments in FY 2016 
(that is, hospitals that we projected would receive interim 
uncompensated care payments during the fiscal year), and for the 
remaining subsection (d) hospitals and subsection (d) Puerto Rico 
hospitals that have the potential of receiving a DSH payment in the 
event that they receive an empirically justified Medicare DSH payment 
for the fiscal year as determined at cost report settlement. Hospitals 
had 60 days from the date of public display of the FY 2016 IPPS/LTCH 
PPS proposed rule to review these tables and notify CMS in writing of a 
change in a hospital's subsection (d) hospital status, such as if a 
hospital closed or converted to a CAH.
    After the publication of this FY 2016 IPPS/LTCH final rule, 
hospitals will have until August 31, 2015, to review and submit 
comments on the accuracy of these tables. Comments can be submitted to 
the CMS inbox at [email protected] through August 31, 2015, 
and any changes to Factor 3 will be posted on the CMS Web site prior to 
October 1, 2015.
    The statute also allows the Secretary the discretion to determine 
the time periods from which we will derive the data to estimate the 
numerator and the denominator of the Factor 3 quotient. Specifically, 
section 1886(r)(2)(C)(i) of the Act defines the numerator of the 
quotient as the amount of uncompensated care for such hospital for a 
period selected by the Secretary. Section 1886(r)(2)(C)(ii) of the Act 
defines the denominator as the aggregate amount of uncompensated care 
for all subsection (d) hospitals that receive a payment under section 
1886(r) of the Act for such period. In the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50638), we adopted a process of making interim payments 
with final cost report settlement for both the empirically justified 
Medicare DSH payments and the uncompensated care payments required by 
section 3133 of the Affordable Care Act. Consistent with that process, 
we also determined the time period from which to calculate the 
numerator and denominator of the Factor 3 quotient in a way that would 
be consistent with making interim and final payments. Specifically, we 
must have Factor 3 values available for hospitals that we estimate will 
qualify for Medicare DSH payments and for those hospitals that we do 
not estimate will qualify for Medicare DSH payments but that may 
ultimately qualify for Medicare DSH payments at the time of cost report 
settlement.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50018), we finalized 
a policy to use the most recently available full year of Medicare cost 
report data for determining Medicaid days and the most recently 
available SSI ratios. This is consistent with the policy we adopted in 
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50638) of calculating the 
numerator and the denominator of Factor 3 for hospitals based on the 
most recently available full year of Medicare cost report data 
(including the most recently available data that may be used to update 
the SSI ratios) with respect to a Federal fiscal year. In other words, 
we used data from the most recently available full year cost report for 
the Medicaid days, the most recent cost report data submitted to CMS by 
IHS hospitals, and the most recently available SSI ratios (that is, 
latest available SSI ratios before the beginning of the Federal fiscal 
year) for the Medicare SSI days. Therefore, to estimate Factor 3 for FY 
2015, we used data from the most recently available full year cost 
report and the most recent cost report data submitted to CMS by IHS 
hospitals for the Medicaid days and the most recently available SSI 
ratios, which for FY 2015 were data obtained from the 2011/2012 cost 
reports and the 2010 cost report data submitted by IHS hospitals for 
the Medicaid days, and the FY 2012 SSI ratios for the Medicare SSI 
days.
    Since the publication of the FY 2015 IPPS/LTCH PPS final rule, we 
have been informed by the hospital community that they are experiencing 
difficulties with submitting accurate data for Medicaid days within the 
timeframes noted in the Provider Reimbursement Manual, Part 2, for a 
variety of reasons, such as their ability to receive eligibility data 
from State Medicaid agencies. (As outlined in Section 104, Chapter 1, 
of the Provider Reimbursement Manual, Part 2, a hospital generally has 
5 months after the close of its cost reporting period to file its cost 
report.) In addition, we have been informed that there is variation in 
the ability of hospitals and MACs, respectively, to submit and accept 
amended cost report data in time for the computation of Factor 3. While 
we continue to believe that it is important to use data that are as 
recent as possible, we recognize that, from time to time, the balance 
between recency and accuracy may require refinement. In the case of 
Factor 3, because we make prospective determinations of the 
uncompensated care payment without reconciliation, we believe that it 
would increase the accuracy of the data used to determine Factor 3, and 
accordingly, each eligible hospital's allocation of the overall 
uncompensated care amount, if we provided hospitals with more time to 
submit these data and MACs with more time to consider these submitted 
data before they are used in the computation of Factor 3. As we 
described in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50018), it is 
not possible for us to wait for a later database update of the cost 
report data to calculate the final Factor 3 amount for the final rule 
because this could cause delay in the publication of the final rule. 
Therefore, we are unable to provide hospitals additional time to submit 
supplemental data, or for their MACs to consider and accept those data 
as applicable and appropriate. In the FY 2016 IPPS/LTCH PPS proposed 
rule (80 FR 24488), we noted that one alternative would be to use 
slightly older data within the most recent extract of the hospital cost 
report data in the HCRIS database. We stated that we believe this would 
allow hospitals more time to submit data and MACs more time to consider 
and accept such data as applicable and appropriate.
    Therefore, in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24488), for the computation of Factor 3 for FY 2016, we proposed to 
hold constant the cost report years used to calculate Factor 3 and to 
use data from the 12-month 2012 or 2011 cost reports and, in the case 
of IHS hospitals, the 2012 cost report data submitted to CMS by IHS 
hospitals. However, because a more recent HCRIS database was available 
at the time of the development of the FY 2016 proposed rule, we 
proposed that we would continue to use the most recent HCRIS database 
extract available to us at the time of the annual rulemaking cycle. We 
noted that, as in prior years, if the more recent of the two cost 
reporting periods does not reflect data for a 12-month period, we would 
use data from the earlier of the two periods so long as that earlier 
period reflects data for a period of 12 months. If neither of the two 
periods reflects 12 months, we would use the period that reflects a 
longer amount of time. We proposed to codify this change for FY 2016 by 
amending

[[Page 49528]]

the regulations at Sec.  412.106(g)(1)(iii)(C). We invited public 
comments on this proposal, which we describe more fully below.
    For the FY 2015 IPPS/LTCH PPS final rule, we used the more recent 
of the full year 2012 or full year 2011 data from the March 2014 update 
of the hospital cost report data in the HCRIS database and 2010 cost 
report data submitted to CMS by IHS hospitals as of March 2014 to 
obtain the Medicaid days to calculate Factor 3. In addition, we used 
the FY 2012 SSI ratios published on the following CMS Web site to 
calculate Factor 3: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Dsh.html. In contrast, under our 
proposal for FY 2016, we indicated we would use the more recent of the 
full year 2012 or full year 2011 data from the March 2015 update of the 
hospital cost report data in the HCRIS database and the 2012 cost 
report data submitted to CMS by IHS hospitals to obtain the Medicaid 
days to calculate Factor 3. In addition, to calculate Factor 3 for FY 
2016, we anticipated that, under our proposal, we would use the FY 2013 
SSI ratios that we expected to be published on the CMS Web site but 
were not yet available before the public display of the proposed rule. 
For illustration purposes, in Table 18 associated with the FY 2016 
proposed rule (which is available via the Internet on the CMS Web site 
at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2016-IPPS-Proposed-Rule-Home-Page-Items/FY2016-IPPS-Proposed-Rule-Tables.html), we computed Factor 3 using the more 
recent of the full year 2012 or 2011 data from the December 2014 update 
of the hospital cost report data in the HCRIS database to obtain the 
Medicaid days and the FY 2012 SSI ratios published on the CMS Web site. 
We anticipated using the more recent of the full year 2012 or 2011 data 
from the March 2015 update of the hospital cost report data in the 
HCRIS database to obtain the Medicaid days and the FY 2013 SSI ratios 
to determine the final Factor 3 for FY 2016.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24488), we stated 
that for subsequent years, if we propose and finalize a policy of using 
insured low-income days in computing Factor 3, we intend to continue to 
use the most recent HCRIS database extract at the time of the annual 
rulemaking cycle, and to use the subsequent year of cost reports, as 
applicable, using the methodology described above (that is, to advance 
the 12-month cost reports by 1 year). We noted that, starting with the 
2013 cost reports, data for IHS hospitals will be included in the 
HCRIS. Therefore, if an IHS hospital has a 12-month 2013 cost reporting 
period in the HCRIS database, we will not need to use the 2012 data 
separately submitted to CMS by the IHS hospital. For example, if we 
finalize for FY 2017, a policy under which Factor 3 is determined on 
the basis of insured low-income days, this approach would result in the 
use of the more recent of the 12-month 2013 or 2012 cost reports in the 
most recent HCRIS database extract available at the time of rulemaking. 
In addition, for any subsequent years in which we finalize a policy to 
use insured low-income days to compute Factor 3, our intention would be 
to continue to use the most recently available SSI ratio data to 
calculate Factor 3 at the time of annual rulemaking. As we indicated in 
the FY 2016 IPPS/LTCH PPS proposed rule, we believe that it is 
appropriate to state our intentions regarding the specific data we 
would use in the event Factor 3 is determined on the basis of low-
income insured days for subsequent years to provide hospitals with as 
much guidance as possible so they may best consider how and when to 
submit cost report information in the future. We note that we will make 
proposals with regard to our methodology for calculating Factor 3 for 
subsequent years through notice-and-comment rulemaking.
    Comment: Several commenters supported the proposal to use more 
recent of the full year 2012 or 2011 data from the March 2015 update of 
the hospital cost report data in the HCRIS database to obtain the 
Medicaid days and the FY 2013 SSI ratios to determine the final Factor 
3 for FY 2016. Other commenters stated that they did not oppose the 
proposal.
    Response: We appreciate the commenters' support for or lack of 
opposition to this proposal.
    Comment: Several commenters questioned the data used to calculate 
the hospitals' Factor 3 and requested clarifications on various aspects 
of the proposed policy. For example, several commenters stated that 
their Medicaid days were understated, and other commenters stated that 
their Medicaid days were based on a 6-month cost report and they should 
be based on a 12-month cost report either by combining cost reports or 
annualizing the data. Several commenters requested that CMS clarify 
whether the 12-month 2012 cost report would have to fall within the 
Federal fiscal year, or if CMS intends to use the full year cost report 
from previous years if there are no full year cost reports during the 
period. One commenter suggested that, for a new hospital for which the 
applicable historical cost reporting data represent less than 12 
months, CMS use the full 12-month cost reporting data that are closest 
to the cost reporting period selected for determining Factor 3 in the 
FY 2016 IPPS/LTCH PPS final rule even if these cost reporting data are 
more recent than the selected period. The commenter also recommended, 
as an alternative, that CMS allow a new hospital to settle its 
uncompensated care payment on its filed cost report for the applicable 
fiscal year until the cost reporting period data that are applicable 
for computing Factor 3 include a full 12-month cost reporting period. 
One commenter asked for clarification on which SSI ratios will be used 
to settle the FY 2015 and FY 2016 cost reports, as well as which SSI 
ratios will be used for what purpose. A number of commenters provided 
information regarding their Medicaid days and requested changes based 
on that information.
    Response: We appreciate the commenters raising these data concerns 
and areas of needed clarification. We are finalizing our proposal to 
calculate Factor 3 using SSI days from the FY 2013 SSI ratios and 
Medicaid days from 2012 cost report data submitted to CMS by IHS 
hospitals and the more recent of hospital-specific full year 2012 cost 
reports (unless that cost report is unavailable or reflects less than a 
full 12-month year, in which case we will use the cost report from 2012 
or 2011 that is closest to being a full 12-month cost report) from the 
March 2015 update of the hospital cost report data in the HCRIS 
database. We also are finalizing our proposed revisions to the 
regulation at Sec.  412.106(g)(1)(iii)(C), which codifies the cost 
reporting periods selected for purposes of determining Factor 3 of the 
uncompensated care payment methodology for FY 2016. We note that since 
we issued the FY 2016 IPPS/LTCH PPS proposed rule, the FY 2013 SSI 
ratios have become available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Dsh.html. We also clarify that the 12-month cost 
report does not need to coincide with the Federal fiscal year.
    With regard to the comments from hospitals that found their Factor 
3 was calculated using a cost report that was less than 12 months, we 
are finalizing our proposal to use the 2012 cost report, unless that 
cost report is unavailable or reflects less than a full 12-month year. 
In the event the 2012 cost report is for less than 12 months, we will 
use the cost report from 2012 or 2011 that is

[[Page 49529]]

closest to being a full 12-month cost report. In the case where a less 
than 12-month cost report is used to calculate a hospital's Factor 3, 
this would indicate that both the 2012 and 2011 cost reports were less 
than 12 months. In such a case, we will use the longer of the two cost 
reports to calculate a hospital's Factor 3. We note that section 
1886(r)(2)(C) of the Act specifies that Factor 3 is equal to the 
percent that represents the amount of uncompensated care for such 
hospital for a period selected by the Secretary (as estimated by the 
Secretary, based on appropriate data divided by the aggregate amount of 
uncompensated care for all subsection (d) hospitals that receive a 
payment for such period (as so estimated). In implementing this 
provision, as we did through rulemaking in the FY 2014 IPPS/LTCH PPS 
final rule, we noted that we believed it was appropriate to first 
select the period--in that case, the period for which we had the most 
recently available data--and then to select the data from a cost report 
that aligns best with that period. Based upon our experience with 
implementing the provision for FY 2014 and FY 2015, we have determined 
that it is more appropriate to use the most recent extract of hospital 
cost report data for a slightly earlier period in order to give 
hospitals more time to submit data and MACs more time to consider and 
accept that data. As we have discussed, we believe this policy will 
improve the accuracy of the data used to calculate Factor 3. However, 
we acknowledge that the situations presented by commenters, where a 
hospital remains in operation in both Federal fiscal years for which we 
analyze cost report data but submits cost reports for both Federal 
fiscal years that reflect substantially less than a full year of data, 
pose unique challenges in the context of estimating Factor 3. We did 
not make a proposal to annualize or combine cost reports to calculate 
Factor 3. As a result, this is an issue that we intend to consider 
further and may address in future rulemaking.
    As stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50643), 
for new hospitals, which for Medicare DSH purposes include hospitals 
with a CCN established after 2012, we do not have data currently 
available to determine if the new hospital is eligible for empirically 
justified Medicare DSH payments and, therefore, eligible to receive an 
uncompensated care payment for FY 2016, nor do we have the data 
necessary to calculate a Factor 3 amount. Accordingly, we will treat 
new hospitals in the same manner as hospitals that are not found to be 
eligible to receive empirically justified Medicare DSH payments based 
upon the most recent available cost report from 2012 or 2011, such that 
the hospital may not receive either interim empirically justified 
Medicare DSH payments or interim uncompensated care payments. However, 
if the hospital is later determined to be eligible to receive 
empirically justified Medicare DSH payments based on its FY 2016 cost 
report, the hospital also will receive an uncompensated care payment 
based on the sum of Medicaid days and Medicare SSI days reported on its 
FY 2016 cost report.
    In response to the commenters' concerns about which SSI ratios will 
be used for what purpose, we note that, consistent with our methodology 
in FY 2014 and FY 2015, the most recently available SSI ratios, in 
conjunction with the Medicaid fraction listed in the most recent update 
of the Provider Specific File, are used to identify which hospitals are 
projected to receive empirically justified DSH payments for FY 2016, 
and thus are eligible to receive interim uncompensated care payments 
for FY 2016. For this FY 2016 IPPS/LTCH PPS final rule, the 2013 SSI 
ratios are the most recently available SSI ratios and the March 2015 
update is the most recent update of the Provider Specific File. The 
final determination as to whether a hospital is eligible to receive 
empirically justified DSH payments and therefore eligible to receive an 
uncompensated care payment is made at cost report settlement using the 
SSI ratio and Medicaid fraction reported on the provider's FY 2016 cost 
report. Therefore, for FY 2016, the 2013 SSI ratios are used to project 
eligibility to receive interim empirically justified DSH payments and 
interim uncompensated care payments, and the 2016 SSI ratios are used 
to determine, at cost report settlement, whether the hospital is 
ultimately eligible for empirically justified DSH payments and the 
uncompensated care payment. Furthermore, as stated elsewhere in this 
final rule, the SSI days from the 2013 SSI ratios are used in computing 
Factor 3. The calculation of Factor 3 in this final rule is a final 
determination that is not subject to review and will not be revised at 
cost report settlement to reflect updated information regarding the 
eligibility of individual hospitals for empirically justified DSH 
payments and uncompensated care payments.
    Comment: Several commenters requested additional time after the 
publication of the final rule to review the data used to calculate 
Factor 3 and submit corrections. Some commenters asked questions 
regarding whether or not Medicaid days from more recent cost reports 
than the cost reporting periods we proposed to use could be included 
for their hospitals in determining Factor 3 for FY 2016. Some of these 
commenters included specific information and copies of documentation 
related to these days.
    Response: We thank the commenters for their submissions. Regarding 
the data used to calculate Factor 3, we believe that the SSI days from 
the FY 2013 SSI ratios and Medicaid days from the more recent of 
hospitals' 2012 or 2011 cost report (that encompasses a period closest 
to 12 months) from the March 2015 HCRIS extract, as well as Medicaid 
days from 2012 cost report data submitted to CMS by IHS hospitals, 
should be used to determine Factor 3. As we stated above, we believe 
using 2011/2012 cost report data will allow hospitals more time to 
submit their cost report data and MACs more time to consider and accept 
such data as applicable and appropriate, thus balancing recency and 
accuracy. We cannot allow for further updates and revisions to the data 
used to determine Factor 3 because they would cause an unacceptable 
delay in the publication of this final rule and prevent changes and 
updates to payments under the IPPS from taking effect on October 1, the 
first day of the fiscal year. Furthermore, the statute provides the 
Secretary with the authority and discretion to estimate the amount of 
uncompensated care for a hospital and also provides the Secretary with 
the authority and discretion to select the time period for which this 
uncompensated care amount is estimated.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24488), we 
proposed to continue the policies that were finalized in the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50020) to address several specific 
issues concerning the process and data to be employed in determining 
Factor 3 in the case of hospital mergers for FY 2016 and subsequent 
fiscal years. In order to confirm mergers and ensure the accuracy of 
the data used to determine each merged hospital's uncompensated care 
payment, we stated that we would publish a table on the CMS Web site, 
in conjunction with the issuance of each Federal fiscal year's IPPS/
LTCH PPS proposed and final rules, that contains a list of the mergers 
that we are aware of and the computed uncompensated care payment for 
each merged hospital. Hospitals have 60 days from the date of public 
display of each year's IPPS/LTCH PPS proposed rule to review these 
tables and notify CMS in writing of any

[[Page 49530]]

inaccuracies. After the publication of the IPPS/LTCH PPS final rule, 
hospitals will have until August 31 of that year (for FY 2016, the 
deadline is August 31, 2015) to review and submit comments on the 
accuracy of the table for the applicable fiscal year. Comments can be 
submitted to our inbox at [email protected] through August 31, 
and any changes to Factor 3 will be posted on the CMS Web site prior to 
the start of the applicable fiscal year on October 1. We invited public 
comments on our proposal to continue these policies concerning the 
process and data to be employed in determining Factor 3 in the case of 
hospital mergers, as described above.
    Comment: Some commenters provided detailed information regarding 
specific merger situations involving their hospitals and requested that 
CMS consider these mergers in determining Factor 3 for FY 2016. One 
commenter expressed concern that if a hospital is not identified as 
having undergone a merger prior to the public display of the final 
rule, a recalculation would be performed on the surviving hospital's 
Factor 3 at the end of the applicable fiscal year in which the merger 
has taken place. The commenter was concerned that this process may 
result in an extended delay before a hospital's uncompensated care 
payment is corrected and may result in understated interim 
uncompensated care payments. The commenter recommended an alternate 
approach for the recalculation of a hospital's Factor 3 that utilizes 
the tentative settlement process currently used by the MACs for the 
purpose of updating the hospital's payment rate prior to final 
settlement.
    Response: We appreciate the commenters' input. As in FY 2015, we 
published a table on the CMS Web site in conjunction with the issuance 
of the proposed rule containing a list of the mergers that we are aware 
of and the computed uncompensated care payment for each merged 
hospital. The affected hospitals had the opportunity to comment during 
the public comment period on the accuracy of this information. We have 
updated our list of mergers based on information submitted by the MACs 
as of June 2015. In addition, we have reviewed the commenters' 
submissions of mergers not previously identified in the proposed rule 
and have updated our list accordingly.
    While we continue to believe that recalculation of a surviving 
hospital's Factor 3 at cost report settlement is the most conducive to 
administrative efficiency and predictability for both providers and 
MACs, we may explore the possibility of an alternative approach in 
which recalculation occurs during the tentative settlement process in 
future notice-and-comment rulemaking. In addition, we remind the 
commenters that, in the event that a merger is not identified by the 
MACs, we allow opportunity for comment on the accuracy of the mergers 
that we have identified during the comment period for the proposed rule 
and after the publication of the final rule. Hospitals have until 
August 31, 2015 to review and submit comments on the accuracy of the 
list of mergers that we have identified in this final rule.

E. Hospital Readmissions Reduction Program: Changes for FY 2016 Through 
FY 2017 (Sec. Sec.  412.150 through 412.154)

1. Statutory Basis for the Hospital Readmissions Reduction Program
    Section 3025 of the Affordable Care Act, as amended by section 
10309 of the Affordable Care Act, added a new section 1886(q) to the 
Act. Section 1886(q) of the Act establishes the ``Hospital Readmissions 
Reduction Program,'' effective for discharges from an ``applicable 
hospital'' beginning on or after October 1, 2012, under which payments 
to those applicable hospitals may be reduced to account for certain 
excess readmissions.
    Section 1886(q)(1) of the Act sets forth the methodology by which 
payments to ``applicable hospitals'' will be adjusted to account for 
excess readmissions. In accordance with section 1886(q)(1) of the Act, 
payments for discharges from an ``applicable hospital'' will be an 
amount equal to the product of the ``base operating DRG payment 
amount'' and the adjustment factor for the hospital for the fiscal 
year. That is, ``base operating DRG payments'' are reduced by a 
hospital-specific adjustment factor that accounts for the hospital's 
excess readmissions. Section 1886(q)(2) of the Act defines the base 
operating DRG payment amount as the payment amount that would otherwise 
be made under section 1886(d) of the Act (determined without regard to 
section 1886(o) of the Act [the Hospital VBP Program]) for a discharge 
if this subsection did not apply; reduced by any portion of such 
payment amount that is attributable to payments under paragraphs 
(5)(A), (5)(B), (5)(F), and (12) of section 1886(d) of the Act. 
Paragraphs (5)(A), (5)(B), (5)(F), and (12) of section 1886(d) of the 
Act refer to outlier payments, IME payments, DSH adjustment payments, 
and add-on payments for low-volume hospitals, respectively.
    Furthermore, section 1886(q)(2)(B) of the Act specifies special 
rules for defining the payment amount that would otherwise be made 
under section 1886(d) of the Act for certain hospitals, including 
policies for SCHs and for MDHs for FY 2013. In the FY 2013 IPPS/LTCH 
PPS final rule (77 FR 53374), we finalized policies to implement the 
statutory provisions related to the definition of ``base operating DRG 
payment amount'' with respect to those hospitals.
    Section 1886(q)(3)(A) of the Act defines the ``adjustment factor'' 
for an applicable hospital for a fiscal year as equal to the greater of 
(i) the ratio described in subparagraph (B) for the hospital for the 
applicable period (as defined in paragraph (5)(D)) for such fiscal 
year; or (ii) the floor adjustment factor specified in subparagraph 
(C). Section 1886(q)(3)(B) of the Act, in turn, describes the ratio 
used to calculate the adjustment factor. It states that the ratio is 
equal to 1 minus the ratio of--(i) the aggregate payments for excess 
readmissions and (ii) the aggregate payments for all discharges. 
Section 1886(q)(3)(C) of the Act establishes the floor adjustment 
factor, which is set at 0.97 for FY 2015 and subsequent fiscal years.
    Section 1886(q)(4) of the Act defines the terms ``aggregate 
payments for excess readmissions'' and ``aggregate payments for all 
discharges'' for an applicable hospital for the applicable period. The 
term ``aggregate payments for excess readmissions'' is defined in 
section 1886(q)(4)(A) of the Act as the sum, for applicable conditions 
of the product, for each applicable condition, of (i) The base 
operating DRG payment amount for such hospital for such applicable 
period for such condition; (ii) the number of admissions for such 
condition for such hospital for such applicable period; and (iii) the 
excess readmissions ratio for such hospital for such applicable period 
minus 1. The ``excess readmissions ratio'' is a hospital-specific ratio 
based on each applicable condition. Specifically, section 1886(q)(4)(C) 
of the Act defines the excess readmissions ratio as the ratio of 
actual-over-expected readmissions; specifically, the ratio of ``risk-
adjusted readmissions based on actual readmissions'' for an applicable 
hospital for each applicable condition, to the ``risk-adjusted expected 
readmissions'' for the applicable hospital for the applicable 
condition.
    Section 1886(q)(5) of the Act provides definitions of ``applicable 
condition,'' ``expansion of applicable conditions,'' ``applicable 
hospital,'' ``applicable period,'' and ``readmission.'' The term

[[Page 49531]]

``applicable condition'' (which is addressed in detail in section 
IV.C.3.a. of the FY 2012 IPPS/LTCH PPS final rule (76 FR 51665 through 
51666)) is defined as a condition or procedure selected by the 
Secretary among conditions and procedures for which: (i) Readmissions 
represent conditions or procedures that are high volume or high 
expenditures and (ii) measures of such readmissions have been endorsed 
by the entity with a contract under section 1890(a) of the Act and such 
endorsed measures have exclusions for readmissions that are unrelated 
to the prior discharge (such as a planned readmission or transfer to 
another applicable hospital). Section 1886(q)(5)(B) of the Act also 
requires the Secretary, beginning in FY 2015, to the extent 
practicable, to expand the applicable conditions beyond the three 
conditions for which measures have been endorsed to the additional four 
conditions that have been identified by the MedPAC in its report to 
Congress in June 2007 and to other conditions and procedures as 
determined appropriate by the Secretary.
    Section 1886(q)(5)(C) of the Act defines ``applicable hospital,'' 
that is, a hospital subject to the Hospital Readmissions Reduction 
Program, as a subsection (d) hospital or a hospital that is paid under 
section 1814(b)(3) of the Act, as the case may be. The term 
``applicable period,'' as defined under section 1886(q)(5)(D) of the 
Act, means, with respect to a fiscal year, such period as the Secretary 
shall specify. As explained in the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51671), the ``applicable period'' is the period during which data 
are collected in order to calculate various ratios and payment 
adjustments under the Hospital Readmissions Reduction Program.
    Section 1886(q)(6) of the Act sets forth the public reporting 
requirements for hospital-specific readmission rates. Section 
1886(q)(7) of the Act limits administrative and judicial review of 
certain determinations made pursuant to section 1886(q) of the Act. 
Finally, section 1886(q)(8) of the Act requires the Secretary to 
collect data on readmission rates for all hospital inpatients (not just 
Medicare patients) for a broad range of both subsection (d) and 
nonsubsection (d) hospitals in order to calculate the hospital-specific 
readmission rates for all such hospital inpatients and to publicly 
report these ``all-patient'' readmission rates.
2. Regulatory Background
    The payment adjustment factor set forth in section 1886(q) of the 
Act did not apply to discharges until FY 2013. In the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51660 through 51676), we addressed the issues of 
the selection of readmission measures and the calculation of the excess 
readmissions ratio, which will be used, in part, to calculate the 
readmissions adjustment factor. Specifically, in that final rule, we 
finalized policies that relate to the portions of section 1886(q) of 
the Act that address the selection of and measures for the applicable 
conditions, the definitions of ``readmission'' and ``applicable 
period,'' and the methodology for calculating the excess readmissions 
ratio. We also established policies with respect to measures for 
readmissions for the applicable conditions and our methodology for 
calculating the excess readmissions ratio.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through 
53401), we finalized policies that relate to the portions of section 
1886(q) of the Act that address the calculation of the hospital 
readmissions payment adjustment factor and the process by which 
hospitals can review and correct their data. Specifically, in that 
final rule, we addressed the base operating DRG payment amount, 
aggregate payments for excess readmissions and aggregate payments for 
all discharges, the adjustment factor, applicable hospital, limitations 
on review, and reporting of hospital-specific information, including 
the process for hospitals to review readmission information and submit 
corrections. We also established a new Subpart I under 42 CFR part 412 
(Sec. Sec.  412.150 through 412.154) to codify rules for implementing 
the Hospital Readmissions Reduction Program.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50649 through 
50676), we finalized our policies that relate to refinement of the 
readmissions measures and related methodology for the current 
applicable conditions, expansion of the ``applicable conditions'' for 
FY 2015 and subsequent fiscal years, and clarification of the process 
for reporting hospital-specific information, including the opportunity 
to review and submit corrections. We also established policies related 
to the calculation of the adjustment factor for FY 2014.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50024 through 
50048), we made refinements to the readmissions measures and related 
methodology for applicable conditions for FY 2015 and subsequent fiscal 
years, expanded the ``applicable conditions'' for FY 2017 and 
subsequent fiscal years, discussed the maintenance of technical 
specifications for quality measures, and described a waiver from the 
Hospital Readmissions Reduction Program for hospitals formerly paid 
under section 1814(b)(3) of the Act (Sec.  412.154(d)). We also 
specified the applicable period for FY 2015 and made changes to the 
calculation of the aggregate payments for excess readmissions to 
include two additional applicable conditions for the FY 2015 payment 
determination.
3. Overview of Policies for the FY 2016 and FY 2017 Hospital 
Readmissions Reduction Program
    In this final rule, for the FY 2016 Hospital Readmissions Reduction 
Program, we are--
     Specifying the adjustment factor floor for FY 2016 
(section IV.E.6. of the preamble of this final rule);
     Specifying the applicable period for FY 2016 (section 
IV.E.7. of the preamble of this final rule);
     Specifying the calculation of aggregate payments for 
excess readmissions for FY 2016 (section IV.E.8. of the preamble of 
this final rule); and
     Adopting an extraordinary circumstance exception policy to 
address hospitals that experience a disaster or other extraordinary 
circumstance beginning in FY 2016 and for subsequent years (section 
IV.E.9. of the preamble of this final rule).
    In addition, in this final rule, for the FY 2017 Hospital 
Readmissions Reduction Program, we are making a refinement to the 
pneumonia readmissions measure, which would expand the measure cohort, 
for the FY 2017 payment determination and subsequent years (section 
IV.E.4. of the preamble of this final rule).
    We note that, during the comment period for the FY 2016 IPPS/LTCH 
PPS proposed rule, we received public comments that were not related to 
our specific proposals for the Hospital Readmissions Reduction Program 
and therefore considered out of the scope of the proposed rule. Some of 
the out-of-scope comments were related to a wide range of aspects of 
the Hospital Readmissions Reduction Program and its readmissions 
measures. For example, there were recommendations for statutory changes 
to the program payment structure and previously finalized program 
definitions, changes to the program goals, and the frequency of 
assessing and reporting performance on measures. Notably, there were 
many public comments on risk adjustment for sociodemographic status 
(SDS) at the patient-level and hospital-level. While we appreciate the 
commenters' feedback, we consider these topics to be

[[Page 49532]]

out of scope of the proposed rule. Therefore, we are not addressing 
most of them in this final rule. However, we are addressing topic of 
the risk-adjustment for SDS in this final rule because of the volume of 
public comments and the importance of this topic for outcome measures 
in payment programs. We are also addressing the impact of declining 
admissions on the Hospital Readmissions Reduction Program.
    All other out-of-scope topics will be taken into consideration when 
developing policies and program requirements for future years.
    Comment: Several commenters suggested that all readmissions 
measures in the Hospital Readmissions Reduction Program should be risk-
adjusted to reflect the hospital's inpatient population and account for 
sociodemographic factors, including income, education level, and 
poverty rate. The commenters suggested that, without an SDS adjustment, 
large hospitals, major teaching hospitals, and hospitals with a higher 
DSH proportion (indicating higher levels of care for more vulnerable 
patients) are more likely to be penalized for community factors outside 
of a hospital's control (for example, availability of primary care, 
physical therapy, rehabilitative services, and family support).
    Response: While we appreciate these comments and the importance of 
the role that sociodemographic status plays in the care of patients, we 
continue to have concerns about holding hospitals to different 
standards for the outcomes of their patients of low sociodemographic 
status because we do not want to mask potential disparities or minimize 
incentives to improve the outcomes of disadvantaged populations. We 
routinely monitor the impact of sociodemographic status on hospitals' 
results on our measures. To date, we have found that hospitals that 
care for large proportions of patients of low sociodemographic status 
are capable of performing well on our measures (we refer readers to the 
2014 Chartbook, pages 48-57, 70-73, and 78, at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/Medicare-Hospital-Quality-Chartbook-2014.pdf).
    NQF is currently undertaking a 2-year trial period in which new 
measures and measures undergoing maintenance review will be assessed to 
determine if risk-adjusting for sociodemographic factors is appropriate 
for each measure. For 2 years, NQF will conduct a trial of a temporary 
policy change that will allow inclusion of sociodemographic factors in 
the risk-adjustment approach for some performance measures. At the 
conclusion of the trial, NQF will determine whether to make this policy 
change permanent. Measure developers must submit information such as 
analyses and interpretations as well as performance scores with and 
without sociodemographic factors in the risk adjustment model.
    Furthermore, the Office of the Assistant Secretary for Planning and 
Evaluation (ASPE) is conducting research to examine the impact of 
sociodemographic status on quality measures, resource use, and other 
measures under the Medicare program as directed by the IMPACT Act. We 
will closely examine the findings of the ASPE reports and related 
Secretarial recommendations and consider how they apply to our quality 
programs at such time as they are available.
    Comment: A number of commenters recommended that CMS examine the 
effect of declining hospital admissions on readmission penalties, and 
consider whether future revisions to the readmission measure formulas 
are needed.
    Response: We thank the commenters for their recommendation. We note 
that the basic readmissions formulas for the Hospital Readmissions 
Reduction Program are specified in the statute. We will continue to 
monitor admissions rates and the effects of changes in admission rates 
on measures performance in our quality reporting and incentive 
programs.
4. Refinement of the Hospital 30-Day, All-Cause, Risk-Standardized 
Readmission Rate (RSRR) Following Pneumonia Hospitalization Measure 
Cohort for the FY 2017 Payment Determination and Subsequent Years
a. Background
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24490 through 
24492), for the FY 2017 payment determination and subsequent years, we 
proposed a refinement of the currently NQF-endorsed CMS Hospital 30-
Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) following 
Pneumonia Hospitalization measure (NQF #0506) (hereafter referred to as 
the CMS 30-Day Pneumonia Readmission Measure (NQF #0506)), which would 
have expanded the measure cohort. For the purposes of describing the 
refinement of this measure, we noted that ``cohort'' is defined as the 
hospitalizations, or ``index admissions,'' that are included in the 
measure. This cohort is the set of hospitalizations that meet all of 
the inclusion and exclusion criteria, and we proposed an expansion to 
this set of hospitalizations. The previously adopted CMS 30-Day 
Pneumonia Readmission Measure (NQF #0506) included hospitalizations for 
patients with a principal discharge diagnosis of pneumonia indicating 
viral or bacterial pneumonia. For measure cohort details of the prior 
version of the measure, we refer readers to the measure methodology 
report and measure risk adjustment statistical model on our Web site 
at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    The proposed measure refinement would have expanded the measure 
cohort to include hospitalizations for patients with a principal 
discharge diagnosis of aspiration pneumonia and for patients with a 
principal discharge diagnosis of either sepsis or respiratory failure 
who also have a secondary diagnosis of pneumonia present on admission. 
We suggested that including such patients would better represent the 
complete population of a hospital's patients who are receiving clinical 
management and treatment for pneumonia, and ensure the measure includes 
more complete and comparable populations across hospitals. In addition, 
use of comparable populations would reduce measurement bias resulting 
from different coding practices seen across hospitals. We stated our 
belief that measure results derived from refinement of the measure 
cohort in the manner we proposed would improve the measure's assessment 
of avoidable readmissions and more accurately reflect quality and 
outcome for pneumonia patients. The determination to refine the measure 
cohort was based on our evaluation of both the frequency and variation 
in utilization of these diagnosis codes, and as such coding practices 
have been described in recently published studies. The rationale for 
expanding the measure cohort for the CMS 30-Day Pneumonia Readmission 
Measure (NQF #0506) was further described in section VIII.A.6.b. of the 
preamble of the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24564 
through 24566) under our discussion of proposed refinements for the 
Hospital IQR Program.
b. Overview of the Measure Cohort Change
    The proposed measure refinement would have expanded the cohort to 
include hospitalizations for patients with a principal discharge 
diagnosis of aspiration pneumonia and for patients with a principal 
discharge diagnosis of either sepsis or respiratory failure who

[[Page 49533]]

also have a secondary diagnosis of pneumonia that is coded as present 
on admission. The data sources, exclusion criteria, and assessment of 
the outcome of readmission remained unchanged.
    The proposed refinement of the CMS 30-Day Pneumonia Readmission 
Measure (NQF #0506) with this expanded measure cohort was reviewed by 
the Measure Applications Partnership (MAP), which conditionally 
supported use of the measure update for the Hospital Readmissions 
Reduction Program pending NQF review of the measure update and 
appropriate consideration under the NQF SDS pilot, if required, as 
detailed in its Pre-Rulemaking 2015 MAP Recommendations Report 
available at: https://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx.
    We note that during the MAP Hospital Workgroup and MAP Coordinating 
Committee in-person meetings, some members discussed the benefit of a 
phased approach that would first allow for public reporting of the 
refined measure before implementing it in a pay-for-performance program 
in order to allow providers to gain experience with the measure 
refinement, while other members expressed concern that this would delay 
implementation of an improved measure and also cause alignment issues 
and potential confusion among providers. The MAP supported the use of 
the measure refinement without stipulating prior public reporting as a 
condition of support. However, we acknowledge the importance of this 
consideration and took it into account when determining to propose 
implementation of the measure refinement in the Hospital Readmissions 
Reduction Program beginning with the FY 2017 payment determination.
    We considered other options in proposing when to implement the 
refinement of the CMS 30-Day Pneumonia Readmission Measure (NQF #0506) 
in the Hospital Readmissions Reduction Program, including the option to 
implement the measure refinement beginning with the FY 2018 payment 
determination. Delaying implementation of the measure refinement until 
FY 2018 would allow hospitals to gain more experience with the impact 
of the measure refinement on their measure results and excess 
readmissions ratios. However, it also would mean delaying use of an 
improved measure that we believe would better represent the complete 
population of a hospital's pneumonia patients and better reflect 
comparable pneumonia patients across hospitals. Delaying implementation 
of the measure refinement for the Hospital Readmissions Reduction 
Program could also potentially increase confusion among hospitals as 
well as raise alignment issues with other CMS hospital inpatient 
quality reporting and payment programs that use the same measure.
    After considering these options, we proposed to begin with the FY 
2017 payment determination to implement the refinement of the CMS 30-
Day Pneumonia Readmission Measure (NQF #0506) in the Hospital 
Readmissions Reduction Program. We believed that after weighing the 
considerations, the proposed measure refinement should be incorporated 
into the Hospital Readmissions Reduction Program as soon as statutorily 
and operationally feasible, primarily because improving the measure in 
the manner we proposed would greatly improve the measure's assessment 
of quality and outcome for pneumonia patients and, therefore, its 
implementation should not be unnecessarily delayed.
c. Risk Adjustment
    The risk adjustment and statistical modeling approach as well as 
the measure calculation for the proposed measure remained unchanged 
from the previously adopted measure. However, we did confirm the use of 
current risk-adjustment variables in the expanded measure cohort by 
confirming their association with the outcome. We also examined 
additional risk variables leading to the addition of a few additional 
risk variables in the measure.
d. Calculating the Excess Readmissions Ratio
    The proposed refinement of the measure cohort for the CMS 30-Day 
Pneumonia Readmission Measure (NQF #0506) would have used the same 
methodology and statistical modeling approach as the previously adopted 
in the CMS 30-Day Pneumonia Readmission Measure (NQF #0506) for the 
Hospital Readmissions Reduction Program, as well as the other Hospital 
Readmissions Reduction Program measures. We published a detailed 
description of how the readmission measures estimate the excess 
readmissions ratios in the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53380 through 53381).
    We noted that the set of hospitals for which this refined measure 
would be calculated for the Hospital Readmissions Reduction Program 
would differ from those used in calculations for the Hospital IQR 
Program. The Hospital Readmissions Reduction Program includes only 
subsection (d) hospitals as defined in section 1886(d)(1)(B) of the Act 
(and, if not waived from participating, those hospitals paid under 
section 1814(b)(3) of the Act), while the Hospital IQR Program 
calculations include non-IPPS hospitals, such as CAHs, cancer 
hospitals, and hospitals located in the Territories of the United 
States. However, we believed that adoption of the refinement to the 
measure cohort for the CMS 30-Day Pneumonia Readmission Measure (NQF 
#0506) would be appropriate for both programs.
    In summary, we proposed a refinement of the NQF-endorsed CMS 30-Day 
Pneumonia Readmission Measure (NQF #0506), which would expand the 
measure cohort, in the Hospital Readmissions Reduction Program for the 
FY 2017 payment determination and subsequent years.
    We invited public comment on this proposal.
    Comment: Many commenters supported CMS' proposed refinement of the 
NQF-endorsed CMS 30-Day Pneumonia Readmission Measure (NQF #0506), 
stating that the revised cohort would more completely cover the 
inpatient hospital patient population.
    Response: We appreciate the commenters' support.
    Comment: Many commenters expressed concern that patients with acute 
respiratory failure present higher acuity than average community 
acquired pneumonia patients, as they often arrive at the hospital 
intubated or in immediate need of ventilator support and frequently 
have pre-existing lung disease and pathology, severe influenza, or 
viral pneumonia. Several commenters also stated that the proposed 
inclusion of patients with respiratory failure may result in the double 
counting of cases in two different readmission measures (pneumonia and 
chronic obstructive pulmonary disease (COPD)), as both the proposed 
revised pneumonia measure and the COPD measure could include the same 
cases when respiratory failure is the primary diagnosis and COPD and 
pneumonia are listed as the secondary diagnoses. One commenter was 
particularly concerned about the inclusion of sepsis patients with 
other infectious diseases in addition to pneumonia, severe illness 
consistent with severe sepsis, or prolonged intubation.
    Response: We thank the commenters for their recommendations, and 
appreciate their concerns regarding the extent of the cohort expansion 
particularly with regard to inclusion of patients with a primary 
diagnosis of respiratory failure and severe sepsis.

[[Page 49534]]

Upon further evaluation and analysis of the impact of the proposed 
measure, and in response to the public comments, we are finalizing a 
modified version of the expanded pneumonia cohort from what we had 
specified in the proposed rule. The modified version includes patients 
with a principal discharge diagnosis of pneumonia or aspiration 
pneumonia, and patients with a principal discharge diagnosis of sepsis 
with a secondary diagnosis of pneumonia coded as present on admission. 
However, we are not including patients with a principal discharge 
diagnosis of respiratory failure or patients with a principal discharge 
diagnosis of sepsis if they are coded as having severe sepsis as we had 
previously proposed.
    As we stated in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24490 through 24492), the purpose of expanding the cohort of the 
current pneumonia readmission measure is to include a broader spectrum 
of pneumonia patients and respond to changes in coding practices that 
were potentially biasing estimates of the performance of hospitals. 
Additional analyses were conducted after the proposed rule was 
published as part of the measure reevaluation and re-specification 
process. These analyses revealed challenges to the risk adjustment 
methodology with respect to patients with severe sepsis and respiratory 
failure, and revealed that the proposed cohort expansion would 
exacerbate the bias in the existing measure that it was intended to 
mitigate. Specifically, hospital coding frequency was found to be even 
more strongly, and inversely, associated with performance. Therefore, 
we modified the refined cohorts to address this bias.
    The decision to finalize the modified version is also consistent 
with clinical practice, as these sickest patients often receive care in 
an intensive care unit and other specialized interventions (such as 
ventilator support) that is clinically distinct from the care provided 
to patients with less severe forms of pneumonia. The modified version 
has also been determined to be statistically robust, such that risk-
standardization accounted for case-mix differences across hospitals, 
without being confounded by hospital coding patterns. These changes 
also are consistent with public comments received in response to the FY 
2016 IPPS/LTCH PPS proposed rule. For details on the rationale for the 
cohort expansion, the analyses supporting the re-specified cohort we 
are finalizing instead of the specifications previously proposed, and 
the full specification and results of the measure as adopted in this 
final rule, we refer readers to the measure methodology report for the 
finalized measure in the AMI, HF, PN, COPD, and Stroke Readmission 
Updates zip file on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    This additional analysis indicates that the modified version of the 
expansion of the cohort we are finalizing responds to potential bias in 
the current measure, and that risk adjustment is adequate. We believe 
this revised cohort expansion produces a measure that does not favor or 
disadvantage hospitals on the basis of their coding practices. We also 
believe the revised cohort we are adopting still effectively broadens 
the cohort of patients included in the measure to be more clinically 
comprehensive (bringing in sepsis and aspiration pneumonia patients) in 
relation to what we previously proposed. Finally, we believe that we 
also are being responsive to commenters' concerns by not including 
those patients that are most severely ill on arrival (those with severe 
sepsis and respiratory failure, as included in the previously proposed 
version), because these patients' increased risk is challenging to 
appropriately account for across hospitals.
    We note that because patients with a principal discharge diagnosis 
of respiratory failure are no longer included in the modified version 
of the cohort, there is no opportunity for readmissions to be counted 
in both the pneumonia and COPD readmission measures.
    Comment: A number of commenters argued that patients with a 
diagnosis of sepsis and secondary diagnosis of pneumonia have a higher 
predicted mortality and readmission risk, and often have multiple 
comorbidity conditions, which are prone to exacerbation during the 
index admission. One commenter argued the inclusion of sepsis in the 
pneumonia readmission measures creates the possibility of duplicate 
penalties. Another commenter argued that additional conditions needed 
to be added to the risk adjustment for sepsis patients. Another 
commenter was particularly concerned about the inclusion of sepsis 
patients with severe sepsis.
    Response: We thank the commenters for their comments. As we 
discussed, we have conducted additional analysis regarding the impact 
of the modified cohort, and in response to public comments and the 
results of this analysis, we are finalizing the modified version of the 
expanded pneumonia cohort from what we had specified in the proposed 
rule. The modified version of the expanded pneumonia cohort includes 
patients with a principal discharge diagnosis of pneumonia or 
aspiration pneumonia, and patients with a principal discharge diagnosis 
of sepsis with a secondary diagnosis of pneumonia coded as present on 
admission, but does not include patients with a principal discharge 
diagnosis of respiratory failure or patients coded as having severe 
sepsis. Based on the testing and analysis we conducted, we believe that 
the risk adjustment we are finalizing adequately accounts for the 
varying severity and comorbidities of patients across the finalized 
cohort, and that hospitals will not be unfairly penalized for treating 
sicker patients. Based on our additional evaluation, we confirmed that 
the approach to risk-adjustment for the modified measure was effective, 
as hospital coding frequency was not associated with performance on the 
readmission measure.
    We had previously proposed including the presence of sepsis or 
respiratory failure in the index admission as covariates, or risk-
adjusters, in the model. However, analyses conducted subsequent to 
publication of the FY 2016 IPPS/LTCH PPS proposed rule revealed that 
this approach would exacerbate the bias in the existing measure that it 
was intended to mitigate as such patients' increased risk was 
challenging to appropriately account for across hospitals. Therefore, 
in the modified measure, the risk adjustment factors used in the 
publicly reported version of the readmission measure were retained and 
one new risk-adjustment variable (respiratory dependence/tracheostomy 
(CC77)) was added. No additional risk adjustment variables were added 
for the patients included in the expanded cohort (that is, aspiration 
pneumonia and sepsis patients).
    We conducted additional analyses and found that limiting the 
measure expansion to aspiration pneumonia patients and sepsis patients 
without including risk adjustment for these alternate principal 
diagnoses of respiratory failure and severe sepsis was the most 
feasible approach that brought in a large portion of patients currently 
excluded from the measure but mitigated the biases introduced by 
hospital coding patterns. Specifically, our analysis indicated that 
under the revisions we are adopting, hospital performance among 
hospitals with higher rates of patients with sepsis or

[[Page 49535]]

aspiration pneumonia is similar to those with fewer such patients, 
suggesting that the finalized risk adjustment methodology adequately 
accounts for the differences in risk among the subgroups of patients. 
For details on the finalized risk adjustment model, we refer readers to 
the measure methodology report for the finalized measure in the AMI, 
HF, PN, COPD, and Stroke Readmission Updates zip file on the CMS Web 
site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    Comment: Several commenters objected to the addition of aspiration 
pneumonia to the revised cohort. A number of commenters suggested that 
adding aspiration pneumonia to the current measure denominator would 
result in a 26.4 percent increase in the patient cohort for major 
teaching hospitals, compared to a 20.6 percent increase for nonteaching 
hospitals, raising concerns that the modification would adversely 
affect teaching hospital measure performance.
    Response: We appreciate the commenters' concerns regarding the 
inclusion of aspiration pneumonia in the finalized cohort. We believe 
that inclusion of aspiration pneumonia patients in the expanded cohort 
we are adopting in this final rule is appropriate to broaden the 
portion of patients otherwise excluded from the measure. While the 
pathological causes of aspiration pneumonia are slightly different from 
the causes of community acquired pneumonia, in routine clinical 
practice it can be very challenging for physicians to differentiate 
aspiration syndromes, including pneumonitis and pneumonia, from other 
types of pneumonia included in the measure. This is reflected in 
tremendous variation across hospitals in the use of aspiration 
pneumonia diagnosis codes. This variation suggests that hospitals are 
not consistently distinguishing between these conditions as distinct 
subtypes. Moreover, the treatment of patients hospitalized for 
pneumonia or aspiration pneumonia or sepsis due to pneumonia is very 
similar and involves antibiotics, IV fluids, and symptom management. In 
addition, although some patients with aspiration pneumonia have a 
higher predicted mortality or readmission risk, many of the associated 
comorbidities are captured in the finalized measure's risk adjustment 
methodology, including clinical history of stroke, neuromuscular 
disease, and dementia.
    We find that hospital performance among hospitals with higher rates 
of patients with aspiration pneumonia is similar to those with fewer 
such patients, suggesting that the finalized risk adjustment 
methodology adequately accounts for the differences in risk among the 
subgroups of patients. Although major teaching hospitals may have 
larger increases in the size of their cohorts due to this modification, 
that should not impose additional burden on these hospitals (as this is 
a claims-based measure and does not require data collection), nor 
should it lead to worse performance on the measure by major teaching 
hospitals due to adequate risk-adjustment for the aspiration pneumonia 
patients.
    The analyses of this measure indicated that an approximately equal 
numbers of hospitals, and, specifically, equal numbers of teaching 
hospitals, improved or worsened their categorical performance under the 
modified version of the measure we are adopting in this final rule. We 
did not see evidence that teaching hospitals will be differentially 
burdened or adversely affected on the basis of this modification to the 
measure. We believe that while some variation in case-mix is to be 
expected, the risk adjustment methodology we have adopted takes into 
account many of the risk factors for aspiration pneumonia (including 
age, neurologic disease, and dementia), and adequately controls for 
these differences. We found minimal association between aspiration 
coding patterns and risk-standardized readmission rates. For details on 
the measure as finalized, we refer readers to the measure methodology 
report for the finalized measure in the AMI, HF, PN, COPD, and Stroke 
Readmission Updates zip file on the CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    Comment: A number of commenters expressed concern that the revised 
measure only received conditional support from the MAP for use in the 
Hospital Readmissions Reduction Program pending NQF review of the 
measure update and appropriate consideration under the NQF 
sociodemographic status pilot. The commenters noted that NQF review and 
consideration of the measure under the sociodemographic status pilot 
have not yet occurred, and recommended postponing implementation of the 
measure refinement until these conditions have been met. Several 
commenters also suggested that the revisions to the measure cohort were 
significant enough that the revised measure was in many respects a new, 
rather than a revised, measure. Some commenters expressed concern that 
consumers may be confused or unaware of the differences between the 
revised measure we are adopting in this final rule and the previously 
adopted version of the measure.
    Response: We thank the commenters for their thoughts regarding the 
MAP review and NQF endorsement. We note that NQF endorsement is not a 
formal requirement for the refinement of Hospital Readmissions 
Reduction Program measures. We plan to submit the modified version of 
the measure that we are adopting in this final rule to the NQF for 
endorsement maintenance as part of the Pulmonary Project when the 
project has its call for measures later this year. In addition, the 
modified version of this measure will be included in the NQF SDS pilot 
as part of the endorsement maintenance process. While we believe both 
of these processes will provide valuable input on this measure, one of 
the most important goals of the Hospital Readmissions Reduction Program 
is to more completely cover the inpatient hospital patient population, 
and we have performed extensive additional analyses to evaluate the 
impact of the revised measure. We did not want to delay the 
implementation of this important revision until after the completion of 
the NQF endorsement process, as we believe that improving the measure 
in the form we are finalizing will greatly improve the measure's 
assessment of quality and outcome for pneumonia patients, and further 
the goals of the Hospital Readmissions Reduction Program. Therefore, we 
believe that it is appropriate to implement the measure in the 
finalized timeframe.
    Although the modified version of the cohort expansion for this 
measure that we are finalizing will increase the number of patients 
included in the measure and change the national readmission rate, we do 
not believe this constitutes a new measure. The intent of the measure 
has not changed since initial development and NQF endorsement. The 
finalized readmission measure cohort will be approximately 15 percent 
smaller than originally proposed in the FY 2016 IPPS/LTCH PPS proposed 
rule (80 FR 24491). In addition, section 1886(q)(5)(B) of the Act 
allows the use of a feasible and practical measure that has not been 
NQF-endorsed as long as due consideration has been given to the 
measure. After extensive consideration, we believe adoption of the 
modified version of this measure beginning with the FY 2017 payment 
determination is feasible, practical, and important for

[[Page 49536]]

improving the assessment of quality and outcome for pneumonia patients 
such that implementation should not be unnecessarily delayed. For 
details of the finalized measure that we are adopting in this final 
rule, we refer readers to the measure methodology report and measure 
risk adjustment statistical model in the AMI, HF, PN, COPD, and Stroke 
Readmission Updates zip file on the CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. We will note 
which version of the measure is displayed on Hospital Compare to 
minimize any potential confusion for consumers.
    Comment: Several commenters objected to studies CMS cited in the 
proposed rule regarding the impact of coding differences across 
hospitals on the 30-Day Pneumonia Readmission Measure (NQF#0506), 
arguing that these studies examine in-hospital mortality rates, but not 
30-day readmission rates. The commenters further argued that these 
studies do not examine the cause of the coding differences, and that 
additional study on the effect of the revised measure is needed prior 
to implementation in the Hospital Readmissions Reduction Program.
    Response: We thank the commenters for their responses. We note 
that, although the original medical research prompting the expansion of 
the measure cohort used only inpatient mortality as the outcome, we 
evaluated the concerns about potential bias due to differences in 
coding practice among hospitals using the 30-day readmission and 
mortality measures and found patterns as described in the literature. 
This subsequent evaluation lead us to undergo the measure reevaluation 
work that resulted in the proposed change to the cohort as described in 
the FY 2016 IPPS/LTCH PPS proposed rule and the modified version that 
we are adopting in this final rule. Furthermore, a more recent 
publication has confirmed similar risks using 30-day readmission and 
mortality rates in Medicare beneficiaries. For details of this 
publication and the modified version of the expanded measure cohort 
that we are adopting in this final rule, we refer readers to the 
measure methodology report and measure risk adjustment statistical 
model in the AMI, HF, PN, COPD, and Stroke Readmission Updates zip file 
on CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    Comment: A number of commenters requested that CMS postpone 
implementation of the revised measure in order to allow hospitals more 
time to prepare for the impact of any changes to their rates and to 
develop or evaluate interventions for the expanded cohort. Many 
commenters also asked CMS to provide dry run data on Hospital Compare 
for hospitals to review prior to implementation, with some requesting a 
year of public reporting prior to implementation. Other commenters 
noted that the performance period for the FY 2017 payment year will 
have ended by the time this final rule is published, which will limit 
the ability of hospitals to improve performance prior to payment 
impact.
    Several commenters also requested delayed implementation of the 
revised measure in order to provide time to assess the impact of the 
upcoming transition to ICD-10 on the revised pneumonia readmission 
measure, and suggested that CMS not make any changes to the current 
pneumonia measure until any impact can be evaluated. The commenters 
asked that CMS provide data on the revised measure, including ICD-9 and 
ICD-10 detailed codes, to allow hospitals to assess impact prior to 
implementation.
    Response: We thank the commenters for their comments and 
acknowledge their concerns urging delayed implementation of the 
measure. However, we believe that it is important to expand the portion 
of the hospital inpatient population covered by the Hospital 
Readmissions Reduction Program at this time. Most hospitals have been 
working on addressing the key topics associated with readmissions, 
including coordination of care and care transitions, for some time, and 
we do not believe delayed implementation will be of benefit to 
patients.
    With respect to the upcoming ICD-10 transition, we are aware of 
stakeholder concerns about the potential impacts to hospital 
performance on quality measures when ICD-10 is implemented on October 
1, 2015, as well as their calls for more extensive testing to 
understand the impacts before any payments or penalties are implicated. 
As part of ICD-10 transition planning that has taken place over the 
past several years, we have performed testing and analyses across the 
agency with respect to system readiness and claims reimbursement, and 
we have provided extensive education and outreach to providers, 
vendors, and other payers. Our systems for quality programs have been 
tested and will continue to be tested as ICD-10 data are submitted in 
order to ensure the accuracy of measure calculations and to monitor and 
assess the translation of measure specifications to ICD-10, potential 
coding variation, and impacts on measure performance and payment 
incentive programs. We will continue to work with stakeholders during 
the ICD-10 transition to monitor and assess impacts and to address any 
potential issues that may occur.
    With respect to the modified version of the expanded measure cohort 
that we are adopting in this final rule, we refer commenters to the 
measure methodology report for the details of the measure in the AMI, 
HF, PN, COPD, and Stroke Readmission Updates zip file on CMS Web site 
at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    Based on further analyses and testing of this measure and after 
consideration of the public comments we received, we are finalizing a 
modified version of the expanded pneumonia cohort from the version we 
specified in the FY 2016 IPPS/LTCH PPS proposed rule. The modified 
version of the expanded pneumonia cohort includes patients with a 
principal discharge diagnosis of pneumonia or aspiration pneumonia, and 
patients with a principal discharge diagnosis of sepsis with a 
secondary diagnosis of pneumonia coded as POA, but does not include 
patients with a principal discharge diagnosis of respiratory failure or 
patients with a principal discharge diagnosis of sepsis if they are 
coded as having severe sepsis.
5. Maintenance of Technical Specifications for Quality Measures
    We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50039) for a discussion of the maintenance of technical specifications 
for quality measures for the Hospital Readmissions Reduction Program. 
Technical specifications of the readmission measures are provided on 
our Web site in the Measure Methodology Reports at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. Additional resources 
about the Hospital Readmissions Reduction Program and measure technical 
specifications are on the QualityNet Web site on the Resources page at: 
http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228772412995.

[[Page 49537]]

6. Floor Adjustment Factor for FY 2016 (Sec.  412.154(c)(2))
    Section 1886(q)(3)(A) of the Act defines the ``adjustment factor'' 
for an applicable hospital for a fiscal year as equal to the greater of 
(i) the ratio described in subparagraph (B) for the hospital for the 
applicable period (as defined in paragraph (5)(D)) for such fiscal 
year; or (ii) the floor adjustment factor specified in subparagraph 
(C). Section 1886(q)(3)(B) of the Act, in turn, describes the ratio 
used to calculate the adjustment factor. Specifically, it states that 
the ratio is equal to 1 minus the ratio of--(i) the aggregate payments 
for excess readmissions and (ii) the aggregate payments for all 
discharges. The calculation of this ratio is codified at Sec.  
412.154(c)(1) of the regulations. Section 1886(q)(3)(C) of the Act 
specifies the floor adjustment factor, which is set at 0.97 for FY 2015 
and subsequent fiscal years. We codified the floor adjustment factor at 
Sec.  412.154(c)(2) of the regulations (77 FR 53386).
    Consistent with section 1886(q)(3) of the Act, codified at Sec.  
412.154(c)(2), the adjustment factor is either the greater of the ratio 
or, for FY 2015 and subsequent fiscal years, a floor adjustment factor 
of 0.97. Under our established policy, the ratio is rounded to the 
fourth decimal place. In other words, for FY 2015 and subsequent fiscal 
years, a hospital subject to the Hospital Readmissions Reduction 
Program will have an adjustment factor that is between 1.0 (no 
reduction) and 0.9700 (greatest possible reduction).
7. Applicable Period for FY 2016
    Under section 1886(q)(5)(D) of the Act, the Secretary has the 
authority to specify the applicable period with respect to a fiscal 
year under the Hospital Readmissions Reduction Program. In the FY 2012 
IPPS/LTCH PPS final rule (76 FR 51671), we finalized our policy to use 
3 years of claims data to calculate the readmission measures. In the FY 
2013 IPPS/LTCH PPS final rule (77 FR 53675), we codified the definition 
of ``applicable period'' in the regulations at 42 CFR 412.152 as the 3-
year period from which data are collected in order to calculate excess 
readmissions ratios and adjustments for the fiscal year, which includes 
aggregate payments for excess readmissions and aggregate payments for 
all discharges used in the calculation of the payment adjustment.
    Consistent with the definition specified at Sec.  412.152, we 
established that the applicable period for FY 2014 under the Hospital 
Readmissions Reduction Program is the 3-year period from July 1, 2009, 
to June 30, 2012. That is, we determined the excess readmissions ratios 
and calculate the payment adjustment (including aggregate payments for 
excess readmissions and aggregate payments for all discharges) for FY 
2014 using data from the 3-year time period of July 1, 2009 through 
June 30, 2012, as this was the most recent available 3-year period of 
data upon which to base these calculations (78 FR 50669).
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 40 through 50041), 
for FY 2015, consistent with the definition specified at Sec.  412.152, 
we finalized an ``applicable period'' for the Hospital Readmissions 
Reduction Program to be the 3-year period from July 1, 2010 through 
June 30, 2013. That is, we determined the excess readmissions ratios 
and the payment adjustment (including aggregate payments for excess 
readmissions and aggregate payments for all discharges) for FY 2015 
using data from the 3-year time period of July 1, 2010 through June 30, 
2013.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24492), for FY 
2016, consistent with the definition specified at Sec.  412.152, we 
proposed an ``applicable period'' for the Hospital Readmissions 
Reduction Program to be the 3-year period from July 1, 2011 through 
June 30, 2014. In other words, we proposed that the excess readmissions 
ratios and the payment adjustment (including aggregate payments for 
excess readmissions and aggregate payments for all discharges) for FY 
2016 using data from the 3-year time period of July 1, 2011 through 
June 30, 2014.
    Comment: Some commenters requested that CMS revise the applicable 
time period to only include a shorter time period such as the most 
recent year.
    Response: We note that we addressed this concern in the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53380), and that we use a 3-year period 
of index admissions to increase the number of cases per hospital used 
for measure calculation, which improves the precision of each 
hospital's readmission estimate. Although this approach utilizes older 
data, it also identifies more variation in hospital performance and 
still allows for improvement from one year of reporting to the next.
    After consideration of the public comments we received, we are 
finalizing as proposed the applicable period of the 3-year time period 
of July 1, 2011 to June 30, 2014 to calculate the excess readmission 
ratios and the readmission payment adjustment factors for FY 2016.
8. Calculation of Aggregate Payments for Excess Readmissions for FY 
2016
a. Background
    Section 1886(q)(3)(B) of the Act specifies the ratio used to 
calculate the adjustment factor under the Hospital Readmissions 
Reduction Program. It states that the ratio is equal to 1 minus the 
ratio of--(i) the aggregate payments for excess readmissions and (ii) 
the aggregate payments for all discharges. The definition of 
``aggregate payments for excess readmissions'' and ``aggregate payments 
for all discharges,'' as well as a methodology for calculating the 
numerator of the ratio (aggregate payments for excess readmissions) and 
the denominator of the ratio (aggregate payments for all discharges) 
are codified at Sec.  412.154(c)(2) of the regulations (77 FR 53387).
    Section 1886(q)(4) of the Act sets forth the definitions of 
``aggregate payments for excess readmissions'' and ``aggregate payments 
for all discharges'' for an applicable hospital for the applicable 
period. The term ``aggregate payments for excess readmissions'' is 
defined in section 1886(q)(4)(A) of the Act as for a hospital for an 
applicable period, the sum, for applicable conditions of the product, 
for each applicable condition, of (i) The base operating DRG payment 
amount for such hospital for such applicable period for such condition; 
(ii) the number of admissions for such condition for such hospital for 
such applicable period; and (iii) the excess readmissions ratio for 
such hospital for such applicable period minus 1. We codified this 
definition of ``aggregate payments for excess readmissions'' under the 
regulations at Sec.  412.152 as the product, for each applicable 
condition, of: (1) The base operating DRG payment amount for the 
hospital for the applicable period for such condition; (2) the number 
of admissions for such condition for the hospital for the applicable 
period; and (3) the excess readmissions ratio for the hospital for the 
applicable period minus 1 (77 FR 53675).
    The excess readmissions ratio is a hospital-specific ratio 
calculated for each applicable condition. Specifically, section 
1886(q)(4)(C) of the Act defines the excess readmissions ratio as the 
ratio of ``risk-adjusted readmissions based on actual readmissions'' 
for an applicable hospital for each applicable condition, to the 
``risk-adjusted expected readmissions'' for the applicable hospital for 
the applicable condition. The methodology for the calculation of the 
excess readmissions ratio was finalized in the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51673).

[[Page 49538]]

``Aggregate payments for excess readmissions'' is the numerator of the 
ratio used to calculate the adjustment factor under the Hospital 
Readmissions Reduction Program (as described in further detail later in 
this section).
    The term ``aggregate payments for all discharges'' is defined at 
section 1886(q)(4)(B) of the Act as for a hospital for an applicable 
period, the sum of the base operating DRG payment amounts for all 
discharges for all conditions from such hospital for such applicable 
period. ``Aggregate payments for all discharges'' is the denominator of 
the ratio used to calculate the adjustment factor under the Hospital 
Readmissions Reduction Program. We codified this definition of 
``aggregate payments for all discharges'' under the regulations at 
Sec.  412.152 (77 FR 53387).
    We finalized the inclusion of one additional applicable condition, 
Patients Readmitted Following Coronary Artery Bypass Graft (CABG) 
Surgery, in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50033 through 
50039) effective for FY 2017. We will address the inclusion of this 
additional measure in the calculation of the readmissions payment 
adjustment for FY 2017 in the FY 2017 rulemaking.
b. Calculation of Aggregate Payments
    As discussed above, when calculating the numerator (aggregate 
payments for excess readmissions), we determine the base operating DRG 
payments for the applicable period. ``Aggregate payments for excess 
readmissions'' (the numerator) is defined as the sum, for applicable 
conditions of the product, for each applicable condition, of (i) the 
base operating DRG payment amount for such hospital for such applicable 
period for such condition; (ii) the number of admissions for such 
condition for such hospital for such applicable period; and (iii) the 
excess readmissions ratio for such hospital for such applicable period 
minus 1.
    When determining the base operating DRG payment amount for an 
individual hospital for such applicable period for such condition, we 
use Medicare inpatient claims from the MedPAR file with discharge dates 
that are within the same applicable period to calculate the excess 
readmissions ratio. We use MedPAR claims data as our data source for 
determining aggregate payments for excess readmissions and aggregate 
payments for all discharges, as this data source is consistent with the 
claims data source used in IPPS rulemaking to determine IPPS rates.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24493 through 
24496), for FY 2016, we proposed to use MedPAR claims with discharge 
dates that are on or after July 1, 2011, and no later than June 30, 
2014. Under our established methodology, we use the update of the 
MedPAR file for each Federal fiscal year, which is updated 6 months 
after the end of each Federal fiscal year within the applicable period, 
as our data source (that is, the March updates of the respective 
Federal fiscal year MedPAR files) for the final rules.
    The FY 2011 through FY 2014 MedPAR data files can be purchased from 
CMS. Use of these files allows the public to verify the readmissions 
adjustment factors. Interested individuals may order these files 
through the CMS Web site at: http://www.cms.hhs.gov/LimitedDataSets/ by 
clicking on MedPAR Limited Data Set (LDS)-Hospital (National). This Web 
page describes the files and provides directions and detailed 
instructions for how to order the data sets. Persons placing an order 
must send the following: A Letter of Request, the LDS Data Use 
Agreement and Research Protocol (refer to the Web site for further 
instructions), the LDS Form, and a check for $3,655 to:
     If using the U.S. Postal Service: Centers for Medicare and 
Medicaid Services, RDDC Account, Accounting Division, P.O. Box 7520, 
Baltimore, MD 21207-0520.
     If using express mail: Centers for Medicare and Medicaid 
Services, OFM/Division of Accounting--RDDC, Mailstop C#-07-11, 7500 
Security Boulevard, Baltimore, MD 21244-1850.
    In the FY 2016 IPPS/LTCH PPS proposed rule, we proposed to 
determine aggregate payments for excess readmissions and aggregate 
payments for all discharges using data from MedPAR claims with 
discharge dates that are on or after July 1, 2011, and no later than 
June 30, 2014. However, we noted that, for the purpose of modeling the 
proposed FY 2016 readmissions payment adjustment factors for the FY 
2016 IPPS/LTCH PPS proposed rule, we used excess readmissions ratios 
for applicable hospitals from the FY 2015 Hospital Readmissions 
Reduction Program applicable period. For this FY 2016 IPPS/LTCH PPS 
final rule, applicable hospitals will have had the opportunity to 
review and correct data from the proposed FY 2016 applicable period of 
July 1, 2011 to June 30, 2014, before they are made public under our 
policy regarding the reporting of hospital-specific information, which 
we discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 
through 53401).
    In the FY 2016 IPPS/LTCH PPS proposed rule, for FY 2016, we 
proposed to use MedPAR data from July 1, 2011 through June 30, 2014. 
Specifically, in the FY 2016 IPPS/LTCH PPS proposed rule, we used the 
March 2012 update of the FY 2011 MedPAR file to identify claims within 
FY 2011 with discharges dates that are on or after July 1, 2011, the 
March 2013 update of the FY 2012 MedPAR file to identify claims within 
FY 2012, the March 2014 update of the FY 2013 MedPAR file to identify 
claims within FY 2013, and the December 2014 update of the FY 2014 
MedPAR file to identify claims within FY 2014 with discharge dates no 
later than June 30, 2014. For this final rule, we proposed to use the 
same MedPAR files as listed above for claims within FY 2011, FY 2012 
and FY 2013. For claims within FY 2014, we proposed to use in the final 
rule the March 2015 update of the FY 2014 MedPAR file.
    In order to identify the admissions for each condition, to 
calculate the aggregate payments for excess readmissions for an 
individual hospital, for FY 2016, we proposed to identify each 
applicable condition using the ICD-9-CM codes used to identify 
applicable conditions to calculate the excess readmissions ratios. 
(Although the compliance date for the ICD-10-CM and ICD10-PCS code sets 
is October 1, 2015 (79 FR 45128 through 45134), these proposed policies 
apply to data periods prior to this compliance date.) Under our 
existing policy, we identify eligible hospitalizations and readmissions 
of Medicare patients discharged from an applicable hospital having a 
principal diagnosis for the measured condition in an applicable period 
(76 FR 51669). The discharge diagnoses for each applicable condition 
are based on a list of specific ICD-9-CM codes for that condition. 
These codes are posted on the QualityNet Web site at: http://www.QualityNet.org > Hospital-Inpatient > Claims-Based Measures > 
Readmission Measures > Measure Methodology.
    We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50041 through 50048) for a discussion of how we identify the applicable 
conditions to calculate the aggregate payments for excess readmissions 
for FY 2015. For FY 2016, we proposed to follow this same approach.
    In the FY 2016 IPPS/LTCH PPS proposed rule, for FY 2016, we 
proposed to continue to apply the same exclusions to the claims in the 
MedPAR file as we applied for FY 2015 for the current applicable 
conditions. For FY 2016, in order to have the same types of admissions 
to calculate aggregate payments for excess readmissions as is used to 
calculate the excess

[[Page 49539]]

readmissions ratio, we proposed to identify admissions for the AMI, HF, 
PN, THA/TKA, COPD applicable conditions, for the purposes of 
calculating aggregate payments for excess readmissions as follows:
     We would exclude admissions that are identified as an 
applicable condition if the patient died in the hospital, as identified 
by the discharge status code on the MedPAR claim.
     We would exclude admissions identified as an applicable 
condition for which the patient was transferred to another provider 
that provides acute care hospital services (that is, a CAH or an IPPS 
hospital), as identified through examination of contiguous stays in 
MedPAR at other hospitals.
     We would exclude admissions identified as an applicable 
condition for patients who are under the age of 65, as identified by 
linking the claim information to the information provided in the 
Medicare Enrollment Database.
     For conditions identified as AMI, we would exclude claims 
that are same day discharges, as identified by the admission date and 
discharge date on the MedPAR claim.
     We would exclude admissions for patients who did not have 
Medicare Parts A and B FFS enrollment in the 12 months prior to the 
index admission, based on the information provided in the Medicare 
Enrollment Database.
     We would exclude admissions for patients without at least 
30 days post-discharge enrollment in Medicare Parts A and B FFS, based 
on the information provided in the Medicare Enrollment Database.
     We would exclude all multiple admissions within 30 days of 
a prior index admission's discharge date, as identified in the MedPAR 
file, consistent with how multiple admissions within 30 days of an 
index admission are excluded from the calculation of the excess 
readmissions ratio.
    These exclusions are consistent with our current methodology, which 
was established in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50048).
    Furthermore, we would only identify Medicare FFS claims that meet 
the criteria (that is, claims paid for under Medicare Part C (Medicare 
Advantage) would not be included in this calculation), consistent with 
the methodology to calculate excess readmissions ratios based solely on 
admissions and readmissions for Medicare FFS patients. Therefore, 
consistent with our established methodology, for FY 2016, we would 
exclude admissions for patients enrolled in Medicare Advantage as 
identified in the Medicare Enrollment Database. This policy is 
consistent with how admissions for Medicare Advantage patients are 
identified in the calculation of the excess readmissions ratios under 
our established methodology. The tables below list the ICD-9-CM codes 
we proposed to use to identify each applicable condition to calculate 
the aggregate payments for the excess readmissions proposal for FY 
2016. These ICD-9-CM codes also would be used to identify the 
applicable conditions to calculate the excess readmissions ratios, 
consistent with our established policy (76 FR 51673 through 51676).

             ICD-9-CM Codes To Identify Pneumonia (PN) Cases
------------------------------------------------------------------------
      ICD-9-CM code                     Description of code
------------------------------------------------------------------------
480.0....................  Pneumonia due to adenovirus.
480.1....................  Pneumonia due to respiratory syncytial virus.
480.2....................  Pneumonia due to parainfluenza virus.
480.3....................  Pneumonia due to SARS-associated coronavirus.
480.8....................  Viral pneumonia: pneumonia due to other virus
                            not elsewhere classified.
480.9....................  Viral pneumonia unspecified.
481......................  Pneumococcal pneumonia [streptococcus
                            pneumoniae pneumonia].
482.0....................  Pneumonia due to klebsiella pneumoniae.
482.1....................  Pneumonia due to pseudomonas.
482.2....................  Pneumonia due to hemophilus influenzae [h.
                            influenzae].
482.30...................  Pneumonia due to streptococcus unspecified.
482.31...................  Pneumonia due to streptococcus group a.
482.32...................  Pneumonia due to streptococcus group b.
482.39...................  Pneumonia due to other streptococcus.
482.40...................  Pneumonia due to staphylococcus unspecified.
482.41...................  Pneumonia due to staphylococcus aureus.
482.42...................  Methicillin Resistant Pneumonia due to
                            Staphylococcus Aureus.
482.49...................  Other staphylococcus pneumonia.
482.81...................  Pneumonia due to anaerobes.
482.82...................  Pneumonia due to escherichia coli [e.coli].
482.83...................  Pneumonia due to other gram-negative
                            bacteria.
482.84...................  Pneumonia due to legionnaires' disease.
482.89...................  Pneumonia due to other specified bacteria.
482.9....................  Bacterial pneumonia unspecified.
483.0....................  Pneumonia due to mycoplasma pneumoniae.
483.1....................  Pneumonia due to chlamydia.
483.8....................  Pneumonia due to other specified organism.
485......................  Bronchopneumonia organism unspecified.
486......................  Pneumonia organism unspecified.
487.0....................  Influenza with pneumonia.
488.11...................  Influenza due to identified novel H1N1
                            influenza virus with pneumonia.
------------------------------------------------------------------------


           ICD-9-CM Codes To Identify Heart Failure (HF) Cases
------------------------------------------------------------------------
      ICD-9-CM code                       Code description
------------------------------------------------------------------------
402.01...................  Hypertensive heart disease, malignant, with
                            heart failure.
402.11...................  Hypertensive heart disease, benign, with
                            heart failure.

[[Page 49540]]

 
402.91...................  Hypertensive heart disease, unspecified, with
                            heart failure.
404.01...................  Hypertensive heart and chronic kidney
                            disease, malignant, with heart failure and
                            with chronic kidney disease stage I through
                            stage IV, or unspecified.
404.03...................  Hypertensive heart and chronic kidney
                            disease, malignant, with heart failure and
                            with chronic kidney disease stage V or end
                            stage renal disease.
404.11...................  Hypertensive heart and chronic kidney
                            disease, benign, with heart failure and with
                            chronic kidney disease stage I through stage
                            IV, or unspecified.
404.13...................  Hypertensive heart and chronic kidney
                            disease, benign, with heart failure and with
                            chronic kidney disease stage I through stage
                            IV, or unspecified failure and chronic
                            kidney disease stage V or end stage renal
                            disease.
404.91...................  Hypertensive heart and chronic kidney
                            disease, unspecified, with heart failure and
                            chronic kidney disease stage V or end stage
                            renal disease heart failure and with chronic
                            kidney disease stage I through stage IV, or
                            unspecified.
404.93...................  Hypertensive heart and chronic kidney
                            disease, unspecified, with heart failure and
                            chronic kidney disease stage V or end stage
                            renal disease.
428.xx...................  Heart Failure.
------------------------------------------------------------------------


   ICD-9-CM Codes To Identify Acute Myocardial Infarction (AMI) Cases
------------------------------------------------------------------------
      ICD-9-CM code                     Description of code
------------------------------------------------------------------------
410.00...................  AMI (anterolateral wall)--episode of care
                            unspecified.
410.01...................  AMI (anterolateral wall)--initial episode of
                            care.
410.10...................  AMI (other anterior wall)--episode of care
                            unspecified.
410.11...................  AMI (other anterior wall)--initial episode of
                            care.
410.20...................  AMI (inferolateral wall)--episode of care
                            unspecified.
410.21...................  AMI (inferolateral wall)--initial episode of
                            care.
410.30...................  AMI (inferoposterior wall)--episode of care
                            unspecified.
410.31...................  AMI (inferoposterior wall)--initial episode
                            of care.
410.40...................  AMI (other inferior wall)--episode of care
                            unspecified.
410.41...................  AMI (other inferior wall)--initial episode of
                            care.
410.50...................  AMI (other lateral wall)--episode of care
                            unspecified.
410.51...................  AMI (other lateral wall)--initial episode of
                            care.
410.60...................  AMI (true posterior wall)--episode of care
                            unspecified.
410.61...................  AMI (true posterior wall)--initial episode of
                            care.
410.70...................  AMI (subendocardial)--episode of care
                            unspecified.
410.71...................  AMI (subendocardial)--initial episode of
                            care.
410.80...................  AMI (other specified site)--episode of care
                            unspecified.
410.81...................  AMI (other specified site)--initial episode
                            of care.
410.90...................  AMI (unspecified site)--episode of care
                            unspecified.
410.91...................  AMI (unspecified site)--initial episode of
                            care.
------------------------------------------------------------------------


 ICD-9-CM Codes To Identify Chronic Obstructive Pulmonary Disease (COPD)
                                  Cases
------------------------------------------------------------------------
      ICD-9-CM code                     Description of code
------------------------------------------------------------------------
491.21...................  Obstructive chronic bronchitis; With (acute)
                            exacerbation; acute exacerbation of COPD,
                            decompensated COPD, decompensated COPD with
                            exacerbation.
491.22...................  Obstructive chronic bronchitis; with acute
                            bronchitis.
491.8....................  Other chronic bronchitis. Chronic:
                            Tracheitis, tracheobronchitis.
491.9....................  Unspecified chronic bronchitis.
492.8....................  Other emphysema; emphysema (lung or
                            pulmonary): NOS, centriacinar,
                            centrilobular, obstructive, panacinar,
                            panlobular, unilateral, vesicular. MacLeod's
                            syndrome; Swyer-James syndrome; unilateral
                            hyperlucent lung.
493.20...................  Chronic obstructive asthma; asthma with COPD,
                            chronic asthmatic bronchitis, unspecified.
493.21...................  Chronic obstructive asthma; asthma with COPD,
                            chronic asthmatic bronchitis, with status
                            asthmaticus.
493.22...................  Chronic obstructive asthma; asthma with COPD,
                            chronic asthmatic bronchitis, with (acute)
                            exacerbation.
496......................  Chronic: nonspecific lung disease,
                            obstructive lung disease, obstructive
                            pulmonary disease (COPD) NOS. NOTE: This
                            code is not to be used with any code from
                            categories 491-493.
518.81*..................  Other diseases of lung; acute respiratory
                            failure; respiratory failure NOS.
518.82*..................  Other diseases of lung; acute respiratory
                            failure; other pulmonary insufficiency,
                            acute respiratory distress.
518.84*..................  Other diseases of lung; acute respiratory
                            failure; acute and chronic respiratory
                            failure.
799.1*...................  Other ill-defined and unknown causes of
                            morbidity and mortality; respiratory arrest,
                            cardiorespiratory failure.
------------------------------------------------------------------------
* Principal diagnosis when combined with a secondary diagnosis of AECOPD
  (491.21, 491.22, 493.21, or 493.22).


[[Page 49541]]


ICD-9-CM Codes To Identify Total Hip Arthroplasty/Total Knee Arthroplaty
                             (THA/TKA) Cases
------------------------------------------------------------------------
               ICD-9-CM code                     Description of code
------------------------------------------------------------------------
81.51.....................................  Total hip arthroplasty.
81.54.....................................  Total knee arthroplasty.
------------------------------------------------------------------------

    For FY 2016, we proposed to calculate aggregate payments for excess 
readmissions, using MedPAR claims from July 1, 2011 to June 30, 2014, 
to identify applicable conditions based on the same ICD-9-CM codes used 
to identify the conditions for the readmissions measures, and to apply 
the proposed exclusions for the types of admissions discussed above. To 
calculate aggregate payments for excess readmissions, we proposed to 
calculate the base operating DRG payment amounts for all claims in the 
3-year applicable period for each applicable condition (AMI, HF, PN, 
COPD and THA/TKA) based on the claims we have identified as described 
above. Once we have calculated the base operating DRG amounts for all 
the claims for the five applicable conditions, we proposed to sum the 
base operating DRG payments amounts by each condition, resulting in 
five summed amounts, one amount for each of the five applicable 
conditions. We proposed to then multiply the amount for each condition 
by the respective excess readmissions ratio minus 1 when that excess 
readmissions ratio is greater than 1, which indicates that a hospital 
has performed, with respect to readmissions for that applicable 
condition, worse than the average hospital with similar patients. Each 
product in this computation represents the payments for excess 
readmissions for that condition. We proposed to then sum the resulting 
products which represent a hospital's proposed ``aggregate payments for 
excess readmissions'' (the numerator of the ratio). Because this 
calculation is performed separately for each of the five conditions, a 
hospital's excess readmissions ratio must be less than or equal to 1 on 
each measure to avoid CMS' determination that there were payments made 
by CMS for excess readmissions (resulting in a payment reduction under 
the Hospital Readmissions Reduction Program). In other words, in order 
to avoid a payment reduction a hospital's excess readmissions ratio 
must be less than or equal to 1 on each measure. We note that we did 
not propose any changes to our existing methodology to calculate 
``aggregate payments for all discharges'' (the denominator of the 
ratio).
    We proposed the following methodology for FY 2016 as displayed in 
the chart below.

  Formulas To Calculate the Readmissions Adjustment Factor for FY 2016
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Aggregate payments for excess readmissions = [sum of base operating DRG
 payments for AMI x (Excess Readmissions Ratio for AMI-1)] + [sum of
 base operating DRG payments for HF x (Excess Readmissions Ratio for HF-
 1)] + [sum of base operating DRG payments for PN x (Excess Readmissions
 Ratio for PN-1)] + [sum of base operating DRG payments for COPD) x
 (Excess Readmissions Ratio for COPD-1)] + [sum of base operating DRG
 payments for THA/TKA x (Excess Readmissions Ratio for THA/TKA-1)].
* We note that if a hospital's excess readmissions ratio for a condition
 is less than/equal to 1, there are no aggregate payments for excess
 readmissions for that condition included in this calculation.
Aggregate payments for all discharges = sum of base operating DRG
 payments for all discharges.
Ratio = 1-(Aggregate payments for excess readmissions/Aggregate payments
 for all discharges).
Proposed Readmissions Adjustment Factor for FY 2016 is the higher of the
 ratio or 0.9700.
------------------------------------------------------------------------
* Based on claims data from July 1, 2011 to June 30, 2014 for FY 2016.

    We invited public comment on these proposals.
    Comment: Several commenters recommended changes to the methodology 
to calculate the readmission payment adjustment factors, many of these 
similar to comments received in prior rulemaking. MedPAC reiterated 
several comments regarding the Hospital Readmissions Reduction Program 
related to the calculation of the readmissions payment adjustment 
factor, including that the readmission penalty formula is flawed 
because aggregate penalties remain constant even as national 
readmission rates decline; the condition-specific penalty per excess 
readmission is higher for conditions with low readmission rates; and 
the penalty should roughly equal the cost of excess readmissions over a 
fixed target level of readmissions. Other commenters also echoed 
MedPAC's point that the calculation of the readmission payment 
adjustment factor creates excessive payment reductions that exceed the 
cost to the Medicare program of the readmission. Other perceived flaws 
noted by commenters included that the payment adjustment factor should 
be adjusted to account for socioeconomic factors and that the 
calculation does not recognize improvement by a hospital in reducing 
readmissions.
    While some commenters asserted that CMS has the authority through 
rulemaking to modify the calculation of the payment adjustment factor 
to address these issues, other commenters indicated that these 
revisions would require a change in statute.
    Response: We received similar types of comments in previous 
rulemaking and we continue to believe that the statute is prescriptive 
with respect to the calculation of aggregate payments for excess 
readmissions because it specifies that the ``aggregate payments for 
excess readmissions'' is the sum for each condition of the product of 
the operating DRG payment amount for such hospital for such applicable 
period for such condition and the number of admissions for such 
condition and the excess readmission ratio minus one. We believe that 
section 1886(q)(4)(A) of the Act requires us to include all admissions 
for a condition in the calculation of aggregate payments for excess 
readmissions. Therefore, we agree with the commenters who indicated 
that the statutory calculation of the penalty creates a result that the 
commenters believe to be prescriptive. The commenters who believe we 
have the discretionary authority to implement an alternative penalty 
calculation to address their issues did not suggest an adequate 
statutory basis for such an approach. We continue to believe that we 
are implementing the provision as required by law.
    As noted above, ASPE is conducting research on the issue of risk 
adjustment for sociodemographic status as directed by the IMPACT Act, 
and expects to issue a report to Congress, including recommendations 
for improvements to the Hospital Readmissions Reduction Program based 
on that research.
    Comment: Some commenters continue to believe that, by including 
admissions denied by the CMS RACs, a hospital would be penalized twice 
for the same admission--once by the RAC denial and a second time by 
having the

[[Page 49542]]

admission included in the readmission payment penalty.
    Response: As we have explained in prior rulemaking, given the 
timing of the RAC audits and the updates of the SAF and MedPAR files 
used to calculate the readmissions measures and readmissions payment 
adjustment factors, we are not certain that all denied claims will be 
reflected in our claims files at the time of our calculations under the 
Hospital Readmissions Reduction Program. However, we continue to 
believe that using these updates of the MedPAR and SAF files is 
consistent with IPPS ratesetting and allows for transparency for the 
public to obtain this dataset for replication. Furthermore, inpatient 
stays that are denied payment under Medicare Part A typically remain 
classified as inpatient stays, and can be billed to Medicare Part B as 
an Medicare Part B inpatient stay. These inpatient stays that are 
denied payment under Medicare Part A will typically continue to count 
as a qualifying inpatient stay for other payment purposes such as 
qualifying for SNF benefits and Medicare DSH patient days. Therefore, 
we continue to believe that it is appropriate to include these 
admissions in the Hospital Readmissions Reduction Program.
    We did not receive any public comments generally objecting to the 
other proposed aspects of the calculation of aggregate payments for 
excess readmissions for FY 2016, such as the specific ICD-9 codes used 
in the calculation and the data sources for calculation.
    After considering the public comments we received, we are 
finalizing our proposed calculation of aggregate payments for excess 
readmissions without modification.
9. Extraordinary Circumstance Exception Policy for the Hospital 
Readmissions Reduction Program Beginning in FY 2016 and for Subsequent 
Years
a. Background
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28117), we 
welcomed public comment on our proposal to adopt an extraordinary 
circumstance exception policy for the Hospital Readmissions Reduction 
Program. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50048), we 
indicated that we received many comments in support of CMS establishing 
a formal extraordinary circumstance exception policy for the Hospital 
Readmissions Reduction Program. We also previously indicated that any 
specific proposals related to the implementation of an extraordinary 
circumstance exception policy would be proposed through rulemaking with 
an opportunity for public comment. In the FY 2016 IPPS/LTCH PPS 
proposed rule (80 FR 24497), we agreed with commenters that there may 
be periods of time during which a hospital is not able to submit all 
claims (from which readmission measures data are derived) in an 
accurate or timely fashion due to an extraordinary circumstance beyond 
its control. Section 1886(q)(5)(D) of the Act permits the Secretary to 
determine the ``applicable period'' for readmissions data collection, 
and we believe that the statute allows us to determine that the period 
not include times when hospitals may encounter extraordinary 
circumstances.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24497), we 
proposed adopting an extraordinary circumstance exception policy for 
the Hospital Readmissions Reduction Program beginning in FY 2016 and 
for subsequent years. This policy was similar to the extraordinary 
circumstance exception policy for the Hospital IQR Program, as 
finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51651), 
modified in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836) 
(designation of a non-CEO hospital contact), and further modified in 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50277) (amended Sec.  
412.140(c)(2) to refer to ``extension or exemption'' instead of the 
former ``extension or waiver''). We also considered how best to align 
an extraordinary circumstance exception policy for the Hospital 
Readmissions Reduction Program with existing extraordinary circumstance 
exception policies for other IPPS quality reporting and payment 
programs, such as the Hospital VBP Program, to the extent feasible.
    In the proposed rule (80 FR 24497), we also considered the 
feasibility and implications of excluding data for certain readmission 
measures for a limited period of time from the calculations for a 
hospital's excess readmissions ratios for the applicable performance 
period. By minimizing the data excluded from the program, this approach 
would enable affected hospitals to continue to participate in the 
Hospital Readmissions Reduction Program for a given fiscal year if they 
otherwise continue to meet applicable measure minimum threshold 
requirements. We believe that this approach could help alleviate the 
reporting burden for a hospital that is adversely impacted by a natural 
disaster or other extraordinary circumstance beyond its control, while 
enabling the hospital to continue to participate in the Hospital 
Readmissions Reduction Program.
b. Requests for an Extraordinary Circumstance Exception
    As we stated in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24497), based upon our prior experience with the Hospital IQR Program 
and the Hospital VBP Program, we anticipate the need to provide 
exceptions to only a small number of hospitals affected by a natural 
disaster or other extraordinary circumstance. During the review of a 
hospital's request for an extraordinary circumstance exception, we will 
maintain the general principle that providing high quality of care and 
ensuring patient safety is of paramount importance, especially in 
difficult circumstances. We do not intend to allow a hospital to use 
this proposed policy and the request process to seek exclusion from the 
Hospital Readmissions Reduction Program in its entirety for a given 
fiscal year(s) solely because of experiencing an extraordinary 
circumstance. Rather, we intend to provide relief for a hospital whose 
ability to accurately or timely submit all of its claims (from which 
readmission measures data are derived) has been negatively impacted as 
a direct result of experiencing a significant disaster or other 
extraordinary circumstance beyond the control of the hospital.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24497 through 
24498) we proposed that the request process for an extraordinary 
circumstance exception begin with the submission of an extraordinary 
circumstance exception request form by a hospital within 90 calendar 
days of the natural disaster or other extraordinary circumstance. We 
believe that the 90-calendar day timeframe is an appropriate period of 
time for a hospital to determine whether to submit an extraordinary 
circumstance exception request. It is also the same length of time as 
the current time period allowed under the Hospital VBP Program. Under 
this policy, a hospital will be able to request a Hospital Readmissions 
Reduction Program extraordinary circumstance exception at the same time 
it may request similar exceptions under the Hospital IQR Program (Sec.  
412.140(c)(2)), the Hospital VBP Program (78 FR 50704 through 50706), 
and the HAC Reduction Program (which we are finalizing in section 
IV.G.8.b. of the preamble to this final rule). The extraordinary 
circumstance exception

[[Page 49543]]

request form will be made available on the QualityNet Web site.
    The following minimum set of information will be required to submit 
the request:
     Hospital CCN;
     Hospital name;
     Hospital Chief Executive Officer (CEO) and any other 
designated personnel contact information, including name, email 
address, telephone number, and mailing address (must include a physical 
address; a post office box address is not acceptable);
     Hospital's reason for requesting an exception, including:
    ++ CMS program name (the Hospital Readmissions Reduction Program);
    ++ The measure(s) and submission quarters affected by the 
extraordinary circumstance that the hospital is seeking an exception 
for should be accompanied with the specific reasons why the exception 
is being sought; and
    ++ How the extraordinary circumstance negatively impacted 
performance on the measure(s) for which an exception is being sought;
     Evidence of the impact of the extraordinary circumstances, 
including but not limited to, photographs, newspaper, and other media 
articles; and
     The request form must be signed by the hospital's CEO or 
designated non-CEO contact and submitted to CMS.
    The same set of information is currently required under the 
Hospital IQR Program and the Hospital VBP Program on the request form 
from a hospital seeking an extraordinary circumstance exception with 
respect to these programs. The specific list of required information is 
subject to change from time to time at the discretion of CMS.
    Following receipt of the request form, CMS will: (1) Provide a 
written acknowledgement of receipt of the request using the contact 
information provided in the request form to the CEO and any additional 
designated hospital personnel; and (2) provide a formal response to the 
CEO and any additional designated hospital personnel using the contact 
information provided in the request notifying them of our decision. 
Under this policy, we will review each request for an extraordinary 
circumstance exception on a case-by-case basis at our discretion. To 
the extent feasible, we also will review requests in conjunction with 
any similar requests made under other IPPS quality reporting and 
payment programs, such as the Hospital IQR Program and the Hospital VBP 
Program.
    This policy would not preclude CMS from granting extraordinary 
circumstance exceptions to hospitals that do not request them if we 
determine at our discretion that a disaster or other extraordinary 
circumstance has affected an entire region or locale. If CMS makes such 
a determination to grant an extraordinary circumstance exception to 
hospitals in an affected region or locale, we will convey this decision 
through routine communication channels to hospitals, vendors, and QIOs, 
including, but not limited to, issuing memos, emails, and notices on 
the QualityNet Web site. This provision also aligns with the Hospital 
IQR Program's extraordinary circumstances extensions or exemptions 
policy.
    We invited public comment on this proposal.
    Comment: Many commenters supported the proposal to establish a 
request process for extraordinary circumstance exceptions for the 
Hospital Readmissions Reductions Program. The commenters noted that it 
was in alignment with other CMS hospital quality reporting programs and 
would provide relief to hospitals affected by a natural disaster or 
other extraordinary circumstances. Several commenters recommended that 
CMS develop a single extraordinary circumstance exception request form 
for all hospital quality reporting programs. Several commenters also 
supported the proposed hospital extraordinary circumstances waiver 
process, but requested additional information on the expected timeline 
for review of the submission and determination.
    Response: We thank the commenters for their support, and note that 
we are expecting to update the extraordinary circumstances exception 
form currently in use by the other CMS quality reporting programs to 
include the Hospital Readmissions Reduction Program. The timeline for 
review and determination regarding requests for an extraordinary 
circumstance exception request can vary depending on a number of 
factors including the nature of the event, the exception requested, and 
the number of programs affected. We will work closely with hospitals 
who submit an extraordinary circumstance exception request to ensure 
that they receive a timely response.
    Comment: Several commenters expressed concern that, because of the 
overlap in performance years, multiple payment years could be affected 
by the same loss of measure data. The commenters requested additional 
guidance regarding how a hospital should apply for an exemption if the 
period of affected data is used in performance periods for multiple 
payment years.
    Response: We note that the extraordinary circumstance exception 
request form allows hospitals to list the quarter(s) that were affected 
by the extraordinary circumstance, and we are aware that the 
overlapping measure performance periods mean that extraordinary 
circumstance exception requests may impact multiple program years. We 
will work closely with an affected hospital to address these concerns.
    Comment: Several commenters suggested that there are situations 
that do not prevent a hospital from submitting claims or other measure 
data in a timely fashion, but do cause performance to drop 
significantly for reasons outside of a hospital's control. The 
commenters suggested that circumstances outside the hospital's control 
may disrupt community services and hospital programs needed to continue 
readmission prevention efforts during natural disasters, which may 
result in higher readmission rates, and requested that the exceptions 
process be modified to recognize these situations. The commenters 
requested that CMS consider extraordinary circumstances on a case-by-
case basis even when data submission is not inhibited, and that CMS 
allow for an appeals process governing extraordinary circumstance 
decisions.
    Response: We thank the commenters for their recommendations. As we 
discussed in the proposed rule (80 FR 24497), based on our experience 
with the Hospital VBP Program and the Hospital IQR Program, we 
anticipate a need to provide exemptions only to a small number of 
hospitals where the ability to accurately or timely submits claims has 
been directly impacted. We will continue to monitor extraordinary 
circumstance exception requests to ensure that the process we are 
adopting in this final rule supports the goals of the Hospital 
Readmissions Reduction Program. However, we do not intend to modify the 
criteria for an extraordinary circumstance exception at this time. We 
do not anticipate a need to establish an appeals process for 
extraordinary circumstance exception determinations.
    After consideration of the public comments we received, we are 
adopting the extraordinary circumstances exception policy as proposed.

[[Page 49544]]

F. Hospital Value-Based Purchasing (VBP) Program: Policy Changes for 
the FY 2018 Program Year and Subsequent Years

1. Background

a. Statutory Background and Overview of Past Program Years
    Section 1886(o) of the Act, as added by section 3001(a)(1) of the 
Affordable Care Act, requires the Secretary to establish a hospital 
value-based purchasing program (the Hospital VBP Program) under which 
value-based incentive payments are made in a fiscal year to hospitals 
that meet performance standards established for a performance period 
for such fiscal year. Both the performance standards and the 
performance period for a fiscal year are to be established by the 
Secretary.
    For more of the statutory background and descriptions of our 
current policies for the Hospital VBP Program, we refer readers to the 
Hospital Inpatient VBP Program final rule (76 FR 26490 through 26547); 
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51653 through 51660); the 
CY 2012 OPPS/ASC final rule with comment period (76 FR 74527 through 
74547); the FY 2013 IPPS/LTCH PPS final rule (77 FR 53567 through 
53614); the FY 2014 IPPS/LTCH PPS final rule (78 FR 50676 through 
50707); the CY 2014 OPPS/ASC final rule with comment period (78 FR 
75120 through 75121); and the FY 2015 IPPS/LTCH PPS final rule with 
comment period (79 FR 50048 through 50087).
    We have also codified certain requirements for the Hospital VBP 
Program at 42 CFR 412.160 through 412.167.
b. FY 2016 Program Year Payment Details
    Section 1886(o)(7)(B) of the Act instructs the Secretary to reduce 
the base operating DRG payment amount for a hospital for each discharge 
in a fiscal year by an applicable percent. Under section 1886(o)(7)(A) 
of the Act, the sum total of these reductions in a fiscal year must 
equal the total amount available for value-based incentive payments for 
all eligible hospitals for the fiscal year, as estimated by the 
Secretary. We finalized details on how we would implement these 
provisions in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through 
53573) and refer readers to that rule for further details.
    Under section 1886(o)(7)(C)(iv) of the Act, the applicable percent 
for the FY 2016 program year is 1.75 percent. Using the methodology we 
adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through 
53573), we estimate that the total amount available for value-based 
incentive payments for FY 2016 is $1,499,107,502, based on the December 
2014 update of the FY 2014 MedPAR file. We intend to update this 
estimate for the FY 2016 IPPS/LTCH PPS final rule, using the March 2015 
update of the FY 2014 MedPAR file.
    As finalized in the FY 2013 IPPS/LTCH PPS final rule, we will 
utilize a linear exchange function to translate this estimated amount 
available into a value-based incentive payment percentage for each 
hospital, based on its Total Performance Score (TPS) (77 FR 53573 
through 53576). We will then calculate a value-based incentive payment 
adjustment factor that will be applied to the base operating DRG 
payment amount for each discharge occurring in FY 2016, on a per-claim 
basis. We published proxy value-based incentive payment adjustment 
factors in Table 16 of the FY 2016 IPPS/LTCH PPS proposed rule (which 
is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2016-IPPS-Proposed-Rule-Home-Page-Items/FY2016-IPPS-Proposed-Rule-Tables.html). The proxy factors are based on the 
TPSs from the FY 2015 program year. These FY 2015 performance scores 
are the most recently available performance scores that hospitals have 
been given the opportunity to review and correct. The slope of the 
linear exchange function used to calculate those proxy value-based 
incentive payment adjustment factors is 2.5797595162. This slope, along 
with the estimated amount available for value-based incentive payments, 
is also published in Table 16.
    We stated that we intended to update this table as Table 16A in 
this FY 2016 IPPS/LTCH PPS final rule (which will be available via the 
Internet on the CMS Web site) to reflect changes based on the March 
2015 update to the FY 2014 MedPAR file. We also stated that we intended 
to update the slope of the linear exchange function used to calculate 
those updated proxy value-based incentive payment adjustment factors. 
The updated proxy value-based incentive payment adjustment factors for 
FY 2016 will continue to be based on historic FY 2015 program year TPSs 
because hospitals will not have been given the opportunity to review 
and correct their actual TPSs for the FY 2016 program year until after 
this FY 2016 IPPS/LTCH PPS final rule is published. After hospitals 
have been given an opportunity to review and correct their actual TPSs 
for FY 2016, we will add Table 16B (which will be available via the 
Internet on the CMS Web site) to display the actual value-based 
incentive payment adjustment factors, exchange function slope, and 
estimated amount available for the FY 2016 program year. We expect that 
Table 16B will be posted on the CMS Web site in October 2015.
    Comment: Several commenters urged CMS to make every effort to 
release the final VBP adjustment factors for FY 2016 as close to 
October 1, 2015 as possible. The commenters also requested that CMS 
review our timeline for reviewing these factors and make the necessary 
changes to ensure the final factors are released in a timely manner. In 
addition, the commenters expressed disappointment that CMS made no 
attempt to calculate FY 2016 proxy factors using the updated measures 
and domain weights finalized in last year's rule and believed that we 
should include an analysis of the FY 2016 impact in the proposed rule 
files that better aligns with the ever-changing program specifics and 
most recent data available.
    Response: We appreciate the importance of timely release of the 
final adjustment factors for FY 2016, and while we are unable to 
guarantee an exact release date for the final factors, we will make 
every effort to release these factors in a timely fashion.
    With regard to the FY 2016 proxy factors, while we understand 
commenters' concerns, we make these calculations using the most 
recently available performance data that hospitals have had the 
opportunity to review, which at the time of the final rule's 
publication does not include the scoring data for the next fiscal year. 
We do not believe it would be useful to publish proxy factors using 
domain weights finalized for the next fiscal year without the 
corresponding performance scoring data from the same program year 
because that action would mix policies between fiscal years, which is 
why we adopted the practice of calculating proxy factors from the 
previous year. We believe that these calculations represent the most 
accurate data available at the time of the final rule's publication and 
appropriately reflect policies for a single program year.
    We also received a number of general comments on the Hospital VBP 
Program:
    Comment: Several commenters expressed continued support for value-
based payment models. Other commenters noted that the incentive 
structure could provide greater inducement for providers to work 
collaboratively to improve performance. One commenter applauded the 
Hospital VBP Program for assessing multiple

[[Page 49545]]

aspects of care as well as recognizing providers for both achievement 
versus national benchmarks and improvement versus baseline performance.
    Response: We thank the commenters for their support.
    Comment: Several commenters supported CMS' move away from clinical 
process measures and toward the use of outcome measures.
    Response: We thank the commenters for their support.
    Comment: One commenter commended CMS for providing advance notice 
of its policy proposals for the Hospital VBP Program structure and 
measures from FY 2017 to FY 2021.
    Response: We thank the commenter for this support.
    Comment: Several commenters appreciated CMS' continued attempts to 
better align with the Hospital IQR Program, Hospital Readmissions 
Reduction Program, the HAC Reduction Program, the Physician Value-Based 
Payment Modifier Program, and The Joint Commission to avoid redundancy 
and excessive resource burdens.
    Response: We thank the commenters for their support.
    Comment: One commenter supported the Hospital IQR Program as a 
mechanism for measure release and initial publication prior to 
inclusion into the Hospital VBP Program. The commenter believed this 
process allows the public and providers a ``preview year'' to better 
analyze and understand the methodology and impact of the measures as 
well as ensure accuracy of measurement and comparisons.
    Response: We thank the commenter for this support.
    Comment: Several commenters suggested specific means through which 
CMS could mitigate perceived biases within the Hospital VBP Program, 
including the addition of a measure that adjusts for small sample size, 
adjustments for provider penalties based on the sociodemographic status 
of their patient population, and the development of sociodemographic 
stratification measures built on factors used in analysis by key 
stakeholders.
    Several commenters also suggested that CMS ensure the measures are 
appropriately validated and risk-adjusted by limiting performance-based 
payment programs to measures that have been endorsed by NQF and 
approved for specific program use by the MAP, a public-private 
partnership convened by the NQF for the purpose of providing input to 
the Secretary on the selection of certain quality and efficiency 
measures.
    Response: While we appreciate these comments and the importance of 
the role that sociodemographic status plays in the care of patients, we 
continue to have concerns about holding hospitals to different 
standards for the outcomes of their patients of low sociodemographic 
status because we do not want to mask potential disparities or minimize 
incentives to improve the outcomes of disadvantaged populations. We 
routinely monitor the impact of sociodemographic status on hospitals' 
results on our measures. To date, we have found that hospitals that 
care for large proportions of patients of low sociodemographic status 
are capable of performing well on our measures (we refer readers to the 
2014 Chartbook pages 48-57, 70-73, and 78 at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/Medicare-Hospital-Quality-Chartbook-2014.pdf).
    NQF is currently undertaking a 2-year trial period in which new 
measures and measures undergoing maintenance review will be assessed to 
determine if risk-adjusting for sociodemographic factors is appropriate 
for each measure. For 2 years, NQF will conduct a trial of a temporary 
policy change that will allow inclusion of sociodemographic factors in 
the risk-adjustment approach for some performance measures. At the 
conclusion of the trial, NQF will determine whether to make this policy 
change permanent. Measure developers must submit information such as 
analyses and interpretations as well as performance scores with and 
without sociodemographic factors in the risk adjustment model.
    Furthermore, the Office of the Assistant Secretary for Planning and 
Evaluation (ASPE) is conducting research to examine the impact of 
socioeconomic status on quality measures, resource use, and other 
measures under the Medicare program as directed by the IMPACT Act. We 
will closely examine the findings of these reports and related 
Secretarial recommendations and consider how they apply to our quality 
programs at such time as they are available.
    Comment: One commenter recommended that CMS provide measure 
developers with direction about expectations regarding reporting 
periods, volume of procedure thresholds, and other critical elements of 
a measure to avoid compromising the integrity of the carefully designed 
and tested measures. This commenter believed that modified 
specifications subsequent to the testing process jeopardize the value 
of measure testing.
    Response: We thank the commenter for this recommendation. Upon 
completion of measure testing, developers provide recommendations on 
reporting periods and minimum volume threshold based on reliability. We 
do not believe that we change measure specifications after testing in a 
way that would affect the validity of a measure.
    Comment: One commenter raised concerns that the incentives and 
penalties are too insignificant to drive real change in quality and 
cost containment.
    Response: As required by section 1886(o)(7)(B) of the Act, 
incentive payments will be funded for FY 2016 through a reduction to 
the FY 2016 base operating DRG payment for each discharge of 1.75 
percent. The applicable percentage for FY 2017 and subsequent years is 
capped at 2 percent. This is the amount that we are statutorily 
authorized to withhold at this time.
    Comment: Some commenters encouraged CMS to align objectives, 
measures, and reporting format for physician and hospital quality 
programs such as the Physician Value-Based Payment Modifier, EHR 
Incentive, and Hospital IQR Programs as well as the PQRS, and adopt a 
more streamlined and coordinated approach that will reduce what the 
commenters believed is unnecessary data collection and submission 
burden.
    Response: As we stated in the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51626), we agree that alignment of incentives is an important goal, 
and we strive to align quality measurement and value-based purchasing 
efforts with the National Quality Strategy and across our programs, to 
the extent possible, given differences in payment system maturity and 
statutory authorities. We will continue to seek to align aspects of all 
of our quality initiatives to promote high quality care and continued 
innovation, as well as minimize burden on providers.
    Comment: One commenter suggested that CMS ensure the measures 
hospitals are evaluated on are proven to actually improve patient 
outcomes and increase the quality of care for all patients.
    Response: We agree with the commenter's suggestion and continue to 
work with stakeholders to define evidenced-based measures of quality 
that assess clinical care, patient experiences with care, and outcomes. 
We believe that the selected measures in the Hospital VBP Program are 
closely linked with improvements in quality of care and outcomes for 
all patients.
    Comment: One commenter recommended that CMS develop a plan for 
incrementally phasing out

[[Page 49546]]

improvement scoring for specific measures, which have been included in 
the Hospital VBP Program for several consecutive years, as a means of 
emphasizing comparative achievement performance. The commenter added 
that such a plan would facilitate the development of properly 
structured incentives to drive the appropriate developments in 
healthcare delivery systems, resulting in better care for patients at a 
lower cost for payers.
    Response: While we appreciate the commenter's goal of driving 
appropriate development in healthcare delivery systems, section 
1886(o)(3)(B) of the Act requires that the performance standards with 
respect to measures adopted in the Hospital VBP Program include levels 
of achievement and improvement. As we have stated in the past (76 FR 
26514), we believe improvement scores are an important incentive for 
many hospitals that participate in the Hospital VBP Program because 
improvement scores award points for showing improvement on measures, 
not solely for outperforming other hospitals.
    Comment: One commenter expressed serious concerns regarding what 
the commenter believed to be the disproportionate effect of the 
Hospital VBP Program on teaching and large hospitals due to 
insufficient risk adjustment. The commenter noted that CMS has an 
obligation to ensure that measurement and comparisons are as accurate 
as possible.
    Response: We are committed to accurate and fair hospital quality 
measurement comparison. We are currently analyzing how various 
hospitals are affected by the measures in the program. There is a 
statutorily required Hospital VBP Program monitoring and evaluation 
report to Congress due January 1, 2016, in which we expect to present 
our analysis of the Hospital VBP Program's impact on teaching and large 
hospitals.
    Comment: One commenter recommended that CMS place a priority on 
ascertaining appropriate quality measures and encouraged CMS to include 
stakeholders that have relevant expertise in the measure development 
process.
    Response: We are committed to defining appropriate, evidenced-based 
measures of quality. To the extent practicable, we continue to work 
with stakeholders, including those with relevant experience, and 
technical experts in the measure development process.
    Comment: Several commenters expressed concern that CMS has not 
articulated a plan for calculating the Hospital VBP Program scores that 
will be affected by the transition from ICD-9-CM to ICD-10-CM/PCS codes 
and how such a transition could affect program measures and benchmarks, 
as well as the proposed baseline and performance periods. The 
commenters advised greater transparency and convening with stakeholders 
as a means of both soliciting feedback and addressing potential 
unintended consequences with respect to the transition. A few 
commenters requested that CMS elaborate on whether and how CMS will 
begin to re-specify claims-based measures in ICD-10-CM/PCS codes, given 
CMS' intent to use claims-based measures in future program years and in 
other quality measurement programs. Finally, one commenter urged CMS to 
oppose any Congressional efforts to further delay the scheduled 
implementation of ICD-10.
    Response: We are aware of stakeholder concerns about the potential 
impacts to hospital performance on quality measures when ICD-10 is 
implemented on October 1, 2015, as well as calls for more extensive 
testing to understand the impacts before any payments or penalties are 
implicated. We are fully prepared to accept ICD-10-based claims data 
beginning October 1 for use in quality programs and ready to calculate 
measure results on schedule in accordance with established program 
timelines. We encourage stakeholders to subscribe to our listserv 
titled ``Hospital Inpatient Value-Based Purchasing (HVBP) and 
Improvement'' to receive notification of scheduled events. Stakeholders 
may join at https://www.qualitynet.org/dcs/ContentServer?pagename=QnetPublic/ListServe/Register.
    Comment: One commenter noted that while CMS has updated the 
specifications for its chart-abstracted measures, CMS has not published 
any re-specification for the claims-based measures, specifically PSI-
90.
    Response: As with our chart abstracted measures, many claims-based 
measures have updated ICD-10 codes contained in the Measure Information 
Forms (MIFs) on the NQF Web site.\77\ AHRQ's proposed changes for ICD-
10-CM/PCS conversion of its quality indicators are available at: http://www.qualityindicators.ahrq.gov/icd10/default.aspx.
---------------------------------------------------------------------------

    \77\ MORT-30-AMI: NQF 0230 is available at: http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=1286.
    MORT-30-HF: NQF 0229 is available at http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=1285.
    MORT-30-PN: NQF 0468 is available at: http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=448.
    Hip/knee complications NQF 1550 is available at http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=1550.
---------------------------------------------------------------------------

    Comment: A few commenters requested that CMS convene a number of 
national provider calls to share how the ICD-10-CM/PCS transition may 
affect the measures, benchmarks, and performance standards and to 
solicit stakeholder feedback in preparation for FY 2017 rulemaking.
    Response: We plan to convene national provider calls to share 
future plans for the ICD-10-CM/PCS transition. We encourage 
stakeholders to subscribe to our listserv titled ``Hospital Inpatient 
Value-Based Purchasing (HVBP) and Improvement'' to receive notification 
of scheduled events. Stakeholders may join at https://www.qualitynet.org/dcs/ContentServer?pagename=QnetPublic/ListServe/Register.
    Comment: Several commenters expressed concern about the overlap of 
measures between the Hospital VBP Program and the HAC Reduction 
Program, given the different constructions and goals of each. These 
commenters urged CMS to use the measures in either the Hospital VBP 
Program or the HAC Reduction Program, but not both, to ensure the 
programs do not provide hospitals with conflicting signals or multiple 
payment penalties. One commenter expressed its preference that CMS 
remove the overlapping measures from the Hospital VBP Program, while 
another commenter recommended that CMS remove the overlapping measures 
from the HAC Reduction Program. One commenter added that CMS could 
explore a maximum penalty for a single measure across all pertinent 
programs.
    Response: As we stated in the FY 2015 IPPS/LTCH PPS final rule (79 
FR 50056) in response to similar comments, we acknowledge that there is 
overlap in quality measures between the Hospital VBP Program and the 
HAC Reduction Program. While we are aware that commenters object to the 
possibility of scoring hospitals on certain measures under both 
programs, we note that these measures cover topics of critical 
importance to quality improvement in the inpatient hospital setting and 
to patient safety. We selected these quality measures because we 
believe that hospital acquired condition measures comprise some of the 
most critical patient safety areas, therefore justifying the use of the 
measures in more than one program. These measures track infections that 
could cause significant health risks to Medicare patients, and we 
believe it is appropriate to provide incentives for hospitals to avoid 
them under more than one program.

[[Page 49547]]

    We further stress that the HAC Reduction Program and the Hospital 
VBP Program are separate programs with different purposes and policy 
goals. The HAC Reduction Program reduces payments to hospitals for 
excess HACs to increase patient safety in hospitals. On the other hand, 
the Hospital VBP Program is an incentive program that redistributes a 
portion of the Medicare payments made to hospitals based on their 
performance on various measures. Therefore, although the measures exist 
in more than one program, the measures are used and calculated for very 
distinct purposes. Accordingly, we believe that the critical importance 
of these measures to patient safety warrants their inclusion in both 
programs.
2. Retention, Removal, Expansion, and Updating of Quality Measures for 
the FY 2018 Program Year
a. Retention of Previously Adopted Hospital VBP Program Measures for 
the FY 2018 Program Year
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53592), we finalized 
our proposal to readopt measures from the prior program year for each 
successive program year, unless proposed and finalized otherwise (for 
example, if we propose and finalize the removal of a measure). We 
stated our belief that this policy would facilitate measure adoption 
for the Hospital VBP Program for future program years, as well as align 
the Hospital VBP Program with the Hospital IQR Program (77 FR 53592). 
In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24498), we did not 
propose to change our current policy of readopting measures from the 
prior program year for each successive program year.
    We received several comments on measures we readopted into the FY 
2018 program year:
    Comment: One commenter noted its support for the policy CMS 
finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53592) to 
readopt measures from prior program years each year unless otherwise 
indicated.
    Response: We appreciate the commenter's support.
    Comment: One commenter expressed support for the readoption of PSI-
90 because it represents important patient safety outcomes for 
consumers and purchasers.
    Response: We appreciate the commenter's support.
    Comment: One commenter requested that CMS publish the PSI-90 
methodology to be more transparent and reproducible.
    Response: The methodology used to calculate the PSI-90 measure is 
detailed in the original technical report by the ARHQ Composite 
Workgroup: http://www.qualityindicators.ahrq.gov/Downloads/Modules/PSI/PSI_Composite_Development.pdf.
    Comment: One commenter expressed concern about the inclusion of the 
PSI-90 composite measure because it relies on claims-based data, which 
has limited clinical information, making it difficult for a claims-
based measure to address nuances of comorbidities, severity, and 
complications and the ability to perform adequate risk-adjustment.
    Response: While we acknowledge commenters' concerns about the use 
of claims-based data for the PSI-90 composite measure, we note that 
there are previously conducted validity studies that assess the 
relationship between administrative claim data and clinical information 
provided by medical records.\78\ We also note that NQF reviewed the 
risk-adjustment methodology of the component indicators during its last 
cycle of NQF endorsement, and endorsed the PSI-90 composite measure as 
a valid and reliable.
---------------------------------------------------------------------------

    \78\ Sadeghi B, White RH, Maynard G, Zrelak P, Strater A, 
Hensley L, Cerese J, Romano PS. Improved coding of postoperative 
deep vein thrombosis and pulmonary embolism in administrative data 
(AHRQ patient safety indicator 12) after introduction of new ICD-9-
CM diagnosis codes. Medical care. 2015;53(5): e37-e40; Sadeghi B, 
Baron R, Zrelak P, Utter GH, Geppert JJ, Tancredi DJ, Romano PS. 
Cases of iatrogenic pneumothorax can be identified from ICD-9-CM 
coded data. American Journal of Medical Quality, 2010;25(3), 218-
224.
---------------------------------------------------------------------------

    Comment: One commenter did not support AHRQ's proposal as part of 
its NQF measure maintenance process to include PSI-10 in the PSI-
composite given that the denominator is broad and a better indicator 
would require more than one measure.
    Response: We appreciate commenter's concern and are aware that NQF 
is reviewing the PSI-90 composite with three additional components 
(PSI-9, PSI-10, and PSI-11), as part of the routine measure maintenance 
process. We will take NQF's decision on continuing endorsement into 
consideration for proposal in future program years under the Hospital 
VBP Program.
    Comment: Several commenters did not support the inclusion of the 
PSI-12 component of the PSI-90 composite that is being readopted for 
the FY 2018 program year because it does not exclude trauma patients, 
given the high rates of Perioperative Pulmonary Embolism (PE)/Deep Vein 
Thrombosis (DVT) Rate in trauma patients. Without the trauma exclusion, 
commenters explained that facilities that treat a large amount of 
spinal cord injury patients and other traumatic cases will 
automatically be adversely affected and will not be able to compete 
with non-trauma facilities. Thus, commenters believe trauma centers are 
unfairly penalized by PSI-12. Some commenters suggested that the PSI-12 
component also exclude patients with a diagnosis of cancer or brain 
tumors because these patients represent a very high-risk group due to 
their underlying medical condition.
    Further, commenters suggested that PSI-12 relies on risk adjustment 
criteria that could lead to potential unintended consequences (for 
example, the measure could tag every LE thrombophlebitis, whether or 
not it is clinically significant, which could lead to useless data that 
will have little impact on quality). Finally, commenters noted that the 
PSI-12 component includes not otherwise specified (NOS) codes, 
including superficial thrombosis, which commenters did not believe is 
appropriate to measure because there are predictors of DVT that are 
outside of the control of the facility.
    Response: We acknowledge commenters' concerns, but note that NQF 
reviewed the measure and took into account concerns about exclusions. 
NQF endorsed PSI-12 as a valid and reliable measure (NQF #0450) and as 
part of the PSI-90 composite measure during its last cycle of NQF 
endorsement (NQF #0531).
    Comment: Several commenters expressed concern with the PSI-15 
component of the PSI-90 composite measure that is being readopted for 
the FY 2018 program year because coding for accidental puncture is 
still non-uniform due to lack of clarity as to what constitutes an 
``accident'' despite CMS' reference to the American Hospital 
Association Coding Clinical Guidance in the FY 2014 IPPS/LTCH PPS final 
rule. The commenters stated that punctures or lacerations are often 
incorrectly coded as ``accidental'' when the puncture or laceration was 
part of the surgery. Commenters requested that CMS provide more precise 
guidance regarding the correct coding of the PSI-15 component of the 
PSI-90 measure to minimize confusion and improve the accuracy of the 
measure.
    Response: We acknowledge commenters' specific concerns regarding 
coding of the PSI-15 component of the PSI-90 composite. We continue to 
believe that the American Hospital Association Coding Clinical Guidance 
provides sufficient guidance regarding the correct coding of

[[Page 49548]]

``accidental'' punctures and lacerations that are not ``intrinsic'' or 
``inherent'' in a major procedure. We believe that hospitals should 
continue to provide education to their staff on correct coding of PSI-
15. The AHRQ Quality Improvement Toolkit may also provide additional 
guidance to facilitate improvements to documentation and coding: http://www.ahrq.gov/professionals/systems/hospital/qitoolkit/b4_documentationcoding.pdf.
    Comment: One commenter recommended that CMS separate public safety 
measures, such as PSI-03 Pressure Ulcer Rate and PSI-15 Accidental 
Puncture or Laceration to increase transparency for consumers and 
providers.
    Response: We thank the commenter for this suggestion and we will 
take it into consideration in future rulemaking.
    Comment: One commenter expressed continued concern about including 
PSI-9, PSI-10, and PSI-11 in the PSI-90 composite because of concerns 
with the measures' validity. The commenter believed that improvements 
in PSI performance reflect ``gaming'' of the system and not necessarily 
safer care for patients. The commenter recommended that CMS implement 
key steps to improve the validity of these claims-based measures and 
referred to similar comments which it made in the context of the 
Hospital IQR Program in section VIII.A.1.b. of the preamble of this 
final rule.
    Response: We appreciate the commenter's concern and are aware that 
NQF is reviewing the PSI-90 composite with three additional components 
(PSI-9, PSI-10, and PSI-11), as part of the routine measure maintenance 
process. We will take NQF's decision on continuing endorsement into 
consideration when evaluating whether the measure remains appropriate 
for the Hospital VBP Program. Regarding the commenter's concerns 
regarding the validity of the PSI-90 composite, we note that NQF has 
previously endorsed the PSI-90 composite as a valid measure (NQF 
#0531). We continue to believe the PSI-90 composite is an important 
measure of patient safety.
    Comment: One commenter noted that since PSI-7 and NHSN CLABSI are 
both in the Hospital VBP Program, central line infections are counted 
twice (first as part of PSI-90 and then again as a NHSN CLABSI outcome 
measure) with different data sources. Commenter recommended the use of 
the NHSN CLABSI measure because it draws from clinical data and 
continues to have concerns with the PSI-90 measure.
    Response: While we acknowledge that there is the potential for 
overlap between the two measures, the source of the data is different. 
PSI-7 is based on coding of physician documentation and does not 
account for vascular catheter exposure, whereas the CLABSI measure 
relies on microbiologic laboratory confirmation and does account for 
vascular catheter exposure (catheter days). Despite the potential for 
some overlap in these measures, we continue to believe that both 
measures are important to reducing central line associated blood stream 
infections.
    Comment: A few commenters expressed concern with readopting the 
MSPB-1 measure because it measures volume of spending without 
considering quality or appropriateness of care. The commenters noted 
that it might create incentives for hospitals to reduce utilization of 
appropriate and necessary diagnostic technologies and therapeutic 
options. The commenters believed the measure lacks sufficient 
granularity and relies on poor risk-adjustment and attribution 
methodologies.
    Response: We finalized the MSPB-1 measure for inclusion in the 
Hospital VBP Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53592), where we addressed a number of concerns related to the measure. 
With regard to linking MSPB-1 to quality of care, we have emphasized 
that within the Hospital VBP program, MSPB-1 is combined with other 
quality measures in order to calculate the TPS (77 FR 53586). We 
continue to believe that the method of calculating a hospital's TPS, 
which ensures that the MSPB-1 is only a portion of the TPS, 
incentivizes hospitals to continue to provide high quality care. We 
further note that the measure is risk-adjusted using a methodology that 
is consistent with the risk-adjustment model used for several CMS 
initiatives.
    Comment: One commenter recommended that in order to most accurately 
and reliably report meaningful colon and abdominal hysterectomy SSI 
rates, exenterations be excluded from the measure. The commenter 
believed that CMS disproportionately skews and penalizes large tertiary 
centers that perform exenterations, especially for recurrent cancers.
    Response: We agree that not all surgical procedures confer the same 
risk for SSI, and some surgical patients are at greater risk for 
infection because their functional status is compromised by disease 
conditions or other patient-specific factors. CDC is collecting 
additional SSI risk factors that will enable new risk modeling using 
the 2015 SSI data. While these new risk models can take into account 
additional factors that place patients at risk for infection, not all 
SSI risk differences associated with procedural and patient differences 
can be included because of the data collection burden that would be 
imposed on NHSN users.
    Comment: One commenter did not support the THA/TKA measure CMS 
finalized for the FY 2019 program year because of validity and 
appropriateness concerns. The commenter questioned the accuracy of the 
administrative data sets for both procedures. The commenter also noted 
that despite NQF's endorsement of sociodemographic risk adjustment 
refinements, this measure is not risk-adjusted for sociodemographic 
factors, which have significant correlation with variability of 
outcomes. The commenter also noted the current composition of the 
measure could result in problems with access to total joint surgery for 
certain classes of patients (for example, obese, lupus patients and 
transplant patients) given that they carry a higher risk for 
complications.
    Response: We acknowledge the commenter's concerns regarding the use 
of administrative data for the THA/TKA measure, but note that there are 
previously conducted validation studies that validate the use of 
administrative claims data to provide sufficient clinical 
information.\79\ We believe that the current composition of the THA/TKA 
measure will not result in decreased patient access to THA/TKA 
procedures, as the measure incorporates an appropriately comprehensive 
risk-adjustment methodology for patient case-mix and comorbidity.
---------------------------------------------------------------------------

    \79\ Grosso LM, Curtis JP, Lin Z, et al. Hospital-level Risk-
Standardized Complication Rate Following Elective Primary Total Hip 
Arthroplasty (THA) And/Or Total Knee Arthroplasty (TKA): Measure 
Methodology Report. June 2012. Available at: http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    As we discussed more fully above, while we appreciate these 
comments and the importance of the role that sociodemographic status 
plays in the care of patients, we continue to have concerns about 
holding hospitals to different standards for the outcomes of their 
patients of low sociodemographic status because we do not want to mask 
potential disparities or minimize incentives to improve the outcomes of 
disadvantaged populations. We routinely monitor the impact of 
sociodemographic status on hospitals' results on our measures. To date, 
we have found that hospitals that care for large proportions of 
patients of low sociodemographic status are capable of performing well 
on our measures (we

[[Page 49549]]

refer readers to the 2014 Chartbook pages 48-57, 70-73, and 78 at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/Medicare-Hospital-Quality-Chartbook-2014.pdf).
    Comment: One commenter did not support CMS' inclusion of the PC-01 
measure because it is Web-based and there has not been any chart 
validation for accuracy and consistency of data collection across 
hospitals. Further, the commenter believed the benchmark of 0 percent 
is unrealistic because The Joint Commission has stated that not all 
justifications for an elective delivery are included on the ICD-9-CM 
Justification Table.
    Response: We acknowledge commenter's concern regarding the PC-01 
measure, but note that PC-01 is NQF-endorsed (NQF #0469) as clinically 
valid. Moreover, we disagree with the assertion that the benchmark of 0 
percent is unrealistic because not all justifications for an elective 
delivery are included in the ICD-9-CM Justification Table. As we have 
previously noted, the benchmark is intended to represent a level of 
excellent performance to which hospitals generally should aspire. While 
no measure can account for every possible situation, the measure 
specifications (available at: https://manual.jointcommission.org/releases/TJC2015A1/MIF0166.html) provide a large number of ICD-9-CM 
Principal Diagnosis Code or Other Diagnosis Codes for conditions 
possibly justifying elective delivery prior to 39 weeks gestation. 
Furthermore, the 0 percent benchmark for PC-01 was calculated from the 
mean of the top 10 percent for all hospitals during the baseline 
period. We continue to believe that hospitals should aspire to prevent 
elective deliveries from being performed before the gestational age of 
39 weeks without a medical indication.
    Comment: One commenter recommended that CMS retire measures when 
the evidentiary basis for a measure has changed, the cost of collection 
and measurement burden outweighs the utility of the measure, or the 
measure has demonstrated minimal impact on health outcomes and status.
    Response: We thank the commenter for these suggestions and we will 
take these comments into consideration in future rulemaking.
    Comment: One commenter asked that CMS suspend use of HCAHPS 
measures addressing pain management until the revised questions are 
reexamined to determine whether they are contributing to 
overprescribing due to the pressures HCAHPS scores place on providers.
    Response: We understand and share the commenter's concerns about 
inappropriate prescribing of prescription opioids and its link to 
prescription opioid dependence, abuse, and addiction. We believe that 
the rising level of opioid dependence, abuse, addiction, and overdose 
is a public health emergency in the United States. Although we are not 
aware of scientific research that establishes a causal connection 
between HCAHPS scores and provider prescription practices, we recognize 
that there have been anecdotal reports suggesting a link and that many 
providers believe such a link exists. However, there is no evidence of 
which we are aware that finds failing to prescribe unneeded pain 
medications lowers a hospital's HCAHPS scores.
    There are three questions on the HCAHPS survey which directly 
address the issue of pain control during a patient's hospital stay. 
Recent studies have shown a positive relationship between patients 
being satisfied with their pain relief while in the hospital (that is, 
giving high scores on pain control questions) and decreased chronic 
opioid use.\80\
---------------------------------------------------------------------------

    \80\ Maher DP, Wong W, Woo P, et al., ``Perioperative Factors 
Associated with HCAHPS Response of 2,758 Surgical Patients.'' Pain 
Medicine, 2014; Nota SPFT, Spit SA, Voskuyl T, et al., ``Opioid use, 
satisfaction and pain intensity after orthopedic surgery.'' 
Psychosomatics, 2015.
---------------------------------------------------------------------------

    There is evidence that good physician and nurse communication are 
the strongest predictors of better patient experience survey scores, 
including HCAHPS scores.\81\ Finally, the 2018 HCAHPS questions will 
include the Care Transition Management measure which will place 
additional focus on educating patients about their outpatient care 
plan. We believe that this additional measure will further highlight 
patient safety and outpatient care coordination.
---------------------------------------------------------------------------

    \81\ Elliott MN, Kanouse DE, et al., ``Components of Care Vary 
in Importance for Overall Patient Reported Experience by Type of 
Hospitalization.'' Medical Care, 2009.
---------------------------------------------------------------------------

    Comment: One commenter suggested that CMS evaluate an adjustment to 
the HCAHPS survey based on a secondary psychiatric diagnosis because 
these patients report significantly lower scores on the Communication 
with Nurses, Communication with Doctors, and Pain Management HCAHPS 
survey dimensions. The commenter suggested that the investigation could 
address hospital concerns related to pain management and opioid abuse 
and could identify the percentage of patients a hospital is treating 
who suffer from opioid addiction and adjust the data accordingly 
without adding substantial administrative burden to hospitals.
    Response: Currently, we do not collect or investigate secondary 
psychiatric diagnoses for HCAHPS. We do collect and measure self-rated 
mental health which is correlated with such diagnoses.\82\ Findings 
have shown that self-rated mental health is not strongly associated 
with HCAHPS scores after controlling for the full set of current HCAHPS 
patient-mix adjustment (PMA) variables. It is unlikely that secondary 
psychiatric diagnoses would be an important addition to HCAHPS PMA, 
even if there is a bivariate association with HCAHPS scores.
---------------------------------------------------------------------------

    \82\ Ahmad F, Jhajj AK, Stewart DE, et al., ``Single item 
measures of self-rated mental health: a scoping review.'' BMC Health 
Services Research, 2014; Kim G, DeCoster J, Chiriboga, DA, et al., 
``Association between self-rated mental health and psychiatric 
disorders among older adults: do racial/ethnic differences exist?'' 
American Journal of Geriatric Psychiatry, 2011.
---------------------------------------------------------------------------

    With respect to opioid abuse, recent studies have shown a positive 
relationship between patients being satisfied with their pain relief in 
the hospital and decreased chronic opioid use.\83\ There is evidence 
that, in general, good physician and nurse communication are the 
strongest predictors of better patient experience survey scores, 
including HCAHPS scores.\84\
---------------------------------------------------------------------------

    \83\ Maher DP, Wong W, Woo P, et al., ``Perioperative Factors 
Associated with HCAHPS Response of 2,758 Surgical Patients.'' Pain 
Medicine, 2014; Nota SPFT, Spit SA, Voskuyl T, et al., ``Opioid use, 
satisfaction and pain intensity after orthopedic surgery.'' 
Psychosomatics, 2015.
    \84\ Elliott et al., Medical Care, 2009.
---------------------------------------------------------------------------

    Comment: One commenter suggested that CMS separate the Hospital 
Cleanliness & Quietness dimension from the rest of the HCAHPS Survey 
because these two elements are separated in the HCAHPS data that is 
reported in Hospital Compare and it would be useful for consumers to 
know which element is driving the performance and improvement within 
these quality areas. The commenter noted that hospital cleanliness is 
especially important to hospital environmental services members. 
Another commenter recommended that Hospital Cleanliness be weighted 
more heavily than Hospital Quietness for the dimension score because 
hospital cleanliness has a direct impact on the prevention of hospital-
acquired conditions.
    Response: On Hospital Compare, we provide separate scores for 
hospital cleanliness and hospital quietness. These separate scores are 
available to consumers to use in choosing a hospital. In presenting a 
composite clean/quiet dimension score in the Hospital VBP Program, 
there is no objective rationale for giving undue weight to one or the

[[Page 49550]]

other dimension since both hospital cleanliness and quietness are 
observed to impact patient recovery.
    Comment: Several commenters expressed concern for the sufficiency 
of the risk adjustment of the HCAHPS composite measures and believe 
that the methods for delivering the survey are outdated given the shift 
to Web-based activities and suggested that CMS conduct research to 
improve the delivery methods of the HCAHPS survey.
    Response: While Web-based surveys are increasing in use and have 
much value in other contexts, a recent Randomized Control Trial (RCT) 
study found Web-based approaches currently result in lower response 
rates and poorer representativeness than any of the four approved 
HCAHPS modes in the HCAHPS population.\85\ We will continue to explore 
this option as hospital email address information on patients becomes 
more complete and daily Internet access becomes more complete in the 
HCAHPS target population.
---------------------------------------------------------------------------

    \85\ Elliott MN, Brown J, Lehrman WG, Beckett MK, Hambarsoomian 
K, Giordano L, Goldstein E.: ``A Randomized Experiment Investigating 
the Suitability of Speech-Enabled IVR and Web Modes for Publicly 
Reported Surveys of Patient' Experience of Hospital Care.'' Medical 
Care Research and Review, 2013.
---------------------------------------------------------------------------

    Comment: Two commenters stated that patient satisfaction does not 
lead to better health outcomes and therefore using HCAHPS as a measure 
may not be driving positive outcomes. One commenter urged CMS to work 
with AHRQ to assess patient satisfaction's impact on health outcomes.
    Response: HCAHPS measures patient experience, a dimension of 
quality care that is distinct from clinical measures of quality and of 
inherent value. Improving all aspects of quality of care, including 
patient experience, is a CMS and HHS policy priority. Recent reviews 
have found that the vast majority of studies have found positive 
associations between patient experience and clinical process measures 
of quality, outcomes, and efficiency, particularly in the inpatient 
setting.\86\ The most widely cited article that found negative 
associations, by Fenton et al., has been identified as being 
methodologically flawed in a recent reanalysis of its data.\87\
---------------------------------------------------------------------------

    \86\ Anhang Price R, Elliott MN, Cleary PD, Zaslavsky AM, Hays 
RD: ``Should Health Care Providers be Accountable for Patients' Care 
Experiences?'' Journal of General Internal Medicine, 2014a; Anhang-
Price R, Elliott MN, Zaslavsky AM, Hays RD, Lehrman WG, Rybowski L, 
Edgman Levitan S, Cleary PD: ``Examining the Role of Patient 
Experience Surveys in Measuring Health Care Quality'' MCRR, 2014b.
    \87\ Xu X, Buta E, Anhang-Price R, Elliott MN, Hays RD, Cleary 
PD. (2014). ``Methodological Considerations when Studying the 
Association between Patient-Reported Care Experiences and 
Mortality'' Health Services Research, 2014.
---------------------------------------------------------------------------

b. Removal of Two Measures
    One consideration in determining whether a measure should be 
retained or removed from the program is based on an analysis of whether 
the measure is ``topped-out.'' We have adopted two criteria for 
determining the ``topped-out'' status of Hospital VBP measures:
     Statistically indistinguishable performance at the 75th 
and 90th percentiles; and
     Truncated coefficient of variation <= 0.10.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24498 through 
24500), we proposed to remove the IMM-2: Influenza Immunization and 
AMI-7a: Fibrinolytic Therapy Received within 30 Minutes of Hospital 
Arrival measures, effective for the FY 2018 program year. We believe 
that removing these measures will continue to ensure that we make valid 
statistical comparisons through our finalized scoring methodology, 
while reducing the reporting burden on participating hospitals.
(1) Removal of IMM-2: Influenza Immunization Measure
    Based on our evaluation of the most recently available data, we 
believe that IMM-2 is ``topped-out.'' As we have discussed in prior 
rulemaking, measuring hospital performance on ``topped-out'' measures 
will have no meaningful effect on a hospital's TPS, given that 
performance on ``topped-out'' measures is generally so high and 
unvarying that meaningful distinctions and improvements in performance 
can no longer be made.
    As discussed further in section VIII.A.3.b. of the preamble of the 
FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24557 through 24558) and 
this final rule, we believe that this measure should continue to be 
part of the Hospital IQR Program measure set because it is the only 
measure that addresses the Best Practices to Enable Healthy Living goal 
in the CMS Quality Strategy and priority of the same name in the 
National Quality Strategy.
    We invited public comment on this proposal.
    Comment: Most commenters supported the proposal to remove the IMM-2 
measure because it is ``topped-out.''
    Response: We thank the commenters for their support.
    Comment: A few commenters did not support the proposal to remove 
IMM-2 from the Hospital VBP Program despite its ``topped-out'' status. 
One commenter believed that the measure will ensure that providers 
continue to administer this vaccine, and given that adult immunization 
rates remain low, the commenter noted that quality measures are an 
important tool to increase vaccination rates. Another commenter did not 
believe that CMS' measure removal criteria are patient-centered. This 
commenter noted that a measure might meet the criteria for removal but 
a large number of patients may still fail to receive the appropriate 
standard of care.
    Response: We disagree with the commenter that the measure removal 
criteria for IMM-2 are not patient-centered. We continue to believe 
that influenza immunization is important; hence, we have opted to 
retain the measure in the Hospital IQR Program. However, as discussed 
in prior rulemaking, measuring hospital performance on ``topped-out'' 
measures has no meaningful effect on a hospital's TPS, given that 
meaningful distinctions in performance between hospitals cannot be 
made. As we have stated in the past (76 FR 26500), we believe that if a 
measure is ``topped-out,'' then there is no room for improvement for 
the vast majority of hospitals.
    After consideration of the public comments we received, we are 
finalizing the proposal to remove IMM-2 from the FY 2018 program year 
and subsequent years. (2) Removal of AMI-7a: Fibrinolytic Therapy 
Received within 30 Minutes of Hospital Arrival Measure.
    Our evaluation of the most recently available data shows that AMI-
7a is not widely reported by hospitals, and that many hospitals have 
less than the minimum number of cases required for reporting because 
most acute myocardial infarction patients receive percutaneous coronary 
intervention instead of fibrinolytic therapy. In the FY 2016 IPPS/LTCH 
PPS proposed rule (80 FR 24499), we proposed to remove AMI-7a because 
collection of the measure data is burdensome to hospitals and measure 
data are infrequently reported. Therefore, we do not believe that its 
continued adoption under the Hospital VBP Program will advance our 
quality improvement goals. As discussed in section VIII.A.3.b. of the 
preamble of the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24558 
through 24559), we also proposed to remove the chart-abstracted version 
of

[[Page 49551]]

AMI-7a, but to retain the electronic version for the CY 2016/FY 2018 
payment determination and subsequent years under the Hospital IQR 
Program.
    We invited public comment on this proposal.
    Comment: Most commenters supported the proposal to remove the AMI-
7a measure. Some commenters noted that the measure will not advance 
quality improvement goals, that data collection is burdensome, and that 
it no longer reflects current clinical guidelines and standards of 
care. Some commenters also agreed that many hospitals would have a 
difficult time achieving the minimum number of cases needed to report 
this measure.
    Response: We thank the commenters for their support of removal. 
While we acknowledge that primary percutaneous coronary intervention 
(PCI) remains the recommended method of reperfusion when it can be 
performed in a timely fashion by experienced practitioners, we do not 
agree that this measure no longer reflects current clinical guidelines.
    Comment: One commenter recommended that CMS establish a system to 
periodically monitor performance on retired measures to ensure that 
quality gains are sustained.
    Response: At this time, we do not have a formal mechanism in place 
to monitor whether measures that have been ``topped-out'' remain 
``topped-out.'' However, we monitor the performance of removed measures 
to ensure that performance does not decline significantly and will 
continue to do so. We must balance the costs of continued monitoring of 
a successful measure with high levels of performance with the adoption 
of other measures where there are opportunities for improvement in 
clinical quality. We will take the recommendation into consideration in 
the future. For now, we continue to believe that if a measure is 
``topped-out,'' there is no room for improvement for the vast majority 
of hospitals, and that measuring hospital performance on that measure 
will not have a meaningful effect on a hospital's TPS.
    Comment: One commenter did not support the removal of the AMI-7a 
measure because the commenter did not believe the measure removal 
criteria are patient-centered. The commenter noted that a measure might 
meet the criteria for removal but a large number of patients may still 
fail to receive the appropriate standard of care.
    Response: We disagree with the commenter that our measure removal 
criteria are not patient-centered. Currently, most acute myocardial 
infarction patients receive percutaneous coronary intervention instead 
of fibrinolytic therapy. While we acknowledge commenter's concern, our 
evaluation data shows that AMI-7a is infrequently reported, and in 
consequence, does not result in better patient outcomes for the AMI 
population. Furthermore, we have no reason to believe that removal of 
the measure will decrease the use of fibrinolytic therapy for those who 
need it.
    After consideration of the public comments we received, we are 
finalizing the proposal to remove AMI-7a from the Hospital VBP Program 
for the FY 2018 program year and subsequent years.
c. New Measure for the FY 2018 Program Year: 3-Item Care Transition 
Measure (CTM-3) (NQF #0228)
    We consider measures for adoption based on the statutory 
requirements, including specification under the Hospital IQR Program, 
posting dates on the Hospital Compare Web site, and our priorities for 
quality improvement as outlined in the CMS Quality Strategy, available 
at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/CMS-Quality-Strategy.pdf.
    The 3-Item Care Transition Measure (CTM-3) is an NQF-endorsed 
measure. We adopted this measure in the Hospital IQR Program in the FY 
2013 IPPS/LTCH PPS final rule (77 FR 53513 through 53516). Initial 
measure data were posted on Hospital Compare in December 2014 and the 
full measure specifications are available at: http://www.caretransitions.org/documents/CTM3Specs0807.pdf. Specifications for 
the Care Transition Measure as used in the HCAHPS Survey can be found 
in the current HCAHPS Quality Assurance Guidelines, http://www.hcahpsonline.org/qaguidelines.aspx.
    The CTM-3 measure adds three questions to the HCAHPS Survey, as 
follows:
     During this hospital stay, staff took my preferences and 
those of my family or caregiver into account in deciding what my health 
care needs would be when I left.
    [square] Strongly disagree
    [square] Disagree
    [square] Agree
    [square] Strongly agree
     When I left the hospital, I had a good understanding of 
the things I was responsible for in managing my health.
    [square] Strongly disagree
    [square] Disagree
    [square] Agree
    [square] Strongly agree
     When I left the hospital, I clearly understood the purpose 
for taking each of my medications.
    [square] Strongly disagree
    [square] Disagree
    [square] Agree
    [square] Strongly agree
    [square] I was not given any medication when I left the hospital
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50065 through 
50066), we stated that we were considering proposing to add the CTM-3 
measure from the HCAHPS Survey to the Patient and Caregiver Centered 
Experience of Care/Care Coordination (PCCEC/CC) domain of the FY 2018 
program year, and we sought public comments on this topic. We 
specifically sought public comments on how the new CTM-3 dimension 
should be included in the scoring methodology that we have adopted for 
the PCCEC/CC domain.
    Based on other public comments last year, we agreed to release 
additional information about the validity, reliability, and statistical 
properties of the CTM-3 measure when we proposed the measure (79 FR 
50066). We made this information publicly available in 2014 through the 
NQF re-endorsement process of the HCAHPS Survey (NQF #0166), available 
at: http://www.qualityforum.org/ProjectMeasures.aspx?projectID=73867.
    We note that the MAP supported the inclusion of the CTM-3 measure 
in the Hospital VBP Program in its MAP Pre-Rulemaking Report: 2013 
Recommendations on Measures Under Consideration by HHS, available at: 
http://www.qualityforum.org/Publications/2013/02/MAP_Pre-Rulemaking_Report_-_February_2013.aspx. The MAP noted that the addition 
of the CTM-3 measure will fill a gap in measuring care transitions.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24499), we 
proposed this measure for the Hospital VBP Program based on the MAP 
recommendation, our adoption of the measure in the Hospital IQR Program 
and our posting of measure data on Hospital Compare for at least 1 year 
before the beginning of the performance period for that measure. We 
believe that the proposed addition of the CTM-3 measure to the Hospital 
VBP Program meets the statutory requirements for inclusion in the FY 
2018 program year. Finally, we also believe that this measure, in 
conjunction with the HCAHPS survey, assesses an important component of 
quality in the acute care inpatient hospital setting. However, we 
emphasize that HCAHPS scores are designed and intended for use at the

[[Page 49552]]

hospital level. We do not endorse the use of HCAHPS scores for 
comparisons within hospitals, such as comparison of HCAHPS scores 
associated with a particular ward, floor, provider, or nursing staff. 
Further, the pain domain questions are intended to evaluate patients' 
experience of their pain management. HCAHPS pain domain results are not 
designed to judge, or compare, appropriate versus inappropriate 
provider prescribing behavior.
    We invited public comment on this proposal.
    Comment: Several commenters supported the proposed adoption of the 
CTM-3 measure as a good measure of hospital communication and care, 
citing that the inclusion of the measure would not only address all 
aspects of a defined episode of care but it would also affect the 
appropriate administration of prescribed antimicrobials, contribute to 
the early recognition of post-discharge infections, and incentivize 
hospitals to improve their coordination of patient transitions to 
outpatient care settings. These commenters noted that CTM-3 also 
features the necessary components to assess the quality of care 
received by patients at discharge, patient-caregiver comprehension of 
assigned health management plans, and the distribution of appropriate 
treatment, collectively mitigating the current rates of hospital 
readmissions and mortality among Medicare recipients.
    Response: We thank the commenters for their support.
    Comment: One commenter expressed appreciation for CMS' continued 
review of the HCAHPS patient-mix adjustment, and applauded CMS' more 
granular approach to adjust based on the language spoken by the 
patient.
    Response: We thank the commenter for this support.
    Comment: Several commenters expressed support for the measure, but 
noted concern with regard to its potential effect on the PCCEC/CC 
domain, the length and burdensome nature of the HCAHPS survey, as well 
as potential issues with patient comprehension of the language used in 
the questions. The commenters questioned the validity of the HCAHPS 
tool, given that this voluntary survey already has a low response rate.
    Some commenters suggested that CMS should consider using a 
threshold (such as percentiles) rather than a consistency score to 
ensure that this new measure does not adversely affect the HCAHPS 
domain. Several commenters recommended CMS decrease the HCAHPS 
consistency score to 10 percent and weight the HCAHPS measure total 
score with the CTM-3 measure at 90 percent. Another commenter 
recommended revising the methodology of the consistency score to more 
accurately measure consistent performance and retaining the 20 percent 
score. Instead, this commenter suggested using the HCAHPS floor values 
as the minimum range for consistency, and that CMS could use the 25th 
percentile value. The commenter stated that, in this way, consistency 
points would only be rewarding hospitals that maintain a reasonable 
level of performance in each HCAHPS measure.
    Response: The CTM-3 measure is an established and validated measure 
of patient experience with care transitions that has been incorporated 
into the HCAHPS measure. The measure was developed by Eric Coleman, MD, 
MPH, Professor of Medicine and Health at the Division of Health and 
Policy Research at the University of Colorado Anschutz Medical Campus. 
Dr. Coleman is the founder and director of The Care Transitions Program 
(www.caretransitions.org). The three Care Transition Measure questions 
are under copyright of The Care Transitions Program. We conducted 
additional analyses for HCAHPS and released additional information 
about the validity, reliability, and statistical properties of the CTM-
3 measure when we proposed the measure (79 FR 50066). We made this 
information publicly available in 2014 through the NQF re-endorsement 
process of the HCAHPS Survey (NQF #0166), available at: http://www.qualityforum.org/ProjectMeasures.aspx?projectID=73867.
    With respect to response rates and burden of the HCAHPS survey, 
available evidence suggests the addition of 3 items has no measurable 
effect on response rates. National HCAHPS response rates are unchanged 
to the nearest percentage point over the last four years. A 2008 meta-
analysis found response rates are only weakly associated with non-
response bias in probability sample surveys similar to HCAHPS, surveys 
that also adhere to high process standards of survey methodology.\88\
---------------------------------------------------------------------------

    \88\ Groves RM, Peytcheva E: ``The Impact of Nonresponse Rates 
on Nonresponse Bias: A Meta Analysis.'' Public Opinion Quarterly, 
2008.
---------------------------------------------------------------------------

    As indicated by the formula, consistency points only reward 
performance that is consistently good across the HCAHPS dimensions. 
Consistently poor performance does not earn consistency points. 
Consistency points provide additional incentives beyond achievement and 
improvement points to improve a hospital's lowest-performing dimension. 
Adding the CTM measure to the HCAHPS performance score should not 
adversely affect consistency point scoring. In particular, the score 
for this measure for the purposes of consistency points is compared to 
all other hospitals in the baseline period. A hospital will be awarded 
the maximum 20 consistency points when its performance on each HCAHPS 
dimension during the performance period equals or exceeds each 
dimension's achievement threshold. Otherwise, if any dimension rate is 
less than the achievement threshold, consistency points are awarded 
based on the lowest dimension's location relative to the worst 
performing hospital on that dimension. Evaluations have found that 
consistency points have good psychometric properties and positively 
correlate with overall HCAHPS performance.
    Comment: One commenter suggested that CMS should provide further 
discussion and instruction to hospitals regarding the implementation of 
the proposed 3-Item Care Transition Measure and whether this new 
measure will align with the existing measures in the HCAHPS survey. 
Another commenter did not support the inclusion of the CTM-3 measure 
because the commenter believed the survey results are subjective, the 
results inaccurately reflect the effectiveness of hospitals' care 
transitions, and the survey does not assess post-discharge planning 
efforts via Web-based patient portals and outcomes.
    Response: The HCAHPS survey and its administrative protocols are 
designed to produce standardized information about patient's 
perspectives of care that allow objective and meaningful comparisons of 
hospitals on topics that are important to consumers. All survey vendors 
as well as hospitals which self-administer the HCAHPS survey receive 
annual training and oversight on HCAHPS survey implementation. The CTM-
3 measure added 3 questions to the HCAHPS questionnaire in 2013. Survey 
vendors and self-administering hospitals have had two years of 
experience collecting data for the three HCAHPS questions (listed 
above) which comprise the CTM-3 measure. We have conducted additional 
analyses for HCAHPS, with results available as part of the HCAHPS NQF 
submission, confirming this measures' reliability and validity in the 
HCAHPS population (http://www.qualityforum.org/ProjectMeasures.aspx?projectID=73867).
    Comment: One commenter expressed concern that the CTM-3 measure 
does

[[Page 49553]]

not fully ensure medication therapy in the continuity of care for 
patients with acute coronary syndrome (ACS) and chronic obstructive 
pulmonary disease (COPD) in particular. The commenter suggested that 
CMS take additional steps to close these gaps via proper medication 
management, adding a question asking patients to assess their ease of 
obtaining prescription immediately after discharge, and updating the 
medication-related question to: ``When I left the hospital, I clearly 
understood the purpose for taking each of my medications and how long I 
should take each of my medications.''
    Response: The HCAHPS Survey is a standardized survey instrument and 
data collection methodology for measuring patients' experience of 
hospital care. The HCAHPS survey produces comparable nation-wide data 
which allow consumers to make objective and meaningful comparisons of 
hospitals thus supporting consumer choice of hospital. The emphasis is 
on the patients' experience of care while in the inpatient setting. Any 
modification of the HCAHPS Survey needs to focus on care provided by 
the hospital. We will share the commenter's question suggestions to the 
CTM-3 measure developers. Further, HCAHPS survey results are publicly 
reported to create incentives for hospitals to improve the quality of 
care they provide in their facilities.
    Comment: One commenter recommended that CMS consider alternative 
approaches to documenting the CTM-3 measure, including the use of 
emails and Web-based portals, which, the commenter believed, would make 
data collection and aggregation less costly and therefore allow 
hospitals to gather a larger sample size of data.
    Response: While Web-based surveys are increasing in use and have 
much value in other contexts, a recent Randomized Control Trial (RCT) 
study found Web-based approaches currently result in lower response 
rates and poorer representativeness than any of the four approved 
HCAHPS modes in the HCAHPS population.\89\ We will continue to explore 
Web-based approaches as hospital email address information on patients 
becomes more complete and as daily internet access becomes more 
complete in the HCAHPS target population.
---------------------------------------------------------------------------

    \89\ Elliott MN, Brown J, Lehrman WG, Beckett MK, Hambarsoomian 
K, Giordano L, Goldstein E.: ``A Randomized Experiment Investigating 
the Suitability of Speech-Enabled IVR and Web Modes for Publicly 
Reported Surveys of Patient' Experience of Hospital Care.'' Medical 
Care Research and Review, 2013.
---------------------------------------------------------------------------

    Comment: Several commenters requested that CMS implement the CTM-3 
measure sooner than the FY 2018 program year.
    Response: We are unable to implement the measure sooner than the FY 
2018 program year. First, in accordance with section 1886(o)(2)(C)(i) 
of the Act, we post data on measures on Hospital Compare for at least 
one year before we select them for the Hospital VBP Program. CTM-3 
initial measure data was posted on Hospital Compare in December 2014. 
Further, under section 1886(o)(3)(C) of the Act, we establish and 
announce the performance standards for all measures in the Hospital VBP 
Program at least 60 days before the beginning of the performance 
period. As discussed below, we are finalizing the baseline period for 
the CTM-3 measure as January 1, 2014--December 31, 2014 and the 
performance period as January 1, 2016--December 31, 2016.
    After consideration of the public comments we received, we are 
finalizing the proposal to add CTM-3 to the FY 2018 program year and 
subsequent years.
d. Removal of Clinical Care--Process Subdomain for the FY 2018 Program 
Year and Subsequent Years
    We have previously adopted three measures for the Clinical Care--
Process subdomain for the FY 2017 program year (for example, 79 FR 
50062 (Table on Previously Adopted and New Measures for the FY 2017 
program year)). However, as proposed in the FY 2016 IPPS/LTCH PPS 
proposed rule (80 FR 24499), we are finalizing our proposal to remove 
the AMI-7a and IMM-2 measures from the Hospital VBP Program, and we did 
not propose to adopt any additional measures for the Clinical Care--
Process subdomain. Because only one measure, PC-01 Elective Delivery, 
which measures the incidence of elective births prior to 39 weeks 
gestation, would remain in the Clinical Care--Process subdomain for the 
FY 2018 program year, we proposed to move PC-01 to the Safety domain 
and to remove the Clinical Care--Process subdomain beginning with the 
FY 2018 program year.
    As we have stated over the past several years (for example, 79 FR 
50084), we desire the Hospital VBP Program to be as inclusive as 
possible while maintaining and ensuring the reliability of the domains. 
We believe that the PC-01 Elective Delivery measure continues to be 
appropriate for the Hospital VBP Program because, in 2012, nearly one 
million Medicare beneficiaries were women age 45 and under.\90\ 
Further, in 2011, Medicare paid for roughly 14,000 births (79 FR 
50060). However, not all hospitals provide maternity services, which 
would leave these hospitals with no Clinical Care-Process subdomain 
measures to report in FY 2018 if PC-01 remains the only measure in that 
subdomain.
---------------------------------------------------------------------------

    \90\ Centers for Medicare & Medicaid Services. (2013). Table 
I.3--Medicare Enrollment/Demographics. Available at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/CMS-Statistics-Reference-Booklet/Downloads/CMS_Stats_2013_final.pdf.
---------------------------------------------------------------------------

    We believe that the PC-01 Elective Delivery measure, currently in 
the Clinical Care--Process subdomain, can appropriately be 
recategorized as a Safety domain measure. PC-01 addresses a process 
designed to reduce risk to both the neonate and the mother, thereby 
making care safer. Guidelines from the American College of 
Obstetricians and Gynecologists and the American Academy of Pediatrics 
state elective deliveries should not be performed at <39 weeks 
gestation unless medically indicated.\91\ Evidence has shown that 
early-term deliveries result in significant short-term neonatal 
mortality and result in more cesarean deliveries, and longer maternal 
length of stay.\92\ Furthermore, the MAP Hospital Workgroup has 
included PC-01 as an ``obstetrical adverse event'' measure in its 
Safety family of measures.\93\ As we continue to align our measure 
categorizations more closely with the CMS Quality Strategy, in the FY 
2016 IPPS/LTCH PPS proposed rule (80 FR 24500), we proposed to 
recategorize PC-01 as a Safety measure in the Safety domain, and for 
the reasons discussed above, to remove the Clinical Care--Process 
subdomain beginning with the FY 2018 program year.
---------------------------------------------------------------------------

    \91\ Clark, S., Miller, D., Belfort, M., Dildy, G., Frye, D., & 
Meyers, J. (2009). Neonatal and maternal outcomes associated with 
elective delivery. [Electronic Version]. Am J Obstet Gynecol. 
200:156.e1-156.e4.
    \92\ Glantz, J. (Apr.2005). Elective induction vs. spontaneous 
labor associations and outcomes. [Electronic Version]. J Reprod Med. 
50(4):235-40. Available at: http://www.researchgate.net/publication/7826004_Elective_induction_vs._spontaneous_labor_associations_and_outcomes.
    \93\ MAP Families of Measures: Safety, Care Coordination, 
Cardiovascular Conditions, Diabetes Final Report, October 2012, p. 
46.
---------------------------------------------------------------------------

    Finally, we proposed that if we finalize our proposal to remove the 
Clinical Care--Process subdomain, we would rename the Clinical Care--
Outcomes subdomain as simply the Clinical Care domain. We also proposed 
to reweight the domains to reflect our proposals, which we detail in 
section

[[Page 49554]]

IV.G.8.a. (erroneously referenced as section IV.G.7.a. in the preamble 
of the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24508 through 24509).
    We invited public comments on these proposals.
    Comment: Several commenters supported the proposal to remove the 
Clinical Care--Process subdomain and move the PC-01 measure to the 
Safety domain beginning with the FY 2018 program year.
    Response: We thank the commenters for their support.
    Comment: Several commenters expressed confusion regarding the 
inclusion of process measures in future program years. These commenters 
recommended that CMS retain the Clinical Care--Process subdomain at a 
weight of zero and work to repopulate this domain with appropriate 
process of care measures for future years when the domain weight could 
be adjusted. One commenter explained that many hospitals would only 
qualify for the Hospital VBP Program because they meet case minimums 
for process measures. Another commenter credited the Hospital VBP 
Program with facilitating improvements in processes throughout 
hospitals. One commenter noted that it might support the proposal to 
remove process measures as a domain; however, it did not believe that 
process measures should be removed completely from the Hospital VBP 
Program. One commenter expressed concern that new process measures that 
may be developed in the future would be given the same weight as future 
outcome measures grouped in the same domain.
    A few commenters noted that the four current Hospital VBP Program 
domains could accommodate process of care measures in the future, if 
needed.
    Response: We did not intend to signal that we would no longer 
consider process measures in future program years. Rather, we agree 
with some commenters who noted that the four Hospital VBP Program 
domains, Safety, Clinical Care, Efficiency and Cost Reduction, and 
PCCEC/CC, are able to accommodate process of care measures in the 
future, if needed. Further, removing the distinction between process 
measures and outcome measures is in line with our stated policy of 
favoring outcome measures over process measures. We would consider 
adding more process measures if they will further the Hospital VBP 
Program's objectives.
    Comment: One commenter did not support the proposed renaming of the 
Clinical Care--Outcomes subdomain.
    Response: We believe renaming Clinical Care Outcomes subdomain to 
the Clinical Care domain gives us the flexibility to add process 
measures to that domain when appropriate in future program years.
    Comment: One commenter requested that CMS clarify whether hospitals 
that elect to report six months of data for the PC-01 Elective Delivery 
measure as an eCQM for the Hospital IQR Program would also need to 
submit PC-01 Elective Delivery measure data using chart abstraction for 
the full year to have it included in the Hospital VBP Program scoring 
determination.
    Response: Hospitals must submit PC-01 measure data based on chart 
abstraction for the Hospital IQR Program.
    Comment: Several commenters supported the proposed recategorization 
of the PC-01 Elective Delivery measure as a Safety domain measure, as 
well as the proposed weight distribution in FY 2018.
    Response: We thank the commenters for their support.
    After consideration of the public comments we received, we are 
finalizing the proposal to move PC-01 to the Safety domain, remove the 
Clinical Care--Process subdomain, and rename the Clinical Care--
Outcomes subdomain as the Clinical Care domain for the FY 2018 program 
year and subsequent years.
e. NHSN Measures Standard Population Data
    The NHSN measures are calculated by CDC, and currently include the 
CAUTI, CLABSI, MRSA bacteremia, CDI, and Colon and Abdominal 
Hysterectomy SSI measures in the FY 2017 program year and subsequent 
program years. They measure the occurrence of these HAIs in hospitals 
participating in the Hospital VBP Program. In order to calculate the 
NHSN measures for use in both the Hospital IQR Program and the Hospital 
VBP Program, CDC must go through several steps. First, CDC determines 
each NHSN measure's number of predicted infections.\94\ CDC determines 
the number of predicted infections using both specific patient care 
location characteristics (for example, number of days in which a 
patient in an ICU has a central line) and infection rates that occurred 
among a standard population (sometimes referred to by CDC as ``national 
baseline'' but referred to here as ``standard population data'').\95\ 
Finally, for each NHSN measure, CDC calculates the Standardized 
Infection Ratio (SIR) by comparing a hospital's observed number of HAIs 
with the number of HAIs predicted for the hospital, adjusting for 
several risk factors.\96\ For more information about the way NHSN 
measures are calculated, we refer readers to QualityNet's Web page on 
HAI measures, which may be found at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic percent2FPage 
percent2FQnetTier2&cid=1228760487021.
---------------------------------------------------------------------------

    \94\ Available at: http://www.cdc.gov/HAI/surveillance/QA_stateSummary.html.
    \95\ Available at: http://www.cdc.gov/HAI/surveillance/QA_stateSummary.html.
    \96\ Available at: http://www.cdc.gov/nhsn/PDFs/Newsletters/NHSN_NL_OCT_2010SE_final.pdf.
---------------------------------------------------------------------------

    As part of routine measure maintenance, CDC is updating the 
``standard population data'' to ensure the NHSN measures' number of 
predicted infections reflect the current state of HAIs in the United 
States.\97\ Currently, CDC calculates the ``standard population data'' 
for the CAUTI measure based on data it collected in CY 2009.\98\ CDC 
calculates the ``standard population data'' for the CLABSI and Colon 
and Abdominal Hysterectomy SSI measures based on data it collected in 
2006 to 2008.\99\ CDC calculates the ``standard population data'' for 
the MRSA bacteremia and CDI measures based on data it collected in 2010 
to 2011.\100\ Beginning in 2015, CDC will collect data in order to 
update the standard population data for all of these NHSN measures (the 
CY 2015 standard population data for HAI measures will hereinafter be 
referred to as ``new standard population data'').
---------------------------------------------------------------------------

    \97\ Available at: http://www.cdc.gov/nhsn/PDFs/Newsletters/NHSN_NL_OCT_2010SE_final.pdf.
    \98\ Available at: http://www.cdc.gov/HAI/surveillance/QA_stateSummary.html#b6.
    \99\ Available at: http://www.cdc.gov/HAI/surveillance/QA_stateSummary.html#b6.
    \100\ Available at: http://www.cdc.gov/HAI/surveillance/QA_stateSummary.html#b6.
---------------------------------------------------------------------------

    Because the Hospital VBP Program calculates improvement points 
using comparisons between data collected from hospitals in a baseline 
period and data collected in a performance period, the Hospital VBP 
Program must treat CDC's standard population data update differently 
than other quality programs. We have determined that we cannot equally 
compare CDC's ``new standard population data'' to the ``current 
standard population data'' in order to calculate improvement points. If 
we do not address the CDC's measure update, we will be unable to 
compare the baseline and performance periods for NHSN measures in the 
FY 2017 and FY 2018 program years. To address the problem, we intend to 
use the ``current standard population data'' to calculate performance 
standards and calculate

[[Page 49555]]

and publicly report measure scores until the FY 2019 program year, as 
depicted in the table below. For the FY 2019 program year and 
subsequent years, the Hospital VBP Program will use the ``new standard 
population data'' to calculate performance standards and calculate and 
publicly report measure scores.

                           CDC's Standard Population Data in the Hospital VBP Program
----------------------------------------------------------------------------------------------------------------
                                    FY 2017 Program     FY 2018 Program     FY 2019 Program     FY 2020 Program
                                        year *              year *              year **             year **
----------------------------------------------------------------------------------------------------------------
NHSN Measures Baseline Periods..  Current standard    Current standard    New standard        New standard
                                   population data.    population data.    population data.    population data
NHSN Measures Performance         Current standard    Current standard    New standard        New standard
 Periods.                          population data.    population data.    population data.    population data
----------------------------------------------------------------------------------------------------------------
* CDC will use ``current standard population data'' to calculate measure data that we will translate into scores
  on the measures.
** CDC will use ``new standard population data'' (CY 2015) to calculate measure data that we will translate into
  scores on the measures.

    For a discussion addressing the ``new standard population data'' in 
the Hospital IQR Program, we refer readers to sections VIII.A.4.b. of 
the preamble of the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24562) 
and this final rule.
    Comment: Several commenters supported CMS' continuing use of the 
``current standard population data'' to calculate performance standards 
until the FY 2019 program year because the strategy allows for accurate 
measurement between baseline and performance periods without 
readjusting the data to align with the ``new standard population 
data.'' One commenter noted this would help hospitals without an ICU 
capture more cases and better align with the HAC Reduction Program.
    Response: We thank the commenters for their support.
    Comment: One commenter supported the development of a plan to 
address CDC's NHSN new standard population data because they believe 
that the update will reflect significant progress toward elimination of 
HAIs especially for CLABSI. The commenter also believed that the update 
of the standard population data will assist in resetting the baseline 
for CAUTI, which they believe, has been challenging.
    Response: We thank the commenter for its support.
    Comment: One commenter supported the proposal to use new standard 
population data to calculate performance in both the baseline and 
performance periods, and urges CMS to consider the timing of this 
change to coincide with similar changes to these measures in the 
Hospital VBP Program.
    Response: We thank the commenter for its support.
    Comment: One commenter disagreed with the policy of using ``new 
standard population data'' beginning in the FY 2019 program year 
because the commenter believed that CMS should assess the impact of 
CDC's CY 2015 CAUTI ``standard population data'' based on substantive 
changes to surveillance criteria for the CAUTI measure.
    Several commenters recommended that if assessment identifies 
potential problems, then CDC should use CY 2016 as the ``standard 
population data'' because it will be more stable. One commenter 
requested that CDC publish the differences from year-to-year 
collection.
    Response: We appreciate the commenters' thoughts on stability of 
the 2015 data. CDC's new CAUTI definition was developed as a result of 
a subject matter expert working group comprised of CDC and non-CDC 
participants who systematically assessed each definitional component. 
The end result is a new CAUTI definition that is simplified from 
previous iterations and allows for less subjectivity while optimizing 
clinical credibility. An assessment of the impact of the definition 
change on CAUTI incidence was completed as part of the definition 
development. In addition, the NHSN application provides a technical 
infrastructure and built in controls on data entry that serve as 
safeguards against reporting of events that do not meet the new CAUTI 
definition. For these reasons, CDC is confident that the CAUTI data 
reported in 2015 will be appropriate to use for a new standard 
population.
f. Summary of Previously Adopted and Newly Adopted Measures for the FY 
2018 Program Year
    In summary, for the FY 2018 program, we are adopting the following 
measure set:

          FY 2018 Previously Adopted and Newly Adopted Measures
------------------------------------------------------------------------
 
------------------------------------------------------------------------
   Patient and Caregiver-Centered Experience of Care/Care Coordination
                                 Domain
------------------------------------------------------------------------
HCAHPS.......................  Hospital Consumer Assessment of
                                Healthcare Providers and Systems Survey
CTM-3*.......................  3-Item Care Transitions Measure
------------------------------------------------------------------------
                          Clinical Care Domain
------------------------------------------------------------------------
MORT-30-AMI..................  Hospital 30-Day, All-Cause, Risk-
                                Standardized Mortality Rate Following
                                Acute Myocardial Infarction
                                Hospitalization
MORT-30-HF...................  Hospital 30-Day, All-Cause, Risk-
                                Standardized Mortality Rate Following
                                Heart Failure Hospitalization
MORT-30-PN...................  Hospital 30-Day, All-Cause, Risk-
                                Standardized Mortality Rate Following
                                Pneumonia Hospitalization
------------------------------------------------------------------------
                              Safety Domain
------------------------------------------------------------------------
CAUTI........................  National Healthcare Safety Network
                                Catheter-Associated Urinary Tract
                                Infection Outcome Measure
CLABSI.......................  National Healthcare Safety Network
                                Central Line-Associated Bloodstream
                                Infection Outcome Measure
Colon and Abdominal            Centers for Disease Control and
 Hysterectomy SSI.              Prevention Harmonized Procedure Specific
                                Surgical Site Infection Outcome Measure
                                Colon
                                Abdominal Hysterectomy

[[Page 49556]]

 
MRSA bacteremia..............  National Healthcare Safety Network
                                Facility-Wide Inpatient Hospital-Onset
                                Methicillin-Resistant Staphylococcus
                                aureus Bacteremia Outcome Measure
CDI..........................  National Healthcare Safety Network
                                Facility-Wide Inpatient Hospital-Onset
                                Clostridium difficile Infection Outcome
                                Measure
PSI-90.......................  Patient Safety for Selected Indicators
                                (Composite)
PC-01 **.....................  Elective Delivery
------------------------------------------------------------------------
                  Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB-1.......................  Payment-Standardized Medicare Spending
                                Per Beneficiary
------------------------------------------------------------------------
* Finalized new measure.
** Finalized to be moved from the Clinical Care--Process subdomain to
  the Safety domain.

3. Previously Adopted and Newly Adopted Measures for the FY 2019, FY 
2021, and Subsequent Program Years
    Due to the time necessary to adopt measures, we often adopt 
policies for the Hospital VBP Program well in advance of the program 
year for which they will be applicable (for example, 76 FR 26490 
through 26547; 76 FR 51653 through 51660; 76 FR 74527 through 74547; 77 
FR 53567 through 53614; 78 FR 50676 through 50707; 78 FR 75120 through 
75121; 79 FR 50048 through 50087). In the FY 2016 IPPS/LTCH PPS 
proposed rule (80 FR 24501 through 24503), we signaled our intent to 
include additional data in certain NHSN measures beginning with the FY 
2019 program year, proposed to adopt a new measure beginning with the 
FY 2021 program year, and summarized all previously adopted and newly 
proposed measures.
a. Intent To Propose in Future Rulemaking To Include Selected Ward 
(Non-Intensive Care Unit (ICU)) Locations in Certain NHSN Measures 
Beginning With the FY 2019 Program Year
    The Hospital VBP Program uses adult, pediatric, and neonatal 
intensive care unit (ICU) data to calculate performance standards and 
measure scores for the CAUTI and CLABSI measures for the FY 2017 and FY 
2018 program years (79 FY 50061). In the FY 2014 IPPS/LTCH PPS proposed 
rule, we proposed under the Hospital IQR Program to expand the 
collection of CAUTI and CLABSI measures to include several selected 
ward (non-ICU) locations beginning with events occurring on or after 
January 1, 2014 (78 FR 27684). In the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50787), after consideration of the public comments received, we 
deferred the implementation date of the CAUTI and CLABSI measure 
expansion to selected ward (non-ICU) settings for the Hospital IQR 
Program from January 1, 2014 to January 1, 2015 (78 FR 50787). Selected 
ward (non-ICU) locations are defined as adult or pediatric medical, 
surgical, and medical/surgical wards (79 FY 50061; 78 FR 50787).
    In the FY 2015 IPPS/LTCH PPS final rule, we signaled our intent to 
consider using data from selected ward (non-ICU) locations for the 
Hospital VBP Program, beginning in the FY 2019 program year for 
purposes of calculating performance standards for the CAUTI and CLABSI 
measures (79 FR 50061). In the FY 2016 IPPS/LTCH PPS proposed rule (80 
FR 24501 through 24502), we stated our intent to propose to include the 
selected ward (non-ICU) locations in the CAUTI and CLABSI measures 
beginning with the FY 2019 program year in future rulemaking. We intend 
to propose to adopt a baseline period of January 1, 2015 through 
December 31, 2015, and a performance period of January 1, 2017 through 
December 31, 2017, for the CAUTI and CLABSI measures. This expansion of 
the CAUTI and CLABSI measures would be consistent with the NQF re-
endorsement update to these measures, which allows application of the 
measures beyond ICUs (78 FR 50787). We believe this expansion of the 
measures will allow hospitals that do not have ICU locations to use the 
tools and resources of the NHSN for quality improvement and public 
reporting efforts (78 FR 50787).
    We invited public comment on this plan to accommodate these 
measures' expansions in the Hospital VBP Program future rulemaking.
    Comment: Several commenters supported CMS' proposal to include 
performance data from non-ICU locations in the CLABSI and CAUTI 
measures starting in FY 2019, including the proposal to use FY 2019 as 
the first year for the newly revised measures. Several commenters noted 
that CLABSI and CAUTI measures are important targets for dedicated 
surveillance and prevention efforts outside the ICU setting. One 
commenter noted that the inclusion of the selected ward (non-ICU) 
locations in the Hospital VBP Program would represent a more robust 
reflection of organizational performance. Another commenter believes 
this proposal will allow hospitals that do not have ICU locations to 
use the tools and resources of the NHSN for their quality improvement 
efforts. Finally, one commenter noted that more hospitals will be able 
to submit data and be scored given the expansion. The commenter also 
commended CMS for waiting to integrate these measures into the Hospital 
VBP Program until there is a baseline and performance period using the 
same measure definition to allow for an achievement and improvement 
score.
    Response: We thank the commenters for their support.
    Comment: One commenter requested that CMS consider providing 
selected ward (non-ICU) locations with the mechanisms in the FY 2016 
IPPS/LTCH PPS final rule to begin voluntarily collecting data related 
to the CAUTI and CLABSI measures for purposes of calculating 
performance standards.
    Response: We note that data collection began under the Hospital IQR 
Program on January 1, 2015 and the first submission deadline to NHSN 
does not occur until after publication of the FY 2016 IPPS/LTCH PPS 
final rule. We intend to include performance standards in the FY 2017 
IPPS/LTCH PPS proposed and final rules.
    Comment: Several commenters urged CMS to carefully review the data 
submitted to determine its appropriateness for inclusion in the 
program.
    Response: We thank the commenters for their suggestion, and we will 
take the comments and suggestions into consideration in future 
rulemaking. We review all the Hospital VBP Program data provided from 
NHSN, and, in concert with CDC, will conduct appropriate analyses on 
the data provided.
    Comment: One commenter supported CMS' proposal to include 
performance data from non-ICU locations in the CLABSI and CAUTI 
measures, but the commenter objected to the proposal to postpone the 
adoption of these NQF-

[[Page 49557]]

endorsed measures until 2019 feeling that this is too delayed given the 
extent of morbidity and mortality associated with these infections.
    Response: We thank the commenter for the suggestion, but note that 
we cannot adopt the measures earlier than the FY 2019 program year 
because of statutory and other restrictions on measures entering the 
program.
    Comment: One commenter did not support the expansion of CAUTI data 
collection to non-ICU wards because a subset of patients, for example, 
spinal cord injury/dysfunction patients, may be in danger of receiving 
improper care unless they are excluded from the measure. These patients 
are often hospitalized after trauma and may experience over distension 
of the bladder and dysenergic uropathy if their bladder management is 
not performed appropriately. The commenter noted that some hospitals 
remove the catheter prematurely as a result of the CAUTI measure, often 
without recognizing spinal cord injury patients as an at-risk 
population, which can result in improper and unsafe bladder management.
    Response: We agree that patients with spinal cord injury/
dysfunction require careful evaluation for bladder dysfunction and 
proper emptying practices. However, we do not believe that this is a 
reason to exclude patients from CAUTI surveillance. Patients with 
spinal cord injury/dysfunction are at risk of CAUTI, and frequent use 
of indwelling urinary catheters on a long-term basis places a premium 
on proper insertion and maintenance practices.
    Comment: Some commenters supported CMS' inclusion of the expanded 
scope of surveillance and recommended that CMS add detail on how the 
SIR metric for CAUTI and CLABSI will be calculated and used for public 
reporting, given that there has been little experience or use of a 
blend of types of locations into an overall SIR. One commenter 
recommended that CMS work with CDC's NHSN subject matter experts to 
better understand the impact of the expanded scope prior to adoption. 
One commenter also suggested that CMS improve the risk adjustment for 
the CLABSI, CAUTI, and CDI.
    Response: The SIR is a risk-adjusted summary measure that takes 
into account the variability of HAI incidence among different patient 
populations (for example, ICU vs. non-ICU patients). CDC will perform 
in-depth analyses of the 2015 data to determine an appropriate baseline 
for the inclusion of non-ICU data in future CLABSI and CAUTI SIRs.
    We thank the commenters for their views on our intent to propose to 
include the selected ward (non-ICU) locations in the CAUTI and CLABSI 
measures beginning with the FY 2019 program year in future rulemaking.
b. New Measure for the FY 2021 Program Year: Hospital 30-Day, All-
Cause, Risk-Standardized Mortality Rate Following Chronic Obstructive 
Pulmonary Disease (COPD) Hospitalization (NQF #1893)
    Hospital 30-Day, All-Cause, RSMR following COPD Hospitalization 
(NQF #1893) (MORT-30-COPD) is a risk-adjusted, NQF-endorsed mortality 
measure monitoring mortality rates following COPD hospitalizations. We 
adopted this measure in the Hospital IQR Program in the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50792). Initial measure data were posted on 
Hospital Compare in December 2014 and the full measure specifications 
are available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    Chronic lower respiratory disease (including COPD) is the third 
leading cause of death in the United States.\101\ Between 1998 and 
2008, the number of patients hospitalized annually for acute 
exacerbations of COPD increased by approximately 18 
percent.102 103 104 Moreover, COPD is one of the top 20 
conditions contributing to Medicare costs.\105\ The median 30-day RSMR 
following admissions for COPD between July 2010 and June 2013 was 7.8 
percent with variation in mortality rates ranging from 5.5 percent to 
12.4 percent across over 2,700 hospitals.\106\
---------------------------------------------------------------------------

    \101\ Hoyert DL, Xu JQ. Deaths: preliminary data for 2011. Natl 
Vital Stat Rep. 2012;61(6):1-65. Hyattsville, MD: National Center 
for Health Statistics.2012. Available at: http://www.birthbythenumbers.org/wp-content/uploads/2012/12/prelim-deaths-2011.pdf.
    \102\ National Heart L, and Blood Institute, The Morbidity & 
Mortality: Chart Book on Cardiovascular, Lung and Blood Diseases. 
2009; Available at: http://www.nhlbi.nih.gov/resources/docs/2009_ChartBook.pdf.
    \103\ The Centers for Disease Control and Prevention. National 
Center for Health Statistics Chronic Lower Respiratory Disease. 
FastStats 2010; Available at: http://www.cdc.gov/nchs/fastats/copd.htm.
    \104\ Agency for Healthcare Research and Quality. Healthcare 
Cost and Utilization Project Statistics on Hospitals Stays. 2009; 
Available at: http://hcupnet.ahrq.gov/.
    \105\ Andrews RM. The National Hospital Bill: The Most Expensive 
Conditions by Payer, 2006. Rockville: Agency for Healthcare Research 
and Quality; 2008.
    \106\ September 2014 Medicare Hospital Quality Chartbook 
Performance Report on Outcome Measures. Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/Medicare-Hospital-Quality-Chartbook-2014.pdf.
---------------------------------------------------------------------------

    The MAP supported the inclusion of the MORT-30-COPD measure in the 
Hospital VBP Program as detailed in the ``Spreadsheet of MAP 2015 Final 
Recommendations.'' \107\ The MAP noted that the addition of the MORT-
30-COPD measure would be appropriate as 30-day mortality rate measures 
for AMI, HF, and PN are already part of the Hospital VBP Program 
measure set.
---------------------------------------------------------------------------

    \107\ National Quality Forum ``Spreadsheet of MAP 2015 Final 
Recommendations'' available at: http://www.qualityforum.org/map/ and 
``Process and Approach for MAP Pre-Rulemaking Deliberations 2015'' 
found at: http://www.qualityforum.org/Publications/2015/01/Process_and_Approach_for_MAP_Pre-Rulemaking_Deliberations_2015.aspx.
---------------------------------------------------------------------------

    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24502), we 
proposed this measure for the Hospital VBP Program based on the MAP 
recommendation, our adoption of the measure in the Hospital IQR Program 
and our posting of measure data on Hospital Compare for at least 1 year 
prior to the start of the performance period. In addition, the MORT-30-
COPD measure is appropriate for the Hospital VBP Program because it 
addresses a high volume, high cost condition, and chronic lower 
respiratory disease (including COPD) is the third leading cause of 
mortality in the United States. The measure aligns with the CMS Quality 
Strategy Goal of Effective Prevention and Treatment. Based on the 
continued high risk of mortality after COPD hospitalizations, we 
proposed to add it to the Clinical Care domain for the FY 2021 program 
year.
    We invited public comment on this proposal.
    Comment: Several commenters supported the adoption of the MORT-30-
COPD measure for the FY 2021 program year because this measure will 
advance the treatment, management, and care coordination required for 
COPD hospitalizations, resulting in better outcomes for patients and a 
reduction in overall costs. One commenter believed this measure will 
increase incentives for hospitals to better manage COPD for patients 
after discharge.
    Response: We thank the commenters for their support.
    Comment: Several commenters requested that CMS consider an earlier 
adoption of the MORT-30-COPD measure for the FY 2019 program year, with 
data collection beginning in FY 2017 to align with the Hospital 
Readmissions Reduction Program requirements.
    Response: We are unable to implement the measure in the Hospital

[[Page 49558]]

VBP Program sooner than the FY 2021 program year because, as we 
discussed in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24505), we 
proposed to adopt the measure for a future program year in order to 
ensure that we can adopt baseline and performance periods of sufficient 
length for performance scoring purposes. As we stated in the proposed 
rule (80 FR 24504), we believe a 36-month baseline and performance 
period is appropriate for the mortality measures when possible. 
Adopting the MORT-30-COPD measure for the FY 2021 program year also 
aligns the measurement periods for all the 30-day mortality measures in 
the program.
    Comment: Many commenters did not support CMS' proposal to adopt the 
MORT-30-COPD measure. The commenters urged CMS to adjust for 
sociodemographic status because COPD is a condition sensitive to 
environmental factors and exacerbations of the condition can be related 
to the patient's sociodemographic status.
    Commenters expressed concern with the measure's reliability. The 
commenters noted that testing results showed only moderate reliability. 
These commenters recommended that CMS develop a plan to improve or 
replace the claims-based mortality measures used in the Hospital VBP 
Program.
    One commenter suggested that MORT-30-COPD is not a good measure of 
a hospital's evidence-based quality practices for COPD. Another 
commenter suggested that hospitals will be penalized twice in two 
different programs. Finally, one commenter noted that the current form 
of the measure does not address end of life or palliative care, which 
greatly affects hospitals that specialize in these areas of service.
    Response: As we have explained above, while we appreciate these 
comments and the importance of the role that sociodemographic status 
plays in the care of patients, we continue to have concerns about 
holding hospitals to different standards for the outcomes of their 
patients of low sociodemographic status because we do not want to mask 
potential disparities or minimize incentives to improve the outcomes of 
disadvantaged populations. We routinely monitor the impact of 
sociodemographic status on hospitals' results on our measures. To date, 
we have found that hospitals that care for large proportions of 
patients of low sociodemographic status are capable of performing well 
on our measures (we refer readers to the 2014 Chartbook pages 48-57, 
70-73, and 78 at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/Medicare-Hospital-Quality-Chartbook-2014.pdf).
    NQF is currently undertaking a 2-year trial period in which new 
measures and measures undergoing maintenance review will be assessed to 
determine if risk-adjusting for sociodemographic factors is appropriate 
for each measure. For 2 years, NQF will conduct a trial of a temporary 
policy change that will allow inclusion of sociodemographic factors in 
the risk-adjustment approach for some performance measures. At the 
conclusion of the trial, NQF will determine whether to make this policy 
change permanent. Measure developers must submit information such as 
analyses and interpretations as well as performance scores with and 
without sociodemographic factors in the risk adjustment model.
    Furthermore, the Office of the Assistant Secretary for Planning and 
Evaluation (ASPE) is conducting research to examine the impact of 
socioeconomic status on quality measures, resource use, and other 
measures under the Medicare program as directed by the IMPACT Act. We 
will closely examine the findings of these reports and related 
Secretarial recommendations and consider how they apply to our quality 
programs at such time as they are available.
    While we acknowledge the commenters' concerns regarding the 
measure's reliability, we note that we use the same statistical 
approach to reliability for the COPD mortality measure that we have 
established for our other hospital risk-adjusted outcome measures. 
Reliability is related to sample-size, and we adopted a risk-adjustment 
modeling methodology that takes into account sample size. Moreover, as 
stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53591) and the FY 
2014 IPPS/LTCH PPS final rule (78 FR 50693), we believe that the 
mortality measures capture important quality data for purposes of the 
Hospital VBP Program. We believe that the claims-based mortality 
measures are sufficiently reliable for inclusion in the Hospital VBP 
Program, and they are NQF-endorsed.
    We disagree with the commenter that the COPD mortality measure is 
not a good measure of evidenced-based quality practices, as high 
quality care is necessary to achieve low mortality rates. In regard to 
the commenter's concern that the measure does not address end-of life 
or palliative care, we note that patients enrolled in hospice any time 
in the 12 months prior to the index admission, including the first day 
of the index admission, are excluded from the measure because mortality 
is not necessarily an adverse outcome or indicator of poor quality care 
in this population. However, the measure does not exclude patients who 
transition to hospice or palliative care because such transitions may 
be the result of quality failures that have led to poor clinical 
outcomes.
    Comment: One commenter noted that the mortality rate is high for 
patients with COPD, and the commenter encouraged CMS to monitor 
hospitals to ensure that they do not discourage admission of COPD 
patients in order to score better on the measure.
    Response: We acknowledge the commenter's concern and recognize that 
any performance-based payment program may create the potential for 
unintended consequences. However, we remain committed to monitoring and 
assessing unintended consequences, such as changes in utilization, and 
adjusting the program as needed. In order to assess trends in measure 
performance and healthcare utilization, we continuously analyze our 
measures, including the MORT-30-COPD measure, and publish our findings 
annually in the ``Medicare Hospital Quality Chartbook'' at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/OutcomeMeasures.html.
    Comment: One commenter urged CMS to use the years between now and 
FY 2021 to ensure the validity of the proposed measure and ensure that 
information attained from using this measure will improve the quality 
of care for patients prior to moving forward with implementation plans 
for FY 2021.
    Response: We appreciate the commenter's suggestion, but note that 
the measure has been tested and validated for the acute inpatient 
setting. We also note that NQF has endorsed the measure as valid and 
reliable (NQF #1893).
    After consideration of the public comments we received, we are 
finalizing the proposal to add MORT-30-COPD to the FY 2021 program year 
and subsequent years.
c. Summary of Previously Adopted and Newly Adopted Measures for the FY 
2019 and FY 2021 and Subsequent Program Years
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50063), we finalized 
our proposal to adopt the Hospital-Level Risk-Standardized Complication 
Rate Following Elective Primary THA/TKA measures for the FY 2019 
program year and subsequent years. In the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50063

[[Page 49559]]

through 50065), we also finalized our proposal to adopt the PSI-90 
measure for the FY 2019 program year and subsequent years.

                   FY 2019 Previously Adopted Measures
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          Clinical Care Domain
------------------------------------------------------------------------
THA/TKA..................  Hospital-Level Risk-Standardized Complication
                            Rate Following Elective Primary Total Hip
                            Arthroplasty/Total Knee Arthroplasty.
------------------------------------------------------------------------
                              Safety Domain
------------------------------------------------------------------------
PSI-90...................  Patient Safety For Selected Indicators
                            (Composite).
------------------------------------------------------------------------

    In this final rule, we are finalizing our proposal to adopt the 
MORT-30-COPD measure for the FY 2021 program year and subsequent years.

                      FY 2021 Newly Adopted Measure
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          Clinical Care Domain
------------------------------------------------------------------------
MORT-30-COPD.............  Hospital 30-Day, All-Cause, Risk-Standardized
                            Mortality Rate Following Chronic Obstructive
                            Pulmonary Disease Hospitalization.
------------------------------------------------------------------------

4. Possible Measure Topics for Future Program Years
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50066 through 
50070), we responded to comments on measures that could potentially be 
used to expand the Efficiency and Cost Reduction domain in the future. 
In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24503), we again 
sought public comments on this issue. We indicated that we were 
interested in expanding the Efficiency and Cost Reduction domain to 
include a more robust measure set, which may include measures that 
supplement the MSPB measure with more condition and/or treatment 
specific episode measures. In the FY 2016 IPPS/LTCH PPS proposed rule, 
we also encouraged comment on Efficiency and Cost Reduction measures 
already included in the Hospital IQR Program as well as measures we 
proposed in section VIII.A.7. of the preamble of the FY 2016 IPPS/LTCH 
PPS proposed rule (80 FR 24566 through 24581) for inclusion in the 
Hospital IQR Program beginning with the FY 2018 payment determination.
    Comment: We received a number of comments related specifically to 
the proposed clinical episode-based payment measures themselves.
    Response: We thank the commenters for their input regarding the 
four clinical episode-based measures we proposed for the Hospital IQR 
Program. We have addressed these comments in section VIII.A.7.b. of the 
preamble of this final rule. We note that we are finalizing three of 
the four proposed measures: (1) Kidney/UTI Clinical Episode-Based 
Payment Measure (claims-based); (2) Cellulitis Clinical Episode-Based 
Payment Measure (claims-based); and (3) Gastrointestinal Hemorrhage 
Clinical Episode-Based Payment Measure (claims-based) for the Hospital 
IQR Program, but not beginning with the FY 2018 payment determination 
as proposed. Instead, we are finalizing these measures beginning with 
the FY 2019 payment determination and will provide data to hospitals on 
these measures in confidential hospital-specific reports before the 
measures are included in the Hospital IQR Program. We refer readers to 
section VIII.A.7.b. of the preamble of this final rule for further 
details. In order to include these measures in the Hospital VBP Program 
in the future, we would have to propose and finalize related policies 
through future notice and comment rulemaking.
    We also received several comments related to the potential future 
inclusion of the clinical episode-based payment measures in the 
Hospital VBP Program. We summarize and respond to those comments below.
    Comment: Several commenters supported a more granular episode-based 
payment measure in place of, rather than in addition to, the MSPB-1 
measure.
    Response: We thank the commenters for their support of the episode-
based payment measures. We continue to believe that the MSPB measure 
provides valuable information about Medicare spending. We would propose 
any changes to the efficiency domain measure set through future 
rulemaking.
    Comment: One commenter recommended that instead of adding 
duplicative, condition-specific Efficiency and Cost Reduction measures, 
CMS should improve the ``predictive power'' of the existing MSPB-1 
measure through stronger risk-adjustment.
    Response: We do not believe that the clinical episode-based pending 
measures are duplicative of the existing MSPB-1 measure. Rather, the 
measures provide a more complete picture of Medicare spending, in order 
to allow hospitals to better understand and target their efficiency 
efforts. The MSPB-1 measure has been endorsed by the NQF. It is 
considered to be a valid, reliable measure of Medicare spending.
    Comment: One commenter did not support CMS' possible addition of 
episode-based efficiency measures if it is possible that certain 
hospitals may be penalized twice if the hospitals have both high 
procedure costs and a high MSPB-1 rate unless we can ensure that 
hospitals with a high volume of patients--especially those with complex 
patients for an episode condition or surgery--are not inappropriately 
penalized, rewarded, or otherwise scrutinized as a result of 
performance on overlapping measures. The commenter asked that CMS 
specify the combination of diagnosis codes and procedures needed to 
define clinically relevant services for this episode-based efficiency 
measure.
    Response: As we note in section VIII.A.7.b. of the preamble of this 
final rule, we developed these measures in response to public comment 
requesting that we develop a more robust efficiency measure set and 
that we include measures that are inclusive of clinically-

[[Page 49560]]

related services. While performance on the overall Medicare spending 
measure may correlate with performance on the clinical episode-based 
measures, we believe that they will provide valuable additional 
information.
    Comment: A few commenters urged CMS to continue exploring 
additional measures of cost and efficiency for the program, arguing 
that the value of care provided is a function of both quality and cost, 
where both elements carry equal weight. One commenter urged us to 
establish a policy goal and specific plan to incrementally increase the 
efficiency domain to 50 percent of the TPS as more efficiency measures 
are developed and added to the program.
    Response: We thank commenters for their input and we will take it 
into consideration in future rulemaking.
    Comment: Commenters suggested reducing the weight of the Efficiency 
domain during future initial implementation of new episode-based 
measures until we have adequate experience using the new measures.
    Response: We thank the commenters for their input regarding the 
four clinical episode-based measures we proposed for the Hospital IQR 
Program. We note that we are finalizing three of the four proposed 
measures: (1) Kidney/UTI Clinical Episode-Based Payment Measure 
(claims-based); (2) Cellulitis Clinical Episode-Based Payment Measure 
(claims-based); and (3) Gastrointestinal Hemorrhage Clinical Episode-
Based Payment Measure (claims-based) for the Hospital IQR Program, but 
not beginning with the FY 2018 payment determination as proposed. 
Instead, we are finalizing them beginning with the FY 2019 payment 
determination and will provide data to hospitals on these measures in 
confidential hospital-specific reports before the measures are included 
in the Hospital IQR Program. We refer readers to section VIII.A.7.b. of 
the preamble of this final rule for further details.
    Comment: One commenter recommended that CMS explore utilization 
measures that reflect the appropriateness of service use and intensity 
in hospitals for inclusion in the Efficiency and Cost Reduction domain.
    Response: We thank commenter for this input regarding Efficiency 
and Cost Reduction domain.
    Comment: One commenter supported efficiency measures that are 
linked closely to hospital services.
    Response: We thank commenter for this input regarding the 
Efficiency and Cost Reduction domain.
    Comment: One commenter requested that CMS disaggregate by clinical 
service line and that CMS provide the number of episodes per service 
line for certain files on Hospital Compare, including data that shows 
the breakdown of spending per episode on physician, inpatient, 
outpatient, durable medical equipment, home care, and nursing home 
services during admission and post-discharge. The commenter noted that 
this information is already provided to individual hospitals, but it 
would be more useful if hospitals and their agents could compare 
results among hospitals.
    Response: A ``Medicare Hospital Spending by Claim'' table is 
currently available on Hospital Compare at: http://www.medicare.gov/hospitalcompare/Data/spending-per-hospital-patient.html. The table 
divides each hospital's average episode spending levels into three time 
periods: (1) During the 3 days prior to the index admission; (2) during 
the index admission; and (3) during the 30 days after hospital 
discharge. Within the time periods, the average episode spending levels 
are further broken down into seven service types (for example, 
inpatient or outpatient).
    We also received several comments providing thoughts on other new 
measures for us to add in future program years:
    Comment: Several commenters encouraged CMS to develop a measure 
that captures information about patient transitions to outpatient care, 
arguing that as hospitals are taking on a greater role in post-acute 
care coordination, understanding how well efforts to connect patients 
with external providers and social support systems will contribute to a 
critical gap.
    Response: We thank the commenters for their suggestions, and we 
will take them into consideration in future rulemaking.
    Comment: One commenter encouraged CMS to develop a measure that 
incorporates healthcare workers in home and community-based services.
    Response: We thank the commenter for this suggestion, and we will 
take it into consideration in future rulemaking.
    Comment: One commenter recommended that CMS explore implementing 
measures of advance care planning because proper end-of-life planning 
discussions reduce related costs of care. The commenter suggested an 
advanced care plan in an electronic medical record as a measure.
    Response: We thank the commenter for these suggestions, and we will 
take them into consideration in future rulemaking.
    Comment: One commenter suggested that CMS consider CABG and/or 
Stroke mortality measures.
    Response: We thank the commenter for these suggestions, and we will 
take them into consideration in future rulemaking.
    Comment: One commenter recommended that CMS consider including the 
cost of anesthesia delivery models as a future measure in the 
Efficiency and Cost Reduction domain because peer-reviewed literature 
indicates that Certified Registered Nurse Anesthetists (CRNAs) acting 
as the sole anesthesia provider are the most cost-effective model for 
anesthesia delivery without any measurable difference in quality of 
care. This commenter also suggested that CMS consider the costs 
incurred by (1) an anesthesiologist being ``present at induction'' and 
(2) an anesthesiologist being ``present at emergence'' from anesthesia. 
The commenter noted that waiting costs due to delayed starts to surgery 
lead to postponing the surgery schedule, overtime for staff, delaying 
surgeon's rounds that affect patient care and discharge of the patient, 
opportunity costs, and diversion of resources from other patient care. 
The commenter noted that the literature shows that anesthesiologists 
fail to comply with federal requirements and noted lapses in 
anesthesiologist supervision is common which adds hospital costs while 
the patient remains anesthetized.
    Response: We thank the commenter for these suggestions, and we will 
take them into consideration in future rulemaking.
    Comment: One commenter suggested adding the cost of anesthesia 
subsidies per anesthetizing location as part of the Efficiency and Cost 
Reduction domain because a new measure on spending on subsidies 
information could support hospitals in determining and adopting the 
most efficient model of anesthesia care based on their needs.
    Response: We thank the commenter for this suggestion and we will 
take it into consideration in future rulemaking.
    Comment: One commenter suggested that CMS adopt the STK-04 measure 
because strokes leave many with new disabilities and increased health 
risks, and the commenter believed we should prioritize outcome measures 
related to stroke.
    Response: We thank the commenter for this suggestion, and we will 
take it into consideration in future rulemaking.
    Comment: One commenter suggested that CMS prioritize adding NQF 
#0500, the Severe Sepsis and Septic Shock Management Bundle, to the 
Hospital VBP Program and noted that it has been

[[Page 49561]]

added to the Hospital IQR Program for FY 2017.
    Response: We thank the commenter for this suggestion, and we will 
take it into consideration in future rulemaking.
    Comment: A few commenters recommended that CMS prioritize 
implementation of a nutrition or malnutrition-related quality measure 
set as soon as feasible because malnutrition is a patient safety risk 
and an independent predictor of negative patient outcomes including 
mortality, length of hospital stay, readmissions, and hospitalization 
cost. The commenters noted that malnutrition gap areas include lack of 
systematic: (1) Screening, assessment, and nutrition intervention; (2) 
execution of nutrition care plans upon admission through discharge; and 
(3) care coordination to home or other post-acute care sites.
    Response: We thank the commenters for their suggestions, and we 
will take these comments into consideration in future rulemaking.
    Comment: A few commenters suggested that CMS adopt the PSI-4: Death 
among surgical inpatients with serious treatable complications measure 
and the AMI Payment per Episode measure.
    Response: We thank the commenters for their suggestions, and we 
will take these comments into consideration in future rulemaking.
    Comment: One commenter suggested that CMS fill measurement gaps so 
that a broader perspective of the quality of care rendered can be 
assessed. Specifically, the commenter suggested that CMS include 
outcome measures related to medication errors, mental and behavioral 
health, arthritis, diabetes, chronic kidney disease, depression, 
Alzheimer's disease, ischemic heart disease, stroke/transient ischemic 
attack, breast cancer, colorectal cancer, hip/pelvic fracture, 
cataract, osteoporosis, glaucoma, and endometrial cancer. The commenter 
noted that many outcome measures for those conditions may not yet 
exist, but the commenter suggested that the recently enacted Medicare 
Access and CHIP Reauthorization Act provided for measurement 
development funding, which could be directed toward developing measures 
to fill in these gaps.
    Response: We thank the commenter for these suggestions, and we will 
take these comments into consideration in future rulemaking. We note 
that the funding for measurement development provided in section 
1848(s) of the Act, as added by section 102 of the Medicare Access and 
CHIP Reauthorization Act of 2015, can only be used to develop measures 
for use by physicians and other eligible professionals. The statute 
states that the funding must be used to carry out section 1848(s) of 
the Act, including, but not limited to, the development, improvement, 
updating, or expansion of measures in accordance with the final measure 
development plan that the Secretary is required to post by May 1, 2016. 
The measures that are developed with this funding must be specifically 
targeted for application under the quality performance category of the 
Merit-Based Incentive Payment System under section 1848(q)(2)(B)(i) of 
the Act or under the qualifying alternative payment model participant 
provisions under section 1833(z)(2)(C) of the Act.
    Comment: One commenter recommended that CMS adopt the patient falls 
with injury or patient falls rate for future program years.
    Response: We thank the commenter for this suggestion, and we will 
take these comments into consideration in future rulemaking.
    Comment: One commenter contended that chart-abstracted process of 
care measures should not be replaced by parallel eCQM ones in the 
Hospital VBP Program until all hospitals are reporting the same 
measures electronically and an appropriate data validation process is 
in place.
    Response: We thank the commenter for this suggestion, and we will 
take these comments into consideration in future rulemaking.
    Comment: One commenter encouraged the continued harmonization of 
COPD measures across all programs and supported the development of 
measures addressing care gaps, specifically management of poorly 
controlled COPD, so that patients utilize the right therapies and 
predict risk for exacerbation.
    Response: We thank the commenter for these suggestions, and we will 
take these comments into consideration in future rulemaking.
    Comment: One commenter noted that the excess acute care days after 
hospitalization are explicitly prohibited from inclusion in the 
Hospital VBP Program because the composite measures for AMI and HF 
contain a measure of readmissions.
    Response: We thank the commenter for this interpretation, and we 
will take it into consideration in future rulemaking.
    Comment: Several commenters did not support adding excess day 
measures until there is additional analysis. The commenters believed 
these measures need to be NQF reviewed to ensure they are valid, 
reliable and feasible as well as appropriate for review in the NQF 
sociodemographic trial period. The commenters also recommended, rather 
than adding new measures, CMS should review our multiple bundling 
initiatives and ensure these measures are aligned.
    Response: We thank the commenters for their thoughts, and we will 
take these comments into consideration in future rulemaking.
5. Previously Adopted and Newly Adopted Baseline and Performance 
Periods for the FY 2018 Program Year
a. Background
    Section 1886(o)(4) of the Act requires the Secretary to establish a 
performance period for the Hospital VBP Program that begins and ends 
prior to the beginning of such fiscal year. We refer readers to the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50048 through 50087) for the 
baseline and performance periods for the Clinical Care--Process, PCCEC/
CC, Clinical Care--Outcomes, and Efficiency and Cost Reduction domains 
that we have adopted for the FY 2017 program year.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50692 through 
50694), we adopted baseline and performance periods for the 30-day 
mortality measures for FY 2017, FY 2018, and FY 2019, and for the PSI-
90 measure for FY 2017 and FY 2018 (78 FR 50692 through 50694, 50698 
through 50699).
b. Baseline and Performance Periods for the Patient and Caregiver-
Centered Experience of Care/Care Coordination Domain for the FY 2018 
Program Year
    Since the FY 2015 program year, we have adopted a 12-month baseline 
period and 12-month performance period for measures in the PCCEC/CC 
domain (77 FR 53598; 78 FR 50692; 79 FR 50072). We continue to believe 
that a 12-month performance period for the HCAHPS Survey and proposed 
CTM-3 measure provides us sufficient data on which to score hospital 
performance, which is an important goal for both us and stakeholders. 
Therefore, in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24503), 
for the FY 2018 program year, we proposed to adopt a 12-month 
performance period of January 1, 2016 through December 31, 2016 for the 
PCCEC/CC domain. We also proposed to adopt a corresponding 12-month 
baseline period of January 1, 2014 through December 31, 2014 for 
purposes of calculating improvement points and calculating performance 
standards.
    We invited public comment on these proposals.
    We did not receive any public comments on these proposals, and we

[[Page 49562]]

are finalizing the baseline and performance period as proposed.
c. Baseline and Performance Periods for NHSN Measures and PC-01 in the 
Safety Domain for the FY 2018 Program Year
    Since the FY 2016 program year, we have adopted a 12-month baseline 
period and 12-month performance period for NHSN measures (78 FR 75121; 
79 FR 50071). In addition, we adopted the PC-01 measure for the FY 2017 
program year with a 12-month baseline period and 12-month performance 
period (79 FR 50072). We continue to believe that a 12-month 
performance period provides us with sufficient data on which to score 
hospital performance on the NHSN measures, as well as the PC-01 
measure, in the Safety domain. We also note that 12-month baseline and 
performance periods are consistent with the reporting periods used for 
these measures under the Hospital IQR Program. Therefore, in the FY 
2016 IPPS/LTCH PPS proposed rule (80 FR 24503), for the FY 2018 program 
year, we proposed to adopt a performance period of January 1, 2016 
through December 31, 2016 for the NHSN measures and the PC-01 measure 
in the Safety domain. We also proposed to adopt a corresponding 
baseline period of January 1, 2014 through December 31, 2014 for 
purposes of calculating improvement points and calculating performance 
standards.
    We invited public comment on these proposals.
    Comment: One commenter supported the proposal to use 12-month 
baseline and performance periods for the CAUTI, CLABSI, Colon and 
Abdominal Hysterectomy SSI, CDI, and MRSA bacteremia measures.
    Response: We thank the commenter for its support.
    After consideration of the public comment we received, we are 
finalizing the baseline and performance periods as proposed.
d. Baseline and Performance Periods for the Efficiency and Cost 
Reduction Domain for the FY 2018 Program Year
    Since the FY 2016 program year, we have adopted a 12-month baseline 
period and 12-month performance period for the MSPB-1 measure in the 
Efficiency and Cost Reduction domain (79 FR 50072; 78 FR 50692). These 
baseline and performance periods enable us to collect sufficient 
measure data, while allowing time to calculate and incorporate MSPB-1 
measure data into the Hospital VBP Program scores in a timely manner. 
Therefore, in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24503), 
for the FY 2018 program year, we proposed to adopt a 12-month 
performance period of January 1, 2016 through December 31, 2016 for the 
MSPB-1 measure in the Efficiency and Cost Reduction domain. We also 
proposed to adopt a corresponding baseline period of January 1, 2014 
through December 31, 2014. We note that these proposed baseline and 
performance periods align with the baseline and performance periods for 
the PCCEC/CC domain and all measures in the Safety domain with the 
exception of PSI-90.
    We invited public comment on these proposals.
    We did not receive any public comments on these proposals, and we 
are finalizing the baseline and performance period as proposed.
e. Summary of Previously Adopted and Newly Adopted Baseline and 
Performance Periods for the FY 2018 Program Year
    The table below summarizes the baseline and performance periods for 
the FY 2018 program year (with previously adopted baseline and 
performance periods for the mortality and PSI composite (PSI-90) 
measures noted). We note that we are finalizing our proposal, discussed 
above, to remove the Clinical Care--Process subdomain from the Hospital 
VBP Program beginning with the FY 2018 program year. We note further 
that these baseline and performance periods would continue to align 
with the PCCEC/CC domain and the Efficiency and Cost Reduction domain, 
as well as the periods proposed for certain measures in the Safety 
domain.

  Previously Adopted and Newly Adopted Baseline and Performance Periods
                      for the FY 2018 Program Year
------------------------------------------------------------------------
             Domain                 Baseline period   Performance period
------------------------------------------------------------------------
PCCEC/CC:
     HCAHPS Survey        January 1, 2014-    January 1, 2016-
                                   December 31, 2014.  December 31,
                                                       2016.
     CTM-3
Clinical Care:
    Mortality (MORT-30-AMI, MORT- October 1, 2009-    October 1, 2013-
     30-HF, MORT-30-PN) *.         June 30, 2012.      June 30, 2016.
Safety:
     PSI-90 *...........   July 1,     July 1,
                                   2010-June 30,       2014-June 30,
                                   2012.               2016.
     PC-01 and NHSN        January     January
     measures (CAUTI, CLABSI,      1, 2014-December    1, 2016-December
     SSI, CDI, MRSA).              31, 2014.           31, 2016.
Efficiency and Cost Reduction     January 1, 2014-    January 1, 2016-
 MSPB-1.                           December 31, 2014.  December 31,
                                                       2016.
------------------------------------------------------------------------
* Previously adopted baseline and performance periods.

6. Previously Adopted and Newly Adopted Baseline and Performance 
Periods for Future Program Years
a. Previously Adopted Baseline and Performance Periods for the FY 2019 
Program Year
    The table below summarizes the previously adopted baseline and 
performance periods for the Clinical Care domain and PSI-90 measures 
for the FY 2019 program year.

[[Page 49563]]



   Previously Adopted Baseline and Performance Periods for the FY 2019
                              Program Year
------------------------------------------------------------------------
             Domain                 Baseline period   Performance period
------------------------------------------------------------------------
Clinical Care:
     Mortality (MORT-30-   July 1,     July 1,
     AMI, MORT-30-HF, MORT-30-     2009-June 30,       2014-June 30,
     PN).                          2012.               2017.
     THA/TKA............   July 1,     January
                                   2010-June 30,       1, 2015-June 30,
                                   2013.               2017.*
Safety:
     PSI-90.............   July 1,     July 1,
                                   2011-June 30,       2015-June 30,
                                   2013.               2017.
------------------------------------------------------------------------
* The table in FY 2016 IPS/LTCH PPS proposed rule (80 FR 24505)
  inadvertently stated that this performance period is July 1, 2015-June
  30, 2017. However, as adopted in the FY 2015 IPPS/LTCH PPS final rule
  (79 FR 50073), this performance period is January 1, 2015-June 30,
  2017.

b. Baseline and Performance Periods for the PSI-90 Measure in the 
Safety Domain in the FY 2020 Program Year
    The table below summarizes the previously adopted and proposed 
baseline and performance periods for the FY 2020 program year that we 
proposed in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24504). In 
the FY 2020 program year, we proposed to adopt a performance period of 
July 1, 2016 to June 30, 2018 for the PSI-90 measure. We proposed a 
corresponding baseline period of July 1, 2012 to June 30, 2014. This 
will allow us to collect 24-months of data from hospitals on the PSI-90 
measure.

 Previously Adopted and Newly Proposed Baseline and Performance Periods
                      for the FY 2020 Program Year
------------------------------------------------------------------------
             Domain                 Baseline period   Performance period
------------------------------------------------------------------------
Clinical Care:
     Mortality (MORT-30-  July 1, 2010-June   July 1, 2015-June
     AMI, MORT-30-HF, MORT-30-     30, 2013.           30, 2018.
     PN) *.
     THA/TKA *..........
Safety:
    PSI (PSI-90) Measure........  July 1, 2012-June   July 1, 2016-June
                                   30, 2014.           30, 2018.
------------------------------------------------------------------------
* Previously adopted baseline and performance periods

    We invited comment on these proposals.
    We did not receive any public comments on these proposals, and we 
are finalizing the baseline and performance period as proposed.
c. Baseline and Performance Periods for the Clinical Care Domain for 
the FY 2021 Program Year
    The table below summarizes the proposed baseline and performance 
periods for the FY 2021 program year that we proposed in the FY 2016 
IPPS/LTCH PPS proposed rule (80 FR 24504 through 24505). In the FY 2014 
IPPS/LTCH PPS and FY 2015 IPPS/LTCH PPS final rules (78 FR 50692 
through 50694; 79 FR 50072 through 50073), we adopted baseline and 
performance periods for the three 30-day mortality measures for the FY 
2017, FY 2018, FY 2019, and FY 2020 program years. We adopted baseline 
and performance periods for the THA/TKA measure for the FY 2019 and FY 
2020 program years (79 FR 50073). We adopted this policy in light of 
the length of the performance period that is needed to collect enough 
measure data for reliable performance scoring. We continue to believe 
that we should adopt 36-month baseline and performance periods for the 
mortality measures when possible to accommodate those durations.
    We believe that a similar rationale applies to the new MORT-30-COPD 
measure that we proposed to adopt for the Clinical Care domain for the 
FY 2021 program year. Furthermore, we are attempting to align 
measurement periods under the Hospital VBP Program with measurement 
periods under the Hospital IQR Program for the 30-day mortality 
measures. Therefore, in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24504 through 24505), for the FY 2021 program year, we proposed to 
adopt a 36-month performance period of July 1, 2016 through June 30, 
2019 for all mortality measures (the three previously adopted mortality 
measures, as well as the proposed MORT-30-COPD measure) in the Clinical 
Care domain. We also proposed to adopt a corresponding baseline period 
of July 1, 2011 through June 30, 2014. We note that the proposed 
performance periods will align with the reporting periods for the 
mortality measures in the Hospital IQR Program for the first time.
    For the THA/TKA measure in the FY 2021 program year, we proposed to 
adopt a 36-month performance period of April 1, 2016 through March 31, 
2019. We also proposed to adopt a corresponding baseline period of 
April 1, 2011 through March 31, 2014. This baseline and performance 
period will align with the THA/TKA measure reporting period for the 
Hospital IQR Program and will make reporting more seamless for 
hospitals.
    We invited public comment on these proposals.

 Proposed Baseline and Performance Periods for the FY 2021 Program Year
------------------------------------------------------------------------
             Domain                 Baseline period   Performance period
------------------------------------------------------------------------
Clinical Care:
     Mortality (MORT-30-   July 1,     July 1,
     AMI, MORT-30-HF, MORT-30-     2011-June 30,       2016-June 30,
     PN, MORT-30-COPD).            2014.               2019.
    THA/TKA.....................   April 1,    April 1,
                                   2011-March 31,      2016-March 31,
                                   2014.               2019.
------------------------------------------------------------------------


[[Page 49564]]

    We did not receive any public comments on these proposals, and we 
are finalizing the baseline and performance period as proposed.
7. Performance Standards for the Hospital VBP Program
    a. Background
    Section 1886(o)(3)(A) of the Act requires the Secretary to 
establish performance standards for the measures selected under the 
Hospital VBP Program for a performance period for the applicable fiscal 
year. The performance standards must include levels of achievement and 
improvement, as required by section 1886(o)(3)(B) of the Act, and must 
be established not later than 60 days before the beginning of the 
performance period for the fiscal year involved, as required by section 
1886(o)(3)(C) of the Act. We refer readers to the Hospital Inpatient 
VBP Program final rule (76 FR 26511 through 26513) for further 
discussion of achievement and improvement standards under the Hospital 
VBP Program.
    In addition, when establishing the performance standards, section 
1886(o)(3)(D) of the Act requires the Secretary to consider appropriate 
factors, such as: (1) Practical experience with the measures, including 
whether a significant proportion of hospitals failed to meet the 
performance standard during previous performance periods; (2) 
historical performance standards; (3) improvement rates; and (4) the 
opportunity for continued improvement.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53599 through 
53604), we adopted performance standards for the FY 2015 program year 
and certain FY 2016 program year measures. We also finalized our policy 
to update performance standards for future program years via notice on 
the CMS Web site or another publicly available Web site. In the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50694 through 50698), we revised our 
regulatory definitions of ``achievement threshold'' and ``benchmark'' 
at 42 CFR 412.160 and adopted performance standards for additional FY 
2016 program year measures. We also adopted an interpretation of 
``achievement threshold'' and ``benchmark'' under 42 CFR 412.160 to 
exclude the numerical values that result when the performance standards 
are calculated. We have further adopted a policy under which we may 
update a measure's performance standards for a fiscal year once if we 
identify data issues, calculation errors, or other problems that would 
significantly affect the displayed performance standards (79 FR 50079). 
We refer readers to the FY 2014 IPPS/LTCH PPS final rule for the 
complete set of FY 2016 performance standards (78 FR 50697 through 
50698).
b. Technical Updates
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50077 through 
50079), we adopted a policy under which we may adopt technical updates 
to performance standards under the Hospital VBP Program. We adopted 
this policy by amending the definition of ``performance standards'' 
under 42 CFR 412.160 of our regulations to enable us to update 
performance standards' numerical values to incorporate nonsubstantive 
technical updates made to Hospital VBP Program measures between the 
time that they are adopted for a particular program year and the time 
that we actually calculate hospital performance on those measures after 
the performance period for the program year has concluded. We stated 
our intent to continue to use rulemaking to adopt substantive updates 
to measures adopted for the Hospital VBP Program. We stated that 
examples of changes that we might consider to be substantive include 
those in which the changes are so significant that the measure is no 
longer the same measure or when a standard of performance assessed by a 
measure becomes more stringent. However, we stated our intent to 
determine what constitutes substantive versus nonsubstantive changes on 
a case-by-case basis, although we affirmed our intent to be as 
transparent as possible with stakeholders about any such updates we 
might adopt.
    On January 29, 2015, we announced a technical update to the 
performance standards that we have adopted for the PSI-90 measure for 
the FY 2017 program year. The announcement was published on QualityNet 
and can be viewed at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublicpercent2FPage 
percent2FQnetBasic&cid=1228774624610. The update resulted from a more 
recent AHRQ Quality Indicator software version becoming available. The 
FY 2017 performance standards were initially calculated using Version 
4.4 of the AHRQ software, and the update allowed us to use Version 4.5a 
for both the performance standards and hospital results.
    For more detailed information on the updates implemented in Version 
4.5a, we refer readers to the Log of Coding Updates and revisions, 
posted on QualityNet, available at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublicpercent2FPage 
percent2FQnetTier4&cid=1228695355425. For more information on 
differences between Version 4.5a and previous versions of the software, 
we refer readers to the AHRQ Web site, available at: http://qualityindicators.ahrq.gov or to the AHRQ help desk directly, available 
at: [email protected] or (307) 427-1949.
c. Performance Standards for the FY 2018 Program Year
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24506 through 
24507), in accordance with our finalized methodology for calculating 
performance standards (discussed more fully in the Hospital Inpatient 
VBP Program final rule (76 FR 26511 through 26513)), we proposed to 
adopt the following additional performance standards for the FY 2018 
program year. We noted that the numerical values for the performance 
standards displayed below represent estimates based on the most 
recently available data, and we stated that we intended to update the 
numerical values in the FY 2016 IPPS/LTCH PPS final rule. We note 
further that the MSPB-1 measure's performance standards are based on 
performance period data; therefore, we are unable to provide numerical 
equivalents for the standards at this time.
    We note further that the performance standards for the NHSN 
measures, the PSI-90 measure, and the MSPB-1 measure are calculated 
with lower values representing better performance. This distinction is 
made in contrast to other measures for which higher values indicate 
better performance. As discussed further in the FY 2014 IPPS/LTCH PPS 
final rule, the performance standards for the Colon and Abdominal 
Hysterectomy SSI are computed separately for each procedure stratum, 
and we will first award achievement and improvement points to each 
stratum separately, then compute a weighted average of the points 
awarded to each stratum by predicted infections (78 FR 50684).
    We note that the achievement threshold and benchmarks for the PSI-
90, MORT-30-AMI, MORT-30-HF, and MORT-30-PN measures have not been 
updated from the FY 2016 IPPS/LTCH PPS proposed rule because those 
performance standards were based on the most recent data available. All 
other measures have been updated to reflect new data in the chart 
below.

[[Page 49565]]



   Previously Adopted and Newly Finalized Performance Standards for the FY 2018 Program Year: Safety, Clinical
                                Care, and Efficiency and Cost Reduction Measures
----------------------------------------------------------------------------------------------------------------
             Measure ID                      Description           Achievement threshold         Benchmark
----------------------------------------------------------------------------------------------------------------
                                                 Safety Measures
----------------------------------------------------------------------------------------------------------------
CAUTI *............................  National Healthcare Safety   0.906.................  0.000
                                      Network Catheter-
                                      associated Urinary Tract
                                      Infection Outcome Measure.
CLABSI *...........................  National Healthcare Safety   0.369.................  0.000
                                      Network Central Line-
                                      associated Bloodstream
                                      Infection Outcome Measure.
CDI *..............................  National Healthcare Safety   0.794.................  0.002
                                      Network Facility-wide
                                      Inpatient Hospital-onset
                                      Clostridium difficile
                                      Infection Outcome Measure.
MRSA bacteremia *..................  National Healthcare Safety   0.767.................  0.000
                                      Network Facility-wide
                                      Inpatient Hospital-onset
                                      Methicillin-resistant
                                      Staphylococcus aureus
                                      Bacteremia Outcome Measure.
PSI-90  *..............  Patient safety for selected  0.577321..............  0.397051
                                      indicators (composite).
Colon and Abdominal Hysterectomy     American College of
 SSI *.                               Surgeons--Centers for
                                      Disease Control and
                                      Prevention Harmonized
                                      Procedure Specific
                                      Surgical Site Infection
                                      Outcome Measure.
                                       Colon............   0.824........   0.000
                                       Abdominal           0.710........   0.000
                                      Hysterectomy.
PC-01..............................  Elective Delivery..........  0.020408..............  0.000
----------------------------------------------------------------------------------------------------------------
                                             Clinical Care Measures
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI ...........  Hospital 30-Day, All-Cause,  0.851458 *............  0.871669 *
                                      Risk-Standardized
                                      Mortality Rate Following
                                      Acute Myocardial
                                      Infarction Hospitalization
                                      *.
MORT-30-HF ............  Hospital 30-Day, All-Cause,  0.881794 *............  0.903985 *
                                      Risk-Standardized
                                      Mortality Rate Following
                                      Heart Failure *.
MORT-30-PN ............  Hospital 30-Day, All-Cause,  0.882986 *............  0.908124 *
                                      Risk-Standardized
                                      Mortality Rate Following
                                      Pneumonia Hospitalization
                                      *.
----------------------------------------------------------------------------------------------------------------
                                      Efficiency and Cost Reduction Measure
----------------------------------------------------------------------------------------------------------------
MSPB-1 *...........................  Payment-Standardized         Median Medicare         Mean of the lowest
                                      Medicare Spending per        Spending per            decile Medicare
                                      Beneficiary.                 Beneficiary ratio       Spending per
                                                                   across all hospitals    Beneficiary ratios
                                                                   during the              across all hospitals
                                                                   performance period.     during the
                                                                                           performance period.
----------------------------------------------------------------------------------------------------------------
* Lower values represent better performance.
 Previously adopted performance standards.

    Comment: Several commenters noted that hospitals need timelier, 
more comprehensive and more coordinated data support from CMS, 
especially for claims measures, to better understand measure 
performance and how performance affects payments (for example, to model 
payment impacts). These commenters recommended that CMS release 
quarterly data sets that have sufficient information for hospitals to 
be able to track their performance on the Hospital VBP Program and 
understand the details of the program.
    Response: We thank the commenters for the suggestions and will take 
this under advisement as we seek to make our measures more transparent. 
We currently release data annually, and we offer educational sessions 
for hospitals to learn more about policies and ask questions. Hospitals 
can learn more about such events by visiting: http://www.qualityreportingcenter.com/inpatient/iqr/events/.
    Based on public comments in the FY 2015 IPPS/LTCH PPS final rule, 
we proposed to adopt the ``normalization'' approach to scoring the 
PCCEC/CC domain, which will introduce only minor changes to the 
original scoring formula, as follows. For purposes of the HCAHPS Base 
Score, the new CTM-3 dimensions would be calculated in the same manner 
as the eight existing HCAHPS dimensions. For each of the nine 
dimensions, Achievement Points (0-10 points) and Improvement Points (0-
9 points) would be calculated, the larger of which would be summed 
across the nine dimensions to create a prenormalized HCAHPS Base Score 
(0-90 points, as compared to 0-80 points when only eight dimensions 
were included). The prenormalized HCAHPS Base Score would then be 
multiplied by 8/9 (0.88888) and rounded according to standard rules 
(values of 0.5 and higher are rounded up, values below 0.5 are rounded 
down) to create the normalized HCAHPS Base Score. Each of the nine 
dimensions would be of equal weight, so that, as before, the normalized 
HCAHPS Base Score would range from 0 to 80 points. HCAHPS Consistency 
Points would then be calculated in the same manner as before and would 
continue to range from 0 to 20 points. The Consistency Points would now 
consider scores across all nine of the

[[Page 49566]]

PCCEC/CC dimensions. The final element of the scoring formula would be 
the sum of the HCAHPS Base Score and the HCAHPS Consistency Points and 
will range from 0 to 100 points, as before.

 Proposed Performance Standards for the FY 2018 Program Year Patient and Caregiver-Centered Experience of Care/
                                            Care Coordination Domain
----------------------------------------------------------------------------------------------------------------
                                                                                    Achievement
                     HCAHPS survey dimension                           Floor         threshold       Benchmark
                                                                     (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Communication with Nurses.......................................           55.27           78.52           86.68
Communication with Doctors......................................           57.39           80.44           88.51
Responsiveness of Hospital Staff................................           38.40           65.08           80.35
Pain Management.................................................           52.19           70.20           78.46
Communication about Medicines...................................           43.43           63.37           73.66
Hospital Cleanliness & Quietness................................           40.05           65.60           79.00
Discharge Information...........................................           62.25           86.60           91.63
3-Item Care Transition *........................................           25.21           51.45           62.44
Overall Rating of Hospital......................................           37.67           70.23           84.58
----------------------------------------------------------------------------------------------------------------
* Newly proposed measure.

    We invited public comments on these proposed performance standards.
    Comment: One commenter supported the proposal to adjust the scoring 
of the HCAHPS measure to reflect the addition of a ninth dimension.
    Response: We thank the commenter for its support.
    Comment: One commenter expressed concern with how consistency 
points are calculated for the HCAHPS since such scores can reward both 
good and bad performance (for example, consistently good or 
consistently bad). The commenter recommended that CMS consider using a 
threshold such as 25th percentile, rather than a consistency score.
    Response: As previously discussed, consistency points only reward 
performance that is consistently good across the HCAHPS dimensions. 
Consistently poor performance does not earn consistency points. 
Consistency points provide additional incentives beyond achievement and 
improvement points to improve a hospital's lowest-performing dimension.
    After consideration of the public comments we received, we are 
finalizing the performance standards for the FY 2018 program year as 
proposed.
d. Previously Adopted Performance Standards for Certain Measures for 
the FY 2019 Program Year
    As discussed above, we have adopted certain Safety and Clinical 
Care domain measures for future program years in order to ensure that 
we can adopt baseline and performance periods of sufficient length for 
performance scoring purposes. In the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 50062 through 50065), we adopted the PSI-90 measure in the 
Safety domain and the THA/TKA measure in the Clinical Care domain for 
the FY 2019 program year. As with the PSI-90, MSPB-1, and NHSN measures 
described above, the THA/TKA measure is calculated with lower values 
representing better performance. Therefore, in the FY 2015 IPPS/LTCH 
PPS final rule we adopted the following performance standards for the 
FY 2019 program year (79 FR 50077):

  Previously Adopted Performance Standards for Certain Safety and Clinical Care Domain Measures for the FY 2019
                                                  Program Year
----------------------------------------------------------------------------------------------------------------
                                                                                    Achievement
                 Measure ID                              Description                 threshold       Benchmark
----------------------------------------------------------------------------------------------------------------
                                                 Safety Measures
----------------------------------------------------------------------------------------------------------------
PSI-90 *...................................  Patient Safety for Selected                0.853715        0.589462
                                              Indicators (Composite).
----------------------------------------------------------------------------------------------------------------
                                             Clinical Care Measures
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI................................  Hospital 30-Day, All-Cause, Risk-          0.850671        0.873263
                                              Standardized Mortality Rate
                                              Following Acute Myocardial
                                              Infarction Hospitalization.
MORT-30-HF.................................  Hospital 30-Day, All-Cause, Risk-          0.883472        0.908094
                                              Standardized Mortality Rate
                                              Following Heart Failure
                                              Hospitalization.
MORT-30-PN.................................  Hospital 30-Day, All-Cause, Risk-          0.882334        0.909460
                                              Standardized Mortality Rate
                                              Following Pneumonia
                                              Hospitalization.
THA/TKA *..................................  Hospital-Level Risk-Standardized           0.032229        0.023178
                                              Complication Rate Following
                                              Elective Primary Total Hip
                                              Arthroplasty and/or Total Knee
                                              Arthroplasty.
----------------------------------------------------------------------------------------------------------------
* Lower values represent better performance.


[[Page 49567]]

e. Previously Adopted and Newly Adopted Performance Standards for 
Certain Measures for the FY 2020 Program Year
    As discussed above, we have adopted certain Safety and Clinical 
Care domain measures for future program years in order to ensure that 
we can adopt baseline and performance periods of sufficient length for 
performance scoring purposes. In the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 50063 through 50065), we adopted the PSI-90 measure in the 
Safety domain and the THA/TKA measure in the Clinical Care domain for 
the FY 2019 program year and subsequent years. In the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 50077), we also adopted the following performance 
standards for the MORT-30-AMI, MORT-30-HF, MORT-30-PN, and THA/TKA 
measures for the FY 2020 program year. In the FY 2016 IPPS/LTCH PPS 
proposed rule (80 FR 24507 through 24508), we proposed performance 
standards for the PSI-90 measure for the FY 2020 program year as set 
forth below:

    Previously Adopted and Proposed Performance Standards for Certain Clinical Care Domain and Safety Domain
                                      Measures for the FY 2020 Program Year
----------------------------------------------------------------------------------------------------------------
                                                                                    Achievement
                 Measure ID                              Description                 threshold       Benchmark
----------------------------------------------------------------------------------------------------------------
                                                  Safety Domain
----------------------------------------------------------------------------------------------------------------
PSI-90 *...................................  Patient Safety for Selected                0.778761        0.545903
                                              Indicators (Composite).
----------------------------------------------------------------------------------------------------------------
                                              Clinical Care Domain
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI ...................  Hospital 30-Day, All-Cause, Risk-          0.853715        0.875869
                                              Standardized Mortality Rate
                                              Following Acute Myocardial
                                              Infarction Hospitalization.
MORT-30-HF ....................  Hospital 30-Day, All-Cause, Risk-          0.881090        0.906068
                                              Standardized Mortality Rate
                                              Following Heart Failure
                                              Hospitalization.
MORT-30-PN ....................  Hospital 30-Day, All-Cause, Risk-          0.882266        0.909532
                                              Standardized Mortality Rate
                                              Following Pneumonia
                                              Hospitalization.
THA/TKA * .....................  Hospital-Level Risk-Standardized           0.032229        0.023178
                                              Complication Rate Following
                                              Elective Primary Total Hip
                                              Arthroplasty and/or Total Knee
                                              Arthroplasty.
----------------------------------------------------------------------------------------------------------------
* Lower values represent better performance.
 Previously adopted performance standards.

    We did not receive any public comments on this proposal, and we are 
finalizing the performance standards as proposed.
f. Performance Standards for Certain Measures for the FY 2021 Program 
Year
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24508), we 
proposed the following performance standards for the FY 2021 program 
year for the Clinical Care domain measures (THA/TKA, MORT-30-HF, MORT-
30-AMI, MORT-30-PN, and the proposed MORT-30-COPD):

          Proposed Performance Standards for Clinical Care Domain Measures for the FY 2021 Program Year
----------------------------------------------------------------------------------------------------------------
                                                                                    Achievement
                 Measure ID                              Description                 threshold       Benchmark
----------------------------------------------------------------------------------------------------------------
                                             Clinical Care Measures
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI................................  Hospital 30-Day, All-Cause, Risk-          0.860355        0.879714
                                              Standardized Mortality Rate
                                              Following Acute Myocardial
                                              Hospitalization.
MORT-30-HF.................................  Hospital 30-Day, All-Cause, Risk-          0.883803        0.906144
                                              Standardized Mortality Rate
                                              Following Heart Failure
                                              Hospitalization.
MORT-30-PN.................................  Hospital 30-Day, All-Cause, Risk-          0.886443         0.91067
                                              Standardized Mortality Rate
                                              Following Pneumonia
                                              Hospitalization.
MORT-30-COPD...............................  Hospital 30-Day, All-Cause, Risk-          0.860355        0.879714
                                              Standardized Mortality Rate
                                              Following Chronic Obstructive
                                              Pulmonary Disease Hospitalization.
THA/TKA *..................................  Hospital-Level Risk-Standardized            0.03089        0.022304
                                              Complication Rate Following
                                              Elective Primary Total Hip
                                              Arthroplasty/Total Knee
                                              Arthroplasty.
----------------------------------------------------------------------------------------------------------------
* Lower values represent better performance.

    We did not receive any public comments on this proposal, and we are 
finalizing the performance standards as proposed.
8. FY 2018 Program Year Scoring Methodology
a. Domain Weighting for the FY 2018 Program Year for Hospitals That 
Receive a Score on All Domains
    In the FY 2015 IPPS/LTCH PPS final rule, we adopted the following 
domains and domain weights for the FY 2017 program year for hospitals 
that receive a score in all newly aligned domains:

[[Page 49568]]



  Domain Weights for the FY 2017 Program Year for Hospitals Receiving a
                          Score on All Domains
------------------------------------------------------------------------
                                                              Weight
                         Domain                              (percent)
------------------------------------------------------------------------
Safety..................................................              20
Clinical Care...........................................              30
     Clinical Care--Outcomes....................      25
     Clinical Care--Process.....................       5
Efficiency and Cost Reduction...........................              25
Patient and Caregiver-Centered Experience of Care/Care                25
 Coordination...........................................
------------------------------------------------------------------------

    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24498 through 
24499), for the FY 2018 program year, we proposed to remove two 
``topped-out'' measures from the Clinical Care--Process subdomain. In 
addition, we proposed to move one measure (PC-01) from the Clinical 
Care--Process subdomain to the Safety domain and to remove the Clinical 
Care--Process subdomain (80 FR 24500).
    We stated that if these proposals are adopted, the Safety domain 
will include seven measures for the FY 2018 program year, including PC-
01, which would be new to that domain. Because we proposed to move one 
measure to the Safety domain, and because we continue to believe that 
hospitals should be provided strong incentives to perform well on 
measures of patient safety, we proposed to increase the Safety domain's 
weight by 5 percentage points. We proposed to adopt the following FY 
2018 program year domain weighting for hospitals receiving a score on 
all newly-aligned domains:

   Proposed Domain Weights for the FY 2018 Program Year for Hospitals
                    Receiving a Score on All Domains
------------------------------------------------------------------------
                                                              Weight
                         Domain                              (percent)
------------------------------------------------------------------------
Safety..................................................              25
Clinical Care...........................................              25
Efficiency and Cost Reduction...........................              25
Patient and Caregiver-Centered Experience of Care/Care                25
 Coordination...........................................
------------------------------------------------------------------------

    We invited public comments on the proposed domain weights.
    Comment: Several commenters supported CMS' proposal to reweight the 
four measure domains so that each accounts for 25 percent of a 
hospital's TPS. One commenter noted that the proposed equal weighting 
aligns with the CMS Quality Strategy and highlights the importance of 
each of the domains to understanding the value provided by a hospital 
caring for a patient.
    Response: We thank the commenters for their support.
    Comment: One commenter supported the proposal to increase the 
Safety domain's weight by five percent because of the addition of the 
PC-01 measure and our goal of providing strong incentives to hospitals 
to perform well on measures of patient safety.
    Response: We thank the commenter for the support.
    Comment: Several commenters supported the proposed updates to the 
scoring methodology, including the consolidation of the Clinical Care 
domain because the commenter noted that with our focus on clinical 
outcomes, it is less necessary for us to differentiate domain weights 
for outcome versus process measures.
    Response: We thank the commenters for their support.
    Comment: One commenter recommended that, in order to accurately 
score hospitals on their performance, CMS consider temporarily reducing 
the weight assigned to the Clinical Care measurement domain absent a 
plan to improve or replace the mortality measures due to concerns about 
their reliability. The commenter also recommended that CMS increase the 
weight of the Safety domain given that it is comprised of more reliable 
HAI measures.
    Response: The mortality measures in the Hospital VBP Program have 
been tested for validity and reliability. While we agree that the 
Hospital VBP Program should encourage providers to improve patient 
outcomes, we believe that equally weighting the four domains is 
appropriate for the FY 2018 program year based on the distribution of 
the measures we are finalizing in this final rule. For the FY 2018 
program year, we finalized seven measures for the Safety domain. We 
finalized three measures for the Clinical Care domain. We finalized one 
measure for the PCCEC/CC domain. We finalized one measure for the 
Efficiency and Cost Reduction domain.
    Comment: A few commenters proposed that CMS weight the Safety and 
Clinical Care domains more heavily and give less weight to Efficiency 
and Cost Reduction and PCCEC/CC domains because hospitals have the 
greatest ability to effect change in the Safety and Clinical Care 
domains. One commenter recommended that the weights for the four 
domains be set at 20 percent for PCCEC/CC and Efficiency and Cost 
Reduction and at 30 percent for Safety and Clinic Care.
    Response: We believe that hospitals can effect change through the 
measures in each of the four domains in the Hospital VBP Program. We 
believe that equally weighting the four domains is appropriate for the 
FY 2018 program year based on the distribution of the measures we are 
finalizing in this rule. For the FY 2018 program year, we finalized 
seven measures for the Safety domain. We finalized three measures for 
the Clinical Care domain. We finalized one measure for the PCCEC/CC 
domain. We finalized one measure for the Efficiency and Cost Reduction 
domain.
    Comment: One commenter suggested that CMS raise the proposed weight 
of the Clinical Care domain to ensure that the focus of the Hospital 
VBP Program is on improved patient outcomes.
    Response: While we agree that the Hospital VBP Program should 
encourage providers to improve patient outcomes, we believe that 
equally weighting the four domains is appropriate for the FY 2018 
program year based on the distribution of the measures we are 
finalizing in this final rule. For the FY 2018 program year, we 
finalized seven measures for the Safety domain. We finalized three 
measures for the Clinical

[[Page 49569]]

Care domain. We finalized one measure for the PCCEC/CC domain. We 
finalized one measure for the Efficiency and Cost Reduction domain.
    Comment: Several commenters recommended other scoring options such 
as scoring statistical outliers differently compared to those that are 
clustered around the mean or lowering the achievement threshold so that 
hospitals have greater potential to attain achievement points. One 
commenter proposed that CMS acknowledge that maximum achievement points 
are not possible for all outcome measures and that CMS should review 
how these measures are scored in the future.
    Response: We thank commenters for their recommendation with regard 
to the statistical outliers, and we will take it into consideration for 
future rulemaking. We disagree with the commenter's assertion that 
maximum achievement points are not possible for all outcome measures. 
We refer the commenter to the Hospital Inpatient VBP Program final rule 
(76 FR 26514) where we adopted a methodology for scoring outcome 
measures. We note that if a hospital's performance on an outcome 
measure during a performance period is greater than or equal to the 
benchmark, the hospital receives the maximum 10 achievement points. 
While we acknowledge the commenter's concerns regarding the potential 
to achieve maximum achievement points, we also note that the benchmark 
is intended to represent a level of excellent performance to which 
hospitals generally should aspire.
    Comment: A few commenters expressed concern that the scoring 
methodology could allow hospitals that achieve low cost care at low 
quality to also receive incentive payments, or at least not be 
penalized, because there is no penalty component to providing poor 
quality care. One commenter suggested that CMS assist poor performing 
hospitals by helping them identify how to make appropriate changes for 
positive results. The commenter also urged CMS to ensure that hospitals 
are unable to mask poor care for some patient populations while 
providing high quality care to others.
    Response: We acknowledge the commenters' concerns and encourage all 
hospitals unsure of how to improve their performance, on any measure 
finalized for the Hospital VBP Program, to utilize the quality 
improvement resources that CMS, AHRQ, and CDC have made available to 
assist hospitals with improvement (QIOs, QI toolkits, PSOs, and NHSN 
State-based prevention initiatives). We also offer an improvement 
Webinar series where hospitals with high levels of achievement share 
their path to improvement. We encourage stakeholders to subscribe to 
our listserv titled ``Hospital Inpatient Value-Based Purchasing (HVBP) 
and Improvement'' to receive notification of scheduled events. https://www.qualitynet.org/dcs/ContentServer?pagename=QnetPublic/ListServe/Register.
    Comment: A few commenters did not support the weight given to the 
Efficiency and Cost Reduction domain, which consists of just the MSPB-1 
measure because they believed that this weight was disproportionately 
heavy. One commenter noted that hospitals are unable to monitor their 
own performance. Another commenter believed that measuring Medicare 
payments will not lead to quality improvements.
    Response: As we stated in the FY 2014 IPPS/LTCH PPS final rule (79 
FR 50048 through 50087), we believe we have appropriately balanced our 
desire to provide strong incentives for hospitals to consider the cost 
and the quality of the care that they provide to Medicare beneficiaries 
and to all patients by assigning the Efficiency and Cost Reduction 
domain to 25 percent of the TPS. We continue to believe it merits 
significant domain weighting in order to ensure that hospitals monitor 
the costs of the care they provide to Medicare beneficiaries during the 
inpatient hospitalization and are involved in the coordination of 
beneficiaries' care immediately prior to a hospitalization and post-
discharge.
    With regard to the concern that the domain is comprised of only one 
measure, we acknowledge the potential for building a more robust 
efficiency measure set, as we stated in the FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53585 through 53586) and FY 2014 IPPS/LTCH PPS final rule 
(79 FR 50048 through 50087). In the FY 2015 IPPS/LTCH PPS rulemaking 
(79 FR 28122 through 28224; 79 FR 50066 through 50070), we sought 
comment on measures that could potentially be used to expand the 
Efficiency and Cost Reduction domain in the future. We also again 
solicited and received public comments on how we might pursue that goal 
in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24503). In the 
interim, we continue to believe that increased emphasis on efficiency 
is an important goal for the Hospital VBP Program, and that the 
efficiency domain weight should remain at 25 percent accordingly. 
However, we thank the commenters for their thoughts and intend to 
continue examining domain weighting and will consider revisiting this 
issue in the future.
    Comment: Some commenters did not support CMS' proposal to adopt 
equal weighting across all four domains because of the overlap of 
measures in the Hospital VBP Program and other reporting programs.
    Response: While we acknowledge that there is some overlap in 
quality measures between the Hospital VBP Program and the HAC Reduction 
Program, we note that these measures cover topics of critical 
importance to quality improvement and patient safety in the inpatient 
hospital setting. We selected these quality measures because we believe 
that HAC measures comprise some of the most critical patient safety 
areas. These measures track infections that could cause significant 
health risks to Medicare beneficiaries, and we believe it is 
appropriate to provide incentives for hospitals to avoid them under 
more than one program.
    We further stress that the HAC Reduction Program and the Hospital 
VBP Program are separate programs with different purposes and policy 
goals. The HAC Reduction Program reduces payments to hospitals for 
excess hospital acquired conditions to increase patient safety in 
hospitals. On the other hand, the Hospital VBP Program is an incentive 
program that redistributes a portion of the Medicare payments made to 
hospitals based on their performance on various measures. Therefore, 
although the measures exist in more than one program, the measures are 
used and calculated for very distinct purposes. Accordingly, we believe 
that the critical importance of these measures to patient safety 
warrants their inclusion in both programs. We will, in the future, 
continue to monitor the HAC Reduction Program and Hospital VBP Program 
and analyze the impact of our measures selection, including any 
unintended consequences with having a measure in more than one program, 
and will revise the measure set in one or both programs if needed.
    After consideration of the public comments we received, we are 
finalizing the domain weights as proposed.
b. Domain Weighting for the FY 2018 Program Year for Hospitals 
Receiving Scores on Fewer Than Four Domains
    In prior program years, we finalized a policy that hospitals must 
have received domain scores on all finalized domains in order to 
receive a TPS. However, because the Hospital VBP Program has evolved 
from its initial two domains to an expanded measure set with additional 
domains, we considered whether it was appropriate to continue this 
policy.

[[Page 49570]]

    Therefore, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53606 
through 53607), we finalized our proposal that, for the FY 2015 program 
year and subsequent years, hospitals with sufficient data to receive at 
least two out of the four domain scores that existed for the FY 2015 
program year (that is, sufficient cases and measures to receive a 
domain score on at least two domains) will receive a TPS. We also 
finalized our proposal that, for hospitals with at least two domain 
scores, TPSs would be reweighted proportionately to the scored domains 
to ensure that the TPS is still scored out of a possible 100 points and 
that the relative weights for the scored domains remain equivalent to 
the weighting which occurs when there are scores in all four domains. 
We believe that this approach allows us to include relatively more 
hospitals in the Hospital VBP Program while continuing to focus on 
reliably scoring hospitals on their quality measure performance.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50701 through 
50702), we continued this approach for the FY 2016 program year and 
subsequent program years for purposes of eligibility for the program.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50084 through 
50085), we adopted a policy that, for the FY 2017 program year and 
subsequent years, hospitals must receive domain scores on at least 
three quality domains in order to receive a TPS. We stated our belief 
that, by adopting this policy, we will continue to allow as many 
hospitals as possible to participate in the program while ensuring that 
reliable TPSs result. We also finalized a policy that hospitals with 
sufficient data on at least three of four domains for FY 2017 will have 
their TPSs proportionately reweighted. Finally, in the FY 2015 IPPS/
LTCH PPS final rule, we adopted case minimums for the FY 2016 program 
year and subsequent years (79 FR 50085 through 50086).
    Under these policies, in order to receive a TPS for the FY 2018 
program year:
     Hospitals must meet the requirements to receive an HCAHPS 
Survey measure score in order to receive a PCCEC/CC domain score. 
Hospitals must report a minimum number of 100 HCAHPS surveys for a 
hospital to receive a PCCEC/CC domain score (76 FR 26530).
     Hospitals must meet the requirements to receive a MSPB-1 
measure score in order to receive an Efficiency and Cost Reduction 
domain score. Hospitals must report a minimum number of 25 cases for 
the MSPB-1 measure (77 FR 53609 through 53610).
     Hospitals must receive a minimum of two measure scores 
within the Clinical Care domain. Hospitals must report a minimum number 
of 25 cases for each of the mortality measures (77 FR 53609 through 
53610).
     Hospitals must receive a minimum of three measure scores 
within the Safety domain.
    ++ Hospitals must report a minimum of three cases for any 
underlying indicator for the PSI-90 measure based on AHRQ's measure 
methodology (77 FR 53608 through 53609).
    ++ Hospitals must report a minimum of one predicted infection for 
NHSN-based surveillance measures based on CDC's minimum case criteria 
(77 FR 53608 through 53609).
    ++ Hospitals must report a minimum of 10 cases for the PC-01 
measure (76 FR 26530).
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24509), we did 
not propose any changes to the minimum numbers of cases and measures 
that we have adopted above. However, because we proposed to remove the 
Clinical Care--Process subdomain from the Hospital VBP Program 
effective with the FY 2018 program year, we considered whether we 
should revisit our finalized requirement that hospitals must receive 
scores on at least three domains in order to receive a TPS. However, we 
continue to believe that this requirement appropriately balances our 
desire to enable as many hospitals as possible to participate in the 
Hospital VBP Program and the need for TPSs to be sufficiently reliable 
to provide meaningful distinctions between hospitals' performance on 
quality measures. In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24509), we did not propose to change this requirement at that time. We 
welcomed public comments on whether we should consider adopting a 
different policy on this topic. We indicated that we will continue to 
proportionately reweight hospitals' TPSs when they have sufficient data 
on only three domains.
    We did not receive any public comments on this issue.

G. Changes to the Hospital-Acquired Condition (HAC) Reduction Program

1. Background
    We refer readers to section V.I.1.a. of the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50707 through 50708) for a general overview of the 
HAC Reduction Program.
2. Statutory Basis for the HAC Reduction Program
    Section 3008 of the Affordable Care Act added section 1886(p) to 
the Act to provide an incentive for certain hospitals to reduce the 
incidence of HACs. Section 1886(p) of the Act requires the Secretary to 
make an adjustment to payments to ``applicable hospitals'' effective 
beginning on October 1, 2014, and for subsequent program years. Section 
1886(p)(1) of the Act sets forth the requirements by which payments to 
``applicable hospitals'' will be adjusted to account for HACs with 
respect to discharges occurring during FY 2015 or later. For hospitals 
with HAC scores in the top quartile relative to other applicable 
hospitals for a given fiscal year, the amount of Medicare payment is 
reduced to 99 percent of the amount of payment that would otherwise 
apply to discharges under section 1886(d) or 1814(b)(3) of the Act, as 
applicable. Section 1886(p)(2)(A) of the Act defines ``applicable 
hospitals'' as subsection (d) hospitals that meet certain criteria. 
Section 1886(p)(2)(B)(i) of the Act defines these criteria and 
specifies that the payment adjustment would apply to an applicable 
hospital that ranks in the top quartile (25 percent) of all subsection 
(d) hospitals, relative to the national average, of conditions acquired 
during the applicable period, as determined by the Secretary. Section 
1886(p)(2)(B)(ii) of the Act requires the Secretary to establish and 
apply a risk-adjustment methodology in calculating HAC scores for each 
hospital.
    Sections 1886(p)(3) and (p)(4) of the Act define ``hospital-
acquired conditions'' and ``applicable period,'' respectively. The term 
``hospital-acquired condition'' means ``a condition identified in 
subsection 1886(d)(4)(D)(iv) of the Act and any other condition 
determined appropriate by the Secretary that an individual acquires 
during a stay in an applicable hospital, as determined by the 
Secretary.'' The term ``applicable period'' means, with respect to a 
fiscal year, a period specified by the Secretary.
    Section 1886(p)(5) of the Act requires that, prior to FY 2015 and 
each subsequent fiscal year, the Secretary provide confidential reports 
to each applicable hospital with respect to the HAC Reduction Program 
scores for the applicable period, to give the hospitals an opportunity 
to review and correct the data. Section 1886(p)(6)(A) of the Act sets 
forth the reporting requirements by which the Secretary would make 
information available to the public regarding HACs for each applicable 
hospital. Section 1886(p)(6)(B) of the Act requires the Secretary to 
ensure that an applicable hospital has the opportunity to review, 
submit corrections, and for the information to

[[Page 49571]]

be made public with respect to the HAC scores of the applicable 
hospital prior to such information being made public. Section 
1886(p)(6)(C) of the Act requires that, once corrected, the HAC scores 
be posted on the Hospital Compare Web site (http://www.medicare.gov/hospitalcompare/search.html) in an easily understandable format.
    Section 1886(p)(7) of the Act limits administrative and judicial 
review of certain determinations made pursuant to section 1886(p) of 
the Act. These determinations include: what qualifies as an applicable 
hospital; the specifications of a HAC; the Secretary's determination of 
the ``applicable period''; the provision of confidential reports 
submitted to the applicable hospital; and the information publicly 
reported on the Hospital Compare Web site.
3. Overview of Previous HAC Reduction Program Rulemaking
    For further description of our policies for the HAC Reduction 
Program, we refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 
FR 50707 through 50729) and the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50087 through 50104). These policies describe the general framework for 
implementation of the HAC Reduction Program, including: (a) The 
relevant definitions applicable to the program; (b) the payment 
adjustment under the program; (c) the measure selection and conditions 
for the program, including a risk-adjustment and scoring methodology; 
(d) performance scoring; (e) the process for making hospital-specific 
performance information available to the public, including the 
opportunity for a hospital to review the information and submit 
corrections; and (f) limitation of administrative and judicial review.
    We have also codified certain requirements of the HAC Reduction 
Program at 42 CFR 412.170 through 412.172.
4. Implementation of the HAC Reduction Program for FY 2016
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24509 through 
24514), we did not propose any changes to the above described policies 
for the implementation of the HAC Reduction Program for FY 2016. 
However, we remind readers that, in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50101 through 50102), we finalized the following measures 
for use in the FY 2016 program: AHRQ PSI-90 Composite and CDC Central 
Line-Associated Bloodstream Infection (CLABSI), Catheter-Associated 
Urinary Tract Infection (CAUTI), and Colon and Abdominal Hysterectomy 
Surgical Site Infection (SSI). In the FY 2016 IPPS/LTCH PPS proposed 
rule, we did not propose to add or remove any measures for FY 2016.
    We provided an update on NQF proceedings for three of the measures 
previously finalized for the FY 2016 program: PSI-90 Composite; CLABSI; 
and CAUTI. For FY 2016, we are retaining the AHRQ PSI-90 Composite 
measure (in Domain 1) that we adopted in the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50717). As we noted in the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 50090), the AHRQ PSI-90 Composite measure is 
undergoing NQF maintenance review. At the time of development of this 
final rule, the PSI-90 Composite measure consists of eight component 
indicators: PSI-3 Pressure ulcer rate; PSI-6 Iatrogenic pneumothorax 
rate; PSI-7 Central venous catheter related blood stream infections 
rate; PSI-8 Postoperative hip fracture rate; PSI-12 Perioperative 
pulmonary embolism or Deep vein thrombosis rate; PSI-13 Postoperative 
sepsis rate; PSI-14 Postoperative wound dehiscence rate; and PSI-15 
Accidental puncture or laceration rate.
    As part of the NQF maintenance review process, AHRQ is considering 
revisions to the composite weighting system as well as the addition of 
PSI-9 Perioperative hemorrhage rate, PSI-10 Postoperative physiologic 
and metabolic derangement rate, and PSI-11 Postoperative respiratory 
failure rate measures, or a combination of these three measures, to the 
PSI-90 Composite measure. We consider the potential inclusion of 
additional component measures in the PSI-90 Composite measure to be a 
significant change to the measure and, if that occurs, we would engage 
in notice-and-comment rulemaking prior to requiring the reporting of 
the revised composite for the HAC Reduction Program. At the time of 
development of this final rule, the AHRQ PSI-90 Composite measure is 
continuing to undergo NQF maintenance review. No changes have been 
finalized. Therefore, in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24510), we did not propose any changes to this measure.
    Similarly, in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50090), 
we noted that the CDC NHSN CAUTI and CLABSI measures in Domain 2 that 
we adopted in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717) for 
inclusion in FYs 2015, 2016, and 2017 were undergoing NQF maintenance 
review. We stated in the FY 2015 IPPS/LTCH PPS final rule that if there 
are significant changes to these measures, we would engage in notice-
and-comment rulemaking prior to requiring the reporting of the revised 
measures. These measures have now completed the NQF maintenance review 
process, and modified versions of the measures were reendorsed by NQF 
on November 10, 2014.\108\ We note that reendorsed versions of the CDC 
NHSN CLABSI and CAUTI measures included a new statistical option for 
calculating the measure result, the Adjusted Ranking Metric (ARM), in 
addition to the standardized infection ratio (SIR) statistical option. 
For FY 2016, we will continue use of the CDC NHSN CLABSI and CAUTI 
measures as previously finalized for the program with use of the SIR. 
We will be working with CDC in the future to determine if the newly 
available ARM would be appropriate for use in the HAC Reduction 
Program. If we determine at a later time that the ARM is appropriate 
for use in the HAC Reduction Program and provides an advantage to the 
existing measure result (the SIR), we would propose this change in 
notice-and-comment rulemaking.
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    \108\ National Quality Forum. Measures search. Available at: 
http://www.qualityforum.org/QPS/MeasureDetails.aspx?standardID=1122&print=0&entityTypeID=1 and 
http://www.qualityforum.org/QPS/MeasureDetails.aspx?standardID=1121&print=0&entityTypeID=1.
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    We noted in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24511) 
that we anticipated providing hospitals with their confidential 
hospital-specific reports and discharge level information used in the 
calculation of their FY 2016 Total HAC Score in late summer 2015 via 
the QualityNet Secure Portal.\109\ In order to have access to their 
hospital-specific reports, hospitals must register for a QualityNet 
Secure Portal account. In the FY 2016 IPPS/LTCH PPS proposed rule (80 
FR 24511), we did not propose to make any changes to the review and 
correction policies for FY 2016. Hospitals have a period of 30 days 
after the information is posted to the QualityNet Secure Portal to 
review and submit corrections for the calculation of their HAC 
Reduction Program measure scores, domain scores, and Total HAC Score 
for the fiscal year.
---------------------------------------------------------------------------

    \109\ Available at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetBasic&cid=12287
73343598.
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    Comment: Some commenters supported the HAC Reduction Program 
because they believe it serves as a mechanism against preventable and 
adverse events and effectively promotes improvement in hospitals.
    Response: We appreciate the commenters' support. We are committed 
to the reduction of HACs, which are important markers of quality of 
care and

[[Page 49572]]

whose reduction can possibly influence patient outcomes and the cost of 
care.
    Comment: Some commenters expressed concerns about the threshold 
levels for penalties and argued that the program overwhelmingly and 
disproportionately penalizes the nation's major teaching hospitals. The 
commenters stated that hospitals are identified as poor performers due 
to limitations in the scoring methodology, data collection, risk 
adjustment, and size of teaching facilities, rather than to true 
differences in the quality of care. These commenters noted that 
hospitals that have instituted rigorous programs to identify and treat 
infections are at a disadvantage when compared to those with less 
comprehensive quality programs. The commenters suggested that CMS 
explore measure performance within specific hospital peer cohorts to 
allow hospitals to be compared based on similar characteristics and 
risk profiles.
    Response: We acknowledge the commenters' concerns. We note that the 
intent of the HAC Reduction Program is to encourage all hospitals to 
reduce the incidence of HACs, and that there is room for improvement in 
the incidence of HACs, regardless of the institution or hospital. The 
measures adopted in the HAC Reduction Program, which are risk-adjusted 
to ensure that hospitals serving a large proportion of sicker patients 
will not be penalized unfairly, target important quality improvement 
areas. Endorsement by the NQF and support by the NQF MAP also are taken 
into account in deciding which measures to adopt. All of the measures 
finalized for inclusion in the HAC Reduction Program are NQF-endorsed 
and were recommended for inclusion in the program by the NQF MAP. We 
believe that the HAC Reduction Program encourages improvement in 
patient safety over the long term for all hospitals. We will continue 
to monitor the HAC Reduction Program and take the commenters' concerns 
under consideration as we strive to improve the program.
    Comment: Some commenters urged CMS to use administrative authority 
under section 1886(d)(5)(I)(i) of the Act to limit the HAC penalty to 
the base operating DRG payment only, which they believed would be 
consistent with Congressional intent and with the Hospital VBP Program 
and the Hospital Readmissions Reduction Program. The commenters noted 
that, by restricting the penalty to the base operating DRG payment 
only, CMS could ensure consistency across our value-based purchasing 
programs and reduce provider confusion.
    Response: We did not propose to change the application of the 
payment adjustment that we finalized in the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50711). As we discussed in that rule, the statutory 
requirements for the HAC Reduction Program payment adjustment differ 
from those for the Hospital VBP Program and the Hospital Readmissions 
Reduction Program. In accordance with sections 1886(o)(7)(A) and 
1886(o)(7)(B) of the Act, the Hospital VBP Program applies adjustments 
to the base operating DRG payment amount, which is defined at section 
1886(o)(7)(D) of the Act to exclude certain payments under subsection 
(d). Similarly, in accordance with section 1886(q)(1) of the Act, the 
Hospital Readmissions Reduction Program adjustment is applied to the 
base operating DRG payment amount, which is defined at section 
1886(q)(2) of the Act to exclude certain payments under subsection (d).
    For the HAC Reduction Program, no such statutory exclusion exists 
and section 1886(p)(1) of the Act states that the payment for 
applicable hospitals shall be equal to 99 percent of the amount of 
payment that would otherwise apply. Therefore, the HAC Reduction 
Program payment adjustment will continue to be applied after the 
application of the other program adjustments, including add-on payments 
consisting of outliers, DSH, uncompensated care, and IME. We refer 
readers to the FY 2015 IPPS/LTCH PPS final rule (78 FR 50088) for 
additional information on the HAC Reduction Program's payment 
adjustment.
    Comment: Some commenters suggested that CMS use the Adjusted 
Ranking Metric (ARM) option for calculating the measure results for the 
CDC NHSN CLABSI and CAUTI measures. The ARM is a summary measure 
calculation used to rank facilities and accounts for differences in the 
amount of exposure volume (that is, patient months, patient days, or 
device days) or opportunity for healthcare-associated infection among a 
group of patients in a given facility, as well as unmeasured variation 
across facilities. The commenters stated this would allow for an equal 
weighting between hospitals with low exposure volumes and hospitals 
with high exposure volumes.
    Response: We thank commenters for this suggestion. We will be 
working with CDC in the future to determine if the newly available ARM 
would be appropriate for use in the HAC Reduction Program. If we 
determine at a later time that the ARM is appropriate for use in the 
HAC Reduction Program and provides an advantage to the existing measure 
result (the SIR), we would propose this change in notice-and-comment 
rulemaking.
    Comment: Some commenters suggested that CMS institute appropriate 
sociodemographic status (SDS) adjustments for hospitals serving 
vulnerable patient populations.
    Response: While we appreciate these comments and the importance of 
the role that sociodemographic status plays in the care of patients, we 
continue to have concerns about holding hospitals to different 
standards for the outcomes of their patients of low sociodemographic 
status because we do not want to mask potential disparities or minimize 
incentives to improve the outcomes of disadvantaged populations. We 
routinely monitor the impact of sociodemographic status on hospitals' 
results on our measures.
    NQF is currently undertaking a 2-year trial period in which new 
measures and measures undergoing maintenance review will be assessed to 
determine if risk-adjusting for sociodemographic factors is appropriate 
for each measure. For 2 years, NQF will conduct a trial of a temporary 
policy change that will allow inclusion of sociodemographic factors in 
the risk-adjustment approach for some performance measures. At the 
conclusion of the trial, NQF will determine whether to make this policy 
change permanent. Measure developers must submit information such as 
analyses and interpretations as well as performance scores with and 
without sociodemographic factors in the risk-adjustment model.
    Furthermore, the Office of the Assistant Secretary for Planning and 
Evaluation (ASPE) is conducting research to examine the impact of 
socioeconomic status on quality measures, resource use, and other 
measures under the Medicare program as directed by the IMPACT Act. We 
will closely examine the findings of these ASPE reports and related 
Secretarial recommendations and consider how they apply to our quality 
programs at such time as they are available.
    Comment: Numerous commenters expressed concerns about overlap in 
quality measures between the Hospital VBP Program and the HAC Reduction 
Program. The commenters argued that this overlap creates the 
possibility of double penalties for some hospitals, while assessing 
disparate scores on the same measures for other hospitals. The 
commenters suggested that CMS eliminate the measure overlap between the 
programs.
    Response: As we stated in the FY 2015 IPPS/LTCH PPS final rule (79 
FR 50056), we acknowledge that there is

[[Page 49573]]

some overlap in quality measures between the Hospital VBP Program and 
the HAC Reduction Program. While we are aware that commenters object to 
scoring hospitals on certain measures under both programs, we note that 
these measures cover topics of critical importance to quality 
improvement in the inpatient hospital setting and to patient safety. We 
selected these quality measures because we believe that HAC measures 
comprise some of the most critical patient safety areas. These measures 
track infections that could cause significant health risks to Medicare 
beneficiaries, and we believe it is appropriate to provide incentives 
for hospitals to avoid them under more than one program. Patient safety 
is a CMS priority and we believe justifies the use of the measures in 
both programs.
    We further note that the HAC Reduction Program and the Hospital VBP 
Program are separate programs with different purposes and policy goals. 
The HAC Reduction Program is a program that reduces payments to 
hospitals for excess HACs to increase patient safety in hospitals. On 
the other hand, the Hospital VBP Program is an incentive program that 
redistributes a portion of the Medicare payments made to hospitals 
based on their performance on various measures. Therefore, although the 
measures exist in more than one program, the measures are used and 
calculated for very distinct purposes. Accordingly, we believe that the 
critical importance of these measures to patient safety warrants their 
inclusion in both programs. We will, in the future, monitor the HAC 
Reduction Program and the Hospital VBP Program and analyze the impact 
of our measures selection, including any unintended consequences with 
having a measure in more than one program, and will revise the measure 
set in one or both programs if warranted.
    Comment: Numerous commenters raised concerns about the current 
inclusion of the PSI-90 Composite measure in the HAC Reduction Program. 
The commenters argued that a number of the measures in the PSI-90 
Composite are rare events and do not meet the high-volume requirement 
for measures in the HAC Reduction Program. The commenters suggested 
that CMS only include measures that accurately gauge quality and are 
not inherently skewed against teaching hospitals, large hospitals, and 
hospitals that provide care to vulnerable populations. The commenters 
suggested that CMS review alternatives to the PSI-90 Composite, given 
the concerns raised by the NQF committee and the resulting 
nonendorsement of the measure during the maintenance review process 
last year. The commenters noted that this is a composite measure and it 
would be more informative for consumers to utilize separate public 
safety measures.
    Response: We would like to clarify the status of the PSI-90 
Composite measure with regard to NQF endorsement; the PSI-90 Composite 
measure has not lost NQF endorsement but still remains under 
maintenance review. As part of the routine NQF measure maintenance 
process, the Patient Safety Committee expressed concerns about the 
weighting of the PSI-90 measure components and requested to see 
additional measure information related to reweighting of the PSI-90 
Composite measure with the three additional components (PSI-9, PSI 10, 
and PSI-11) before deciding if it would recommend continued endorsement 
of the measure. AHRQ has submitted the requested data for the NQF 
Patient Safety Committee's consideration. In regard to commenters' 
concerns regarding the validity of the PSI-90 Composite measure, we 
note that NQF has previously endorsed the PSI-90 Composite as a valid 
measure (NQF #0531). We continue to believe the PSI-90 Composite is an 
important measure of patient safety. Experts agree that this measure is 
scientifically rigorous. In regard to the administrative data elements 
of the PSI-90 Composite measure, we note that there are previously 
conducted validation studies that validate the relationship between 
administrative claims data and medical records. We refer readers to the 
FY 2015 IPPS/LTCH PPS final rule (79 FR 50091) for a further discussion 
of the validation of the relationship between administrative claims 
data and medical records.
    Comment: One commenter argued the current PSI-90 Composite measure 
components have been demonstrated to have low measure validity and rely 
heavily on administrative data elements. The commenter noted that some 
codes, like sepsis, have a wide variation in the documentation and 
assignment of the diagnosis and that, by manipulating the diagnosis, it 
is possible to change the performance rates of this measure without 
actually affecting the care of the patient. The commenter recommended 
that CMS implement a policy to improve the validity of these claim-
based measures. Specifically, the commenter proposed that the policy 
should:
     Require hospitals to make an annual attestation that they 
are explicitly following specific coding and documentation practices, 
as outlined by professional organizations such as the Association for 
Clinical Documentation Improvement Specialists (ACDIS) and American 
Health Information Management Association (AHIMA);
     Release joint consensus statements in collaboration with 
AHIMA, ACDIS, and Coding Clinics to provide clarity to hospitals around 
codes that will include or exclude a case from claims-based measures;
     Require that hospitals maintain a record of codes that are 
changed as a result of internal coding reviews to provide a record for 
coding and documentation audits; and
     Conduct random and routine audits of these documentation 
and coding practices at the hospital level.
    Response: We have previously addressed the commenters' specific 
concerns regarding validity and coding issues of the PSI-90 Composite 
measure, and we refer readers to our responses to these comments in the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 50715). We acknowledge the 
commenters' continuing concerns and will continue to monitor the use of 
this measure in the HAC Reduction Program.
    Comment: Some commenters supported the addition of the PSI-11, 
Postoperative Respiratory Failure Rate measure component, pending 
testing. The commenters noted that postoperative respiratory failure is 
a condition for which actionable guidelines exist, with evidence-based 
screening criteria to determine what individuals are at risk. However, 
the commenters disagreed with the inclusion of both PSI-9, 
Perioperative Hemorrhage Rate and PSI-10, Postoperative Physiologic and 
Metabolic Derangement Rate. One commenter noted its experience with 
high false positive rates for both measures. This commenter cited 
complaints from physicians due to unclear coding criteria, resulting in 
the code being used too frequently and inconsistently.
    Response: We appreciate commenters' input and acknowledge their 
concerns. We are aware that NQF is reviewing the PSI-90 Composite 
measure with three additional components (PSI-9, PSI-10, and PSI-11), 
as part of the routine measure maintenance process. We will take NQF's 
decision on continuing endorsement into consideration when evaluating 
whether the measure remains appropriate for the HAC Reduction Program. 
In regard to commenters' concerns regarding the validity of the PSI-90 
Composite measure, we note that NQF has previously endorsed the PSI-90 
Composite as a valid measure (NQF #0531). We continue to believe

[[Page 49574]]

the PSI-90 Composite is an important measure of patient safety.
    Comment: Several commenters noted that perioperative hemorrhage is 
a high-volume condition and that up to 5 percent of patients who 
undergo cardiac surgery require additional surgery to control bleeding. 
The commenters also noted that postoperative respiratory failure is 
also a high-cost condition. The commenters stated that perioperative 
hemorrhage and postoperative respiratory failure are preventable 
conditions by the use of evidence-based guidelines. The commenters 
suggested that, pending NQF endorsement of the addition of these 
measures, CMS expeditiously incorporate these measures through 
rulemaking. The commenters also supported CMS' commitment to pursue the 
changes to the HAC Reduction Program through rulemaking.
    Response: We appreciate the commenters' input and will take this 
feedback into consideration in future measure selection and rulemaking. 
We emphasize that improving patient safety is our primary objective for 
the HAC Reduction Program. AHRQ's Quality Indicator program continually 
updates and refines measures to provide the best possible quality 
indicators to the public. All of the AHRQ quality indicators go through 
a rigorous testing process prior to changes being made to the 
indicators. We note that NQF policy and guidance generally has favored 
risk adjustment approaches over exclusion of high-risk patients, when 
possible, to optimize the generalizability and value of quality 
measures. Suggestions regarding potential PSI measure revisions can be 
made directly to [email protected].
    Comment: One commenter expressed concerns with the unintended 
consequence of the CDC Surgical Site Infection (SSI) measure. The 
commenter noted that this measure is disproportionately skewing and 
penalizing SSI rates in large tertiary centers that perform 
exenterations, especially for recurrent cancers. The commenter noted 
that exenterations are rare, complex multi-organ system resections and 
are performed for one of three reasons: colorectal cancer, a 
genitourinary (GU) cancer, or a gynecologic cancer. The commenter 
stated that the few institutions that perform these rare operations 
might be disproportionately affected by misclassification of SSIs in 
cases of recurrent cancer when the colon has previously been removed 
and only the small bowel is included as the gastrointestinal component 
of the exenteration. The commenter suggested that the unintended 
consequence could be remedied by a new CPT code for exenteration for 
recurrent cancer including small bowel sans colon, or exclusion of 
exenteration from NQF #0753.
    Response: We are using the SSI measure in the HAC Reduction Program 
as specified by the measure steward, the CDC. Comments and suggestions 
regarding inclusion and exclusion criteria should be addressed to 
[email protected]. We appreciate and are concerned about unintended 
consequences and will continue to monitor the HAC Reduction Program and 
take the commenters' concerns under consideration.
    Comment: One commenter suggested that CMS identify untreated 
malnutrition, including disease-related malnutrition (acute and 
chronic) as a HAC. The commenter noted that including untreated 
malnutrition would encourage hospitals to implement policies and 
procedures that promote systematic nutrition screening, assessment, and 
appropriate nutrition intervention. The commenter stated that it is 
widely recognized that nutritional status plays a significant role in 
health outcomes and healthcare costs. The commenter cited that 
malnourished patients are more likely to experience complications such 
as pneumonia, pressure ulcers, nosocomial infections, and death. The 
commenter also cited that malnourished patients have significantly 
longer hospitalizations. The commenter stated the inclusion of 
untreated malnutrition would create the necessary accountability to 
minimize the health and economic impact of disease-malnutrition.
    Response: We thank the commenter for this suggestion and will 
consider new measures in the program through future rulemaking.
5. Changes for Implementation of the HAC Reduction Program for FY 2017
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717), we finalized 
the following measures for use in the FY 2017 program: AHRQ PSI-90 
Composite and CDC NHSN CLABSI, CAUTI, Colon and Abdominal Hysterectomy 
SSI, Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia, and 
Clostridium difficile (CDI). In the FY 2016 IPPS/LTCH PPS proposed rule 
(80 FR 24511), we did not propose any changes to this measure set for 
FY 2017. We also did not propose to make any changes to the measures 
from how they were finalized for use in the FY 2016 program (CAUTI, 
CLABSI, and Colon and Abdominal Hysterectomy SSI) or FY 2017 program 
(the addition of MRSA Bacteremia and CDI).
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24511 through 
24512), for FY 2017, we proposed three changes to existing program 
policies: (1) The dates of the time period used to calculate hospital 
performance; (2) the addition of a narrative rule used in the 
methodology to calculate the Domain 2 score; and (3) the relative 
contribution of Domain 1 (patient safety) and Domain 2 (infection) to 
the Total HAC Score. Each proposal is described in more detail below.
a. Applicable Time Period for the FY 2017 HAC Reduction Program
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717), we finalized 
and codified policy at 42 CFR 412.170 that provided that there will be 
a 2-year applicable time period to collect data used to calculate the 
Total HAC Score.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24511), for FY 
2017, we proposed to continue similar 2-year time periods for the 
calculation of HAC Reduction Program measure results. For the Domain 1 
measure (AHRQ PSI-90 Composite measure), we proposed to use the 24-
month period from July 1, 2013 through June 30, 2015. The claims for 
all Medicare FFS beneficiaries discharged during this period would be 
included in the calculations of measure results for FY 2017. For the 
CDC NHSN measures, previously finalized for use in the FY 2017 HAC 
Reduction Program (CLABSI, CAUTI, Colon and Abdominal Hysterectomy SSI, 
MRSA Bacteremia, and CDI), we proposed to use data from CYs 2014 and 
2015.
    We sought public comment on the proposal to use these updated time 
periods for calculation of measure results for the FY 2017 program.
    Comment: One commenter supported the proposed time periods for the 
calculation of HAC Reduction Program measure results. The commenter 
noted that this proposed change places an emphasis on outcome based 
measures, allowing for focus on influencing preventable events and 
improvement on quality of care.
    Response: We appreciate the commenter's support.
    After consideration of the public comments we received, we are 
finalizing the proposed applicable time periods discussed above for the 
FY 2017 HAC Reduction Program without modification.

[[Page 49575]]

b. Narrative Rule Used in Calculation of the Domain 2 Score for the FY 
2017 HAC Reduction Program
    We noted in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50723) that 
there will be instances in which applicable hospitals may not have data 
on all Domain 1 and 2 measures, and, therefore, a set of narrative 
rules were finalized to determine how to score each Domain. The scoring 
rules were finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50723 through 50725) and clarified in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50096 through 50098). For FY 2017, we will follow the rules 
as previously finalized. As described below, in the FY 2016 IPPS/LTCH 
PPS proposed rule (80 FR 24511 through 24512), we also proposed an 
additional narrative rule for use beginning in the FY 2017 program 
year. This additional narrative rule would be applicable to calculation 
of the Domain 2 score and would treat each Domain 2 measure 
independently when determining if a score of 10 (maximal score) should 
be assigned to the measure for nonsubmission of data without a waiver 
(if applicable).
    We note that the current narrative rules for Domain 2 assign a 
score for each Domain 2 measure and the measure scores are averaged to 
provide a Domain 2 Score. For the FY 2015 and FY 2016 HAC Reduction 
Program, if a hospital reports data for at least one of the Domain 2 
measures, its Domain 2 Score is based solely on the measure(s) the 
hospital reported and the hospital is not assigned the maximum number 
of points for any nonreported measure(s). This approach was employed 
for the FY 2015 and FY 2016 HAC Reduction Program because the 
applicable periods for the Domain 2 measures for those program years 
(the FY 2015 period was January 1, 2012 through December 31, 2013, and 
the FY 2016 period was January 1, 2013 through December 31, 2014) 
occurred, at least in part, prior to the announcement of the HAC 
Reduction Program with the publication of the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50707 through 50729) in August 2013. The proposed 
applicable period for Domain 2 measures in the FY 2017 program (CYs 
2014 and 2015) occurs in its entirety after the HAC Reduction Program 
was announced. In the FY 2016 IPPS/LTCH PPS proposed rule, we informed 
hospitals of the impact that not reporting these data would have on 
their FY 2017 Total HAC Score. In the FY 2016 IPPS/LTCH PPS proposed 
rule (80 FR 24511 through 24512), we proposed, for FY 2017 and 
subsequent program years, that each Domain 2 measure be treated 
independently when determining if a score of 10 (maximal score) should 
be assigned to the measure for nonsubmission of data without a waiver 
(if applicable). For instance, if a hospital does not submit data for 
the Colon and Abdominal Hysterectomy SSI measure and does not have a 
valid waiver for nonreporting, the measure would receive a score of 10. 
This score of 10 would then be combined with the measure scores the 
hospital received for data reported on the other FY 2017 Domain 2 
measures (CLABSI and CAUTI) to calculate the hospital's total Domain 2 
score. The rationale for this proposed change in methodology is to 
encourage hospitals to submit all available data on all measures in the 
program and to further encourage hospitals to reduce all HACs included 
in the program.
    We invited public comments on our proposal to implement the score 
calculations discussed above in FY 2017 and subsequent years, as well 
as our proposal for an additional narrative rule that would treat each 
Domain 2 measure independently when determining if a score of 10 
(maximal score) should be assigned to the measure for nonsubmission of 
data without a waiver (if applicable).
    Comment: Many commenters supported the proposed changes to the 
narrative rule used in the calculation of Domain 2 scores. The 
commenters noted that these proposed changes support greater 
transparency by encouraging hospitals to submit all available data 
required for reporting to NHSN on the different measures captured in 
the Domain 2 score. One commenter noted that, in December 2014, the 
technical expert panel (TEP) convened by CMS to reevaluate scoring 
methodology recommended treating Domain 2 measures independently for 
purposes of determining a Domain 2 score. Some commenters also 
suggested that, in addition to exempting those with waivers, CMS 
continue the practice of not calculating a score when data have been 
submitted but there is not enough data to calculate the standardized 
infection ratio (SIR). These commenters suggested that CMS clarify in 
the final rule that it will continue this practice.
    Response: We appreciate the commenters' support. To provide 
clarification in this final rule, in the event the SIRs for each Domain 
2 measure cannot be calculated because the facility has less than 1.0 
predicted infection for each measure, a Domain 2 score cannot be 
calculated and so we will use solely the Domain 1 score to calculate a 
hospital's Total HAC Score. In other words, we will exclude from the 
Total HAC Score calculation any measure for which a SIR cannot be 
calculated.
    Comment: Some commenters suggested that CMS amend the program to 
include only hospitals with enough data to report at least one of the 
infection measures in Domain 2. The commenters suggested that CMS 
consider an alternative scoring methodology for hospitals that do not 
have adequate data for Domain 2. The commenters also suggested that 
hospitals for which CMS is unable to calculate a Domain 2 score be 
excluded from the pool of hospitals that determine the penalty 
quartile.
    Response: We acknowledge the commenters' concern and appreciate the 
suggestions. However, we note that section 1886(p)(2) of the Act 
requires all subsection (d) hospitals under the Act to be included in 
the HAC Reduction Program. In addition, the intention of the scoring 
methodology for calculating a Total HAC Score is to make use of all 
available data for each hospital and to encourage hospitals to report 
HAI data to CDC NHSN, even if they do not have enough data to reliably 
calculate a SIR for the CDC NHSN HAI measures in Domain 2. CDC 
indicated that it continuously evaluate the data reported to NHSN and 
consider the best measures for monitoring and comparative purposes.
    After consideration of the public comments we received, we are 
finalizing the narrative rules used in the calculation of the Domain 2 
Score discussed above as proposed.
c. Domain 1 and Domain 2 Weights for the FY 2017 HAC Reduction Program
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50102), we finalized 
for FY 2016 a methodology for calculating a Total HAC Score for each 
hospital by determining a score for each domain, then multiplying each 
domain score by a weight (Domain 1--AHRQ Patient Safety Indicators, 25 
percent; Domain 2--CDC NHSN measures, 75 percent), and adding together 
the weighted domain scores to determine the Total HAC Score (Sec.  
412.172(e)(3)).
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24512), for FY 
2017, we proposed to adjust the weighting of Domains 1 and 2 so that 
the weight of Domain 1 would be 15 percent and the weight of Domain 2 
would be 85 percent. We proposed to decrease the Domain 1 weight for 
two reasons. First, with the implementation of the CDC MRSA Bacteremia 
and CDI measures in the FY 2017 program, we believe the weighting of 
both domains

[[Page 49576]]

needs to be adjusted to reflect the addition of the fifth and sixth 
measures in Domain 2. Second, among the public comments on the FY 2014 
and FY 2015 IPPS/LTCH PPS final rules that were considered, MedPAC and 
other stakeholders recommended that Domain 2 should be weighted more 
than Domain 1 because they believed the CDC NHSN chart-abstracted 
measures in Domain 2 were more reliable and actionable than claims-
based measures. We invited public comments on this proposal to decrease 
the Domain 1 weight from 25 percent to 15 percent and increase the 
Domain 2 weight from 75 percent to 85 percent for FY 2017.
    Comment: Many commenters supported the proposed adjustment to the 
relative weightings of Domains 1 and 2 for FY 2017. The commenters 
stated that the proposed change gives more weight to the CDC NHSN 
chart-abstracted measures, which utilize standardized definitions that 
capture both data on Medicare as well as non-Medicare patients, rather 
than measures obtained from claims-based data on Medicare patients 
only. The commenters supported MedPAC's and other stakeholder's 
assertions that CDC NHSN chart-abstracted measures in Domain 2 are more 
reliable and actionable than the claims-based measures in Domain 1.
    Response: We agree that an increase in the Domain 2 weight is 
warranted, given that the number of measures is increasing to include 
addition of the CDC NHSN Surgical Site Infection (SSI) measure for FY 
2016 and the addition of the CDC NHSN Methicillin-Resistant 
Staphylococcus aureus (MRSA) Bacteremia and C. difficile measures for 
FY 2017. We agree that both patient safety events and infections are 
important components of the HAC Reduction Program. We refer readers to 
the FY 2014 IPPS/LTCH PPS proposed rule (79 FR 28143 through 29144) for 
additional information for assigning a higher weight to Domain 2.
    Comment: Some commenters objected to the proposed reduction of the 
weight of Domain 1 to 15 percent in FY 2017. The commenters believed 
that this approach promotes an overly narrow definition of HACs that 
places too much emphasis on infections alone. The commenters asserted 
that, while infections are important patient outcomes, patients are 
exposed to risks from many of the outcomes in the PSI-90 Composite, 
such as pressure ulcers, postoperative hemorrhage, or accidental 
puncture/laceration. The commenters suggested that CMS take a more 
balanced approach to weighting the existing domains in order to place a 
high bar for hospitals to avoid preventable infections and harmful 
complications.
    Response: We acknowledge the commenters' concerns. We maintain that 
the AHRQ PSI-90 measure plays a vital role in patient safety and it 
continues to comprise an integral part of the HAC Reduction Program 
with a weight of 15 percent of the Total HAC Score.
    Comment: Commenters expressed concerns over the pace of the change 
in relative weightings and encouraged CMS to use the same domain 
weighting in both FY 2016 and FY 2017. The commenters stated that 
changes to the weighing of measurement domains in FY 2017, for which 
the performance period is already underway, should not be made.
    Response: We acknowledge the commenters' concerns. We note that the 
proposed change in relative weightings, for the FY 2017 program, was 
based on recommendations from MedPAC and other stakeholders that 
believe the CDC NHSN chart-abstracted measures in Domain 2 are more 
reliable and actionable than claims-based measures. We also note that 
the relative weightings were proposed to be adjusted to account for the 
additions of the CDC NHSN Methicillin-Resistant Staphylococcus aureus 
(MRSA) Bacteremia and C. difficile measures for FY 2017 in Domain 2.
    Comment: Commenters expressed apprehension about modifying the 
relative weighting of the domains before hospital systems have fully 
understood the effects of the transition from the ICD-9 coding system 
to the ICD-10 coding system.
    Response: We are aware of stakeholder concerns about the potential 
impacts to hospital performance on quality measures when the ICD-10 
coding system is implemented on October 1, 2015, as well as their calls 
for more extensive testing to understand the impacts before any 
payments or penalties are implicated. As part of ICD-10 transition 
planning that has taken place over the past several years, we have 
performed testing and analyses across the agency with respect to system 
readiness and claims payments, in addition to extensive education and 
outreach to providers, vendors, and other payers. CMS' systems for 
quality programs have been tested and will continue to be tested as 
ICD-10 data are submitted in order to ensure the accuracy of measure 
calculations and to monitor and assess the translation of measure 
specifications to ICD-10, potential coding variation, and impacts on 
measure performance and payment incentive programs. We will continue to 
work with stakeholders during the ICD-10 transition to monitor and 
assess impacts and to address any potential issues that may occur.
    Comment: Commenters expressed concerns that the change to the 
relative weightings may have a disproportionate impact on States that 
mandate reporting of infections by hospitals and other providers 
through NHSN. The commenters suggested that CMS undertake a State-by-
State review of reporting to determine if there may be a correlation 
between State-mandated reporting requirements and higher infection 
rates reported by hospitals and to consider those findings for future 
program improvements.
    Response: We appreciate commenters' concern that the relative 
weightings may have an impact on states that mandate reporting. 
However, hospitals can voluntarily report to NHSN, and are highly 
encouraged to do so, because their HAC scores are dependent on it. We 
will take the commenters' feedback into future consideration as we 
strive to improve the HAC Reduction Program.
    After consideration of the public comments we received, we are 
finalizing the Domain 1 and 2 weightings for FY 2017 as proposed.
6. Measure Refinements for the FY 2018 HAC Reduction Program
a. Inclusion of Select Ward (Non-Intensive Care Unit (ICU)) Locations 
in Certain CDC NHSN Measures Beginning in the FY 2018 Program Year
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24512 through 
24513), we proposed measure refinements to the CDC NHSN CLABSI and 
CAUTI measures that were previously adopted for the HAC Reduction 
Program to include select ward (non-ICU) locations beginning in the FY 
2018 program. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50712 
through 50719), we adopted the CLABSI and CAUTI measures inclusive of 
pediatric and adult patients in ICUs for the HAC Reduction Program 
beginning with FY 2015. We noted at that time that the Hospital IQR 
Program finalized data collection for these measures for adult and 
pediatric patients in medical, surgical, and medical/surgical wards 
(also referred to as select ward locations), in addition to ICU 
locations, effective beginning January 1, 2015, and that we would 
propose the additional locations for the HAC Reduction Program in the 
future.
    The refined CAUTI and CLABSI measures that include select ward 
locations in addition to ICU locations

[[Page 49577]]

were endorsed by the NQF in 2012. The MAP 2015 final recommendations 
indicated that the CLABSI and CAUTI measures with ICU and select ward 
locations be included in the HAC Reduction Program.\110\ We note that 
during the MAP Hospital Workgroup meeting (December 9-10, 2014) and the 
MAP Coordinating Committee meeting (January 26-27, 2015), some members 
discussed the benefit of reporting the modified measures publicly 
before including them in a payment program in order to allow providers 
and CMS to gain experience with the modified measures. Other members 
expressed concern that this could delay implementation of an improved 
measure.\111\ The MAP supported the use of the refined measures without 
stipulating prior public reporting as a condition of support. However, 
we acknowledge the importance of this consideration and took it into 
account when considering the timing of implementing the expanded 
measure in the HAC Reduction Program.
---------------------------------------------------------------------------

    \110\ Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78853.
    \111\ Ibid.
---------------------------------------------------------------------------

    As described in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24512), we considered a number of options for when to begin using the 
refined measures in the HAC Reduction Program. The CDC NHSN measure 
data used in the HAC Reduction Program are obtained from data that 
hospitals report as part of their participation in the Hospital IQR 
Program. Therefore, due to the timing of the Hospital IQR Program 
including select ward locations (beginning January 1, 2015), the FY 
2017 HAC Reduction Program, using the applicable period of CYs 2014 and 
2015 for the CDC NHSN measures, is the first time data from select ward 
locations could be included in the program. However, using select ward 
location data in the FY 2017 program would result in hospitals with ICU 
locations having the opportunity to contribute 2 years of data, while 
hospitals without ICU locations would have the opportunity to 
contribute 1 year of data for measure result calculation. We believe 
this systematically unequal distribution of data could introduce bias 
in the program and should be avoided. If the introduction of select 
ward location data for the CLABSI and CAUTI measures is delayed until 
the FY 2018 HAC Reduction Program (applicable period would likely be 
CYs 2015 and 2016), all hospitals, regardless of whether or not they 
have ICUs, would have the opportunity to contribute 2 years of data for 
measure result calculations.
    In addition, delaying implementation until FY 2018 would allow CMS 
and providers to gain some experience with the impact that the 
inclusion of these data would have on a hospital's HAC Reduction 
Program scores. We also considered the possibility of further delaying 
implementation of the refined measures until the FY 2019 program 
(applicable period would likely be CYs 2016 and 2017) in order to not 
include the first year of reporting (CY 2015) in a payment program 
measure calculation.
    After considering these three options, in the FY 2016 IPPS/LTCH PPS 
proposed rule (80 FR 24512), we proposed to include data from pediatric 
and adult medical ward, surgical ward, and medical/surgical ward 
locations in addition to data from adult and pediatric ICU locations 
for the CDC NHSN CLABSI and CAUTI measures beginning with the FY 2018 
HAC Reduction Program. This option balances our belief that the 
refinement of the CLABSI and CAUTI measures to include select ward 
locations results in an improved measure that more accurately captures 
hospital-wide performance regarding these HACs with the need to provide 
hospitals with the opportunity to submit data for the full period of 
performance and the desire to gain experience with the refined measures 
before incorporating them into the HAC Reduction Program. We also 
believe this measure refinement will allow hospitals that do not have 
ICU locations to use the tools and resources of the NHSN for quality 
improvement and public reporting efforts (78 FR 50787).
    We invited public comment on our proposal.
    Comment: Many commenters supported the proposed measure refinements 
to include select ward (non-ICU) locations for FY 2018. The commenters 
stated that the CDC NHSN CLABSI and CAUTI measures are important 
targets for dedicated surveillance and prevention efforts outside the 
ICU setting and their inclusion in the program represents a more robust 
reflection of overall organizational performance. The commenters noted 
that this proposed change appropriately recognizes the importance of 
controlling hospital-acquired infections outside of the ICU. Some 
commenters stated that the proposal would allow hospitals without ICU 
locations to have a greater opportunity to participate in public 
reporting and quality improvement. The commenters suggested that CMS, 
in collaboration with CDC, determine how the standardized infection 
ratio (SIR) for CAUTI and CLABSI for these two location types will be 
calculated and displayed, noting that the SIR tends to vary 
significantly between ICU and select ward locations.
    Response: We appreciate the commenters' support. We will consider 
the recommendation regarding public reporting of hospital SIRs for the 
future.
    Comment: Commenters commended CMS for the thorough assessment 
undertaken to determine the most appropriate time to implement the CDC 
NHSN CAUTI and CLABSI measures. One commenter noted that there are 
significant volumes of incident rates of CLASBI and CAUTI that occur in 
non-ICU locations. One commenter suggested, in the interim, that CMS 
provide selected ward (non-ICU) locations with the mechanisms to begin 
voluntary data collection related to the measures for purposes of 
calculating performance standards. This commenter noted that these 
measures are an important tool in measuring efficiency within hospitals 
in order to reduce costly hospital-acquired infections that can have 
detrimental effects on the patients who develop them.
    Response: We appreciate the commenters' support. The intent of the 
HAC Reduction Program is to reduce the number of hospital-acquired 
infections in all areas of the hospital. We believe that including non-
ICU ward locations allows us to work toward achieving that aim.
    Comment: Many commenters suggested that CMS consider delaying the 
inclusion of select ward (non-ICU) locations until FY 2019. The 
commenters suggested CY 2017 to serve as the first performance period, 
to align with the Hospital VBP Program. The commenters suggested that 
CMS be consistent in its reporting and payment policies, especially 
given the overlap of measures between the pay-for-performance programs. 
Some commenters expressed concerns that clinical laboratories will need 
training to implement the proposed changes, noting that hospitals would 
need at least part of 2015 to use as a learning period to implement any 
finalized infection agent changes.
    Commenters suggested that CMS refrain from using CY 2015 as part of 
the performance period for the refined CDC NHSN CAUTI and CLABSI 
measures. In the alternative, the commenters suggested that CMS utilize 
CY 2016 as the 1-year performance period if it insisted on 
incorporating the refined measures in FY 2018, or using a 12-month 
performance-reporting period. Some commenters suggested that CMS

[[Page 49578]]

consider providing additional details about the NHSN locations that are 
included and excluded.
    Response: We appreciate the commenters' concern and suggestions. We 
note that implementation of the modified CLABSI and CAUTI measures that 
include expansion outside the ICU were discussed in the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50787). We further note that the modified 
CLABSI and CAUTI measures that include expansion outside the ICU were 
included on the 2014 Measures Under Consideration list and were 
discussed and generally supported by the MAP Hospital Workgroup at its 
December 2014 meeting. We believe that implementation of the expanded 
measures in FY 2018 will allow more hospitals to have their performance 
monitored during FY 2018 by including hospitals without ICUs that were 
previously not included, or small hospitals with ICUs that previously 
lacked enough data to calculate a standardized infection ratio (SIR).
    Allowing FY 2017 to serve as the first program year would permit 
hospitals with ICU locations to contribute 2 years of data, while 
hospitals without ICU locations would only have 1 year of data to 
contribute for measure result calculations. We believe this unequal 
distribution of data could introduce bias in the program and should be 
avoided. We note that implementation in FY 2018 would allow all 
hospitals, regardless of whether or not they have ICUs, to have the 
opportunity to contribute 2 years of data for measure result 
calculations. This option balances our belief that the refinement of 
the CLABSI and CAUTI measures to include select ward locations results 
in an improved measure that more accurately captures hospital-wide 
performance.
    To address the commenters' specific point to delay implementation 
to align the HAC Reduction Program with the Hospital VBP Program, we 
continue to stress that the HAC Reduction Program and the Hospital VBP 
Program are separate programs with different purposes and policy goals. 
The HAC Reduction Program incentivizes the improvement of patient 
safety in hospitals by reducing payments to hospitals for excess HACs, 
while the Hospital VBP Program is an incentive program that 
redistributes a portion of the Medicare payments made to hospitals 
based on their performance on various measures. We also note that the 
Hospital VBP Program has a specific statutory requirement at section 
1886(o)(2)(C)(i) of the Act that measures selected under the program 
must have had measure data posted on Hospital Compare for 1 year prior 
to the performance period; the HAC Reduction Program has no such 
analogous requirement.
    Comment: One commenter requested to know when the CDC NHSN CAUTI 
and CLABSI results, reflecting the expanded population, would be 
reported on Hospital Compare.
    Response: FY 2018 HAC Reduction Program results will be publicly 
reported on Hospital Compare around December 2017. As previously 
finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50725), we 
will publicly report the following on the Hospital Compare Web site: 
(1) Hospital scores with respect to each measure; (2) each hospital's 
domain specific score; and (3) the hospital's Total HAC Score.
    Comment: One Commenter suggested that CMS provide an analysis of 
the impact of the expansion of the CDC NHSN measures on the program. 
The commenter noted that this is a relatively recent expansion and 
additional information regarding its impact should be made available to 
stakeholders prior to implementation.
    Response: We appreciate the commenter's suggestion. We will 
determine the feasibility of conducting an impact analysis of the CDC 
NHSN measures on the HAC Reduction Program.
    Comment: One commenter expressed concerns that expanding the CDC 
NHSN CAUTI data collection to non-ICU wards may endanger patients with 
spinal cord injury/dysfunction (SCI), unless they are excluded from the 
measure. The commenter noted that, in response to the CDC NHSN CAUTI 
measure, a number of hospitals and hospital systems have encouraged 
removal of indwelling catheters, often without recognizing spinal cord 
injury patients as an at-risk population. The commenter stated that 
premature catheter removal has resulted in improper and unsafe bladder 
management in the acute care and subacute care settings.
    Response: We appreciate the commenter's suggestion on excluding SCI 
patients from CAUTI reporting. Patient exclusions are determined by the 
measure steward, which is the CDC. We are currently using the CAUTI 
measure as specified by the CDC in the HAC Reduction Program, which 
includes SCI patients. Questions concerning CDC NHSN measures should be 
addressed to [email protected].
    After consideration of the public comments we received, we are 
finalizing the inclusion of data from pediatric and adult medical ward, 
surgical ward, and medical/surgical ward locations, in addition to data 
from adult and pediatric ICU locations for the CDC NHSN CLABSI and 
CAUTI measures, beginning in FY 2018, as proposed.
b. Update to CDC NHSN Measures Standard Population Data
    In this section, we provide information regarding upcoming changes 
to the standard population data that are used to calculate the SIR for 
the CDC NHSN measures. These changes are occurring as part of routine 
measure maintenance.
    The CDC NHSN measures are used to monitor hospital performance on 
prevention of healthcare-associated infections (HAIs). For each NHSN 
measure, CDC calculates the SIR, which compares a hospital's observed 
number of HAIs to the number of infections predicted for the hospital, 
adjusting for several risk factors.\112\ The predicted number of 
infections is determined using patient care location characteristics 
(for example, the number of central line days) and infection rates that 
occurred among a standard population during a specified time period 
(sometimes referred to by CDC as ``national baseline'' but referred to 
here as ``standard population data''). For example, CDC currently uses 
data collected in CY 2009 for the CAUTI measure to determine the 
standard population data.\113\ For more information about the method by 
which NHSN measures are calculated, we refer readers to QualityNet's 
Web page on HAI measures, which may be found at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=12287604
87021.
---------------------------------------------------------------------------

    \112\ Available at: http://www.cdc.gov/nhsn/PDFs/Newsletters/NHSN_NL_OCT_2010SE_final.pdf.
    \113\ Available at: http://www.cdc.gov/nhsn/pdfs/pscManual/7pscCAUTIcurrent.pdf; and http://www.cdc.gov/HAI/surveillance/QA_stateSummary.html.
---------------------------------------------------------------------------

    As part of routine measure maintenance, CDC will be updating the 
standard population data to ensure the NHSN measures' number of 
predicted infections reflects the current state of HAIs in the United 
States.\114\ Beginning January 1, 2015, CDC started collecting data to 
use in updating the standard population data for HAI measures. (The CY 
2015 standard population data for HAI measures will hereinafter be 
referred to as ``new standard population data.'') Measure results using 
infections reported in CY 2016 will reflect the use of the new standard 
population data. It is anticipated that the new standard population 
data will affect the HAC

[[Page 49579]]

Reduction Program beginning in FY 2018 when the applicable period for 
the CDC NHSN measures included in the program is likely to include CY 
2015 and CY 2016.
---------------------------------------------------------------------------

    \114\ Available at: http://www.cdc.gov/nhsn/PDFs/Newsletters/NHSN_NL_OCT_2010SE_final.pdf.
---------------------------------------------------------------------------

    Comment: Many commenters supported the adoption of updated standard 
population data in the calculation of SIRs for the CDC NHSN measures to 
ensure that the predicted number of infections used in the measures are 
based on the most recent data.
    Response: We appreciate the commenters' recognition of the 
importance to update the baselines used to calculate HAI performance to 
ensure use of the most recent data.
    Comment: Many commenters objected to how CMS will incorporate the 
updated standard population data. The commenters noted that only 
measure results reported in CY 2016 would utilize the new standard 
population data, resulting in the FY 2018 penalty determinations being 
based upon data from different standard populations for the 2 reporting 
years. The commenters suggested that, for reliability purposes, CMS 
explore other options to implement the standard population data change 
to ensure that 2 years of performance data are calculated under the 
same methodology. The commenters suggested that the incorporation of 
the updated standard population data be accomplished in a way that 
allows hospitals ample time to be able to review, understand, and 
explain the changes in performance that may occur before the changes 
affect payment. The commenters also suggested that CMS engage in 
further conversations with CDC and hospital stakeholders to evaluate 
different approaches for implementation prior to a final decision.
    Response: We acknowledge the commenters' concerns and appreciate 
their suggestions. To provide clarification regarding use of the 
updated standard population data, the FY 2018 program will use SIRs for 
CY 2015 and CY 2016 that will be calculated using the new standard 
population data that are based on CY 2015 data reported to NHSN. There 
will not be two different standard populations used to determine FY 
2018 measure results or scores; only the new standard population will 
be used. The CDC will use CY 2015 data to obtain the national rate and 
then will use this new national rate to calculate the SIRs for CY 2015 
and CY 2016 in connection with the FY 2018 HAC Reduction Program.
    Comment: Commenters expressed concerns that using the rebased and 
expanded measures in FY 2018 would result in the HAC Reduction Program 
implementing these measures a full year earlier than in the Hospital 
VBP Program. The commenters noted that there is value in implementing 
the rebased measures in FY 2019 for both programs. The commenters noted 
that standardizing CDC data collection for these two programs leads to 
less confusion during data reporting. The commenters suggested delaying 
the implementation of the newly rebased and expanded measures until FY 
2019.
    Response: We appreciate commenters' concern. CDC's new CAUTI 
definition was developed by a subject-matter expert working group 
comprised of CDC and non-CDC participants who systematically assessed 
each definitional component. The result is a new CAUTI definition that 
is simplified from previous iterations and allows for less subjectivity 
while optimizing clinical credibility. An assessment of the impact of 
the definition change on CAUTI incidence was completed as part of the 
definition development. In addition, the NHSN application provides a 
technical infrastructure and built-in controls on data entry that serve 
as safeguards against the reporting of events that do not meet the new 
CAUTI definition. For these reasons, CDC is confident that the CAUTI 
data reported in CY 2015 will be appropriate to use for a new standard 
population.
    To address commenters' concerns about program overlap, we note that 
the Hospital VBP Program has a specific statutory requirement at 
section 1886(o)(2)(C)(i) of the Act that measures selected under the 
program must have had measure data posted on Hospital Compare for 1 
year prior to the performance period; the HAC Reduction Program has no 
such analogous requirement. We will continue to look at ways to better 
align the two programs in the future.
    Comment: One commenter suggested that CMS revise the SIR 
methodology or exclude hospitals with low-volumes that may lack 
sufficient cases to establish an expected infection calculation. The 
commenter noted that when the Expected Infection Value is less than 
one, CMS deems the ratio invalid, and eliminates the Infection 
Prevention Component (Domain 2) from the overall performance roll-up. 
The commenter noted that this results in all of the weighting criteria 
shifting to the patient safety domain (Domain 1).
    Response: We appreciate the commenter's suggestions and will take 
them under advisement as we seek to make our measures more transparent. 
We conferred with CDC, which indicated that they continuously evaluate 
the data reported to NHSN and consider the best measures for monitoring 
and comparative purposes. Currently the SIR is the best measure to 
allow for risk adjustment and production of a facility-level and/or 
CCN-level metric that can be used for comparison across similar 
facility types. This provides the opportunity to most accurately 
represent a facility's success. CDC continues to review the data and 
evaluate options for metric development, including situations where 
facilities have low denominator volume and/or few infections.
7. Maintenance of Technical Specifications for Quality Measures
    Technical specifications for AHRQ's PSI-90 Composite measure in 
Domain 1 can be found at AHRQ's Web site at: http://qualityindicators.ahrq.gov/Modules/PSI_TechSpec.aspx. Technical 
specifications for the CDC NHSN HAI measures in Domain 2 can be found 
at CDC's NHSN Web site at: http://www.cdc.gov/nhsn/acute-care-hospital/index.html. Both Web sites provide measure updates and other 
information necessary to guide hospitals participating in the 
collection of HAC Reduction Program data.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50100), we described 
a policy under which we use a subregulatory process to make 
nonsubstantive updates to measures used for the HAC Reduction Program. 
In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24513), we did not 
propose any changes to this policy.
8. Extraordinary Circumstance Exception Policy for the HAC Reduction 
Program Beginning in FY 2016 and for Subsequent Years
a. Background
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28142), we 
welcomed public comment on whether a potential waiver or exception 
policy for hospitals located in areas that experience disasters or 
other extraordinary circumstances should be implemented, and the policy 
and operational considerations of such an extraordinary circumstance 
exception policy for the HAC Reduction Program. In the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50101), we indicated that we received many 
comments in support of CMS establishing a formal extraordinary 
circumstance exception policy under the HAC Reduction Program. We also 
previously indicated that any specific proposals related to the 
implementation of an extraordinary circumstance exception policy would 
be proposed through notice-and-comment

[[Page 49580]]

rulemaking. In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24513 
through 24514), we proposed to establish an extraordinary circumstance 
exception policy for the HAC Reduction Program beginning in FY 2016 and 
for subsequent years.
    In developing this proposed extraordinary circumstance exception 
policy for the HAC Reduction Program beginning in FY 2016 and for 
subsequent years, we considered a policy and process similar to that 
for the Hospital IQR Program, as finalized in the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51651), modified by the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50836) (designation of a non-CEO hospital contact), and 
further modified in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50277) 
(amended Sec.  412.40(c)(2)) to refer to ``extension or exemption'' 
instead of the former ``extension or waiver''). We also considered how 
best to align an extraordinary circumstance exception policy for the 
HAC Reduction Program with existing extraordinary circumstance 
exception policies for other IPPS quality reporting and payment 
programs, such as the Hospital VBP Program, to the extent feasible.
    We considered the feasibility and implications of excluding data 
for certain measures for a limited period of time from the calculations 
for a hospital's measure results or Total HAC Score for the applicable 
performance period. By minimizing the data excluded from the program, 
the proposed policy would enable affected hospitals to continue to 
participate in the HAC Reduction Program for a given fiscal year if 
they otherwise continue to meet applicable measure minimum threshold 
requirements. We believe that this approach could help alleviate the 
reporting burden for a hospital that is adversely impacted by a natural 
disaster or other extraordinary circumstance beyond its control, while 
enabling the hospital to continue to participate in the HAC Reduction 
Program.
b. Requests for an Extraordinary Circumstance Exception
    Based upon our prior experience with the Hospital IQR Program and 
the Hospital VBP Program, we anticipate the need to provide exceptions 
to only a small number of hospitals affected by a natural disaster or 
other extraordinary circumstance. During the review of a hospital's 
request for an extraordinary circumstance exception, we will maintain 
the general principle that providing high quality of care and ensuring 
patient safety is of paramount importance. We do not intend to allow a 
hospital to use this proposed policy and the request process to seek 
exclusion from the HAC Reduction Program in its entirety for a given 
fiscal year(s) solely because of experiencing an extraordinary 
circumstance. Rather, we intend to provide relief for a hospital whose 
ability to accurately collect quality measure data and/or to report 
those data in a timely manner has been negatively impacted as a direct 
result of experiencing a significant disaster or other extraordinary 
circumstance beyond the control of the hospital. Section 1886(p)(4) of 
the Act permits the Secretary to determine the ``applicable period'' 
for HAC data collection, and we believe that the statute allows us to 
determine that the period not include times when hospitals may 
encounter extraordinary circumstances.
    We proposed that the request process for an extraordinary 
circumstance exception begin with the submission of an extraordinary 
circumstance exception request form by a hospital within 90 calendar 
days of the natural disaster or other extraordinary circumstance. We 
believe that the 90-calendar day timeframe is an appropriate period of 
time for a hospital to determine whether to submit an extraordinary 
circumstance exception request. It is also the same length of time as 
the current time period allowed under the Hospital VBP Program. Under 
this proposed policy, a hospital would be able to request a HAC 
Reduction Program extraordinary circumstance exception at the same time 
it may request a similar exception under the Hospital IQR Program, the 
Hospital VBP Program, and the Hospital Readmissions Reduction Program 
(if an extraordinary circumstance exception policy is adopted for the 
Hospital Readmissions Reduction Program as described in section IV.E.9. 
of the preamble of FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24497 
through 24498)). The extraordinary circumstance exception request form 
would be made available on the QualityNet Web site (https://www.qualitynet.org/).
    The following minimum set of information would be required to 
submit the request:
     Hospital CCN;
     Hospital name;
     Hospital Chief Executive Officer (CEO) and any other 
designated personnel contact information, including name, email 
address, telephone number, and mailing address (must include a physical 
address; a post office box address is not acceptable);
     Hospital's reason for requesting an exception, including:
    ++ CMS program name (for example, the HAC Reduction Program, the 
Hospital VBP Program, or the Hospital IQR Program);
    ++ The measure(s) and submission quarters affected by the 
extraordinary circumstance that the hospital is seeking an exception 
for should be accompanied with the specific reasons why the exception 
is being sought; and
    ++ How the extraordinary circumstance negatively impacted 
performance on the measure(s) for which an exception is being sought;
     Evidence of the impact of the extraordinary circumstances, 
including but not limited to, photographs, newspaper articles, and 
other media articles; and
     The request form must be signed by the hospital's CEO or 
designated non-CEO contact and submitted to CMS.
    The same set of information is currently required under the 
Hospital IQR Program and the Hospital VBP Program on the request form 
from a hospital seeking an extraordinary circumstance exception with 
respect to these programs. The specific list of required information 
would be subject to change from time to time at the discretion of CMS.
    Following receipt of the request form, CMS would: (1) Provide a 
written acknowledgement of receipt of the request using the contact 
information provided in the request form to the CEO and any additional 
designated hospital personnel; and (2) provide a formal response to the 
CEO and any additional designated hospital personnel using the contact 
information provided in the request notifying them of the CMS decision. 
Under the proposed policy, we would review each request for an 
extraordinary circumstance exception on a case-by-case basis at CMS' 
discretion. To the extent feasible, we also would review such a request 
in conjunction with any similar requests made under other IPPS quality 
reporting and payment programs, such as the Hospital IQR Program and 
the Hospital VBP Program.
    The proposed policy would not preclude CMS from granting 
extraordinary circumstance exceptions to hospitals that do not request 
them if we determine at our discretion that a disaster or other 
extraordinary circumstance has affected an entire region or locale. If 
CMS makes such a determination to grant an extraordinary circumstance 
exception to hospitals in an affected region or locale, we would convey 
this decision through routine communication channels to hospitals, 
vendors, and QIOs, including, but not limited, to issuing memos, 
emails, and

[[Page 49581]]

notices on the QualityNet Web site at: https://www.qualitynet.org/. 
This provision also would align with the Hospital IQR Program's 
extraordinary circumstances extension or exemption policy, as set forth 
in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51651).
    We invited public comment on this proposal.
    Comment: Many commenters supported the proposal to establish an 
extraordinary circumstance exception policy. The commenters appreciated 
that CMS previously implemented similar policies for other quality 
reporting programs and agreed that policies should be consistent across 
programs. The commenters appreciated that penalties will not be imposed 
for failure to meet goals related to natural or manmade disasters, 
overwhelming epidemics, or catastrophic failures of infrastructure. The 
commenters recommended that CMS develop a single request form, 
encompassing all quality reporting programs from which a hospital might 
request an exception. The commenters noted that the request form could 
list all of the various quality reporting programs and require a 
hospital to check off the programs for which it has encountered 
difficulty collecting data.
    Response: We appreciate the commenters' support for the adoption of 
an extraordinary circumstance exception policy for the HAC Reduction 
Program. We also appreciate the recommendations from the commenters and 
will take into consideration these recommendations as we implement 
operational processes.
    Comment: One commenter suggested that CMS adopt an extraordinary 
circumstance exception that allows for at least a 1-year exemption from 
the HAC Reduction Program. The commenter stated that an exception 
policy of at least 1 year would allow hospitals to focus on and address 
their immediate needs during a time of crisis and to recover from 
physical damage and data lags. The commenter noted that hospitals 
struggling with an extraordinary circumstance may face a truncated 
reporting period and may have a low volume of data to report, resulting 
in inconsistent and unreliable outcomes.
    Response: We appreciate the commenter's suggestion. Each request 
for an extraordinary circumstance exception will be reviewed on a case-
by-case basis. Determinations will be based on the information a 
hospital submits in connection with the reason for the request, such 
as: The measure(s) and submission quarters affected by the 
extraordinary circumstance; how the extraordinary circumstance 
negatively impacted performance on the measure(s); and evidence of the 
impact.
    Comment: One commenter suggested that CMS consider a range of 
extenuating circumstances that could adversely affect a hospital's 
ability to submit data in a timely fashion. The commenter also 
suggested that CMS allow an appeals process to govern extraordinary 
circumstance exception decisions.
    Response: We appreciate the commenter's recommendations. As we 
discussed in the proposed rule (80 FR 24497), based on our experience 
with the Hospital Value-Based Purchasing Program and the Hospital 
Inpatient Quality Reporting Program, we anticipate a need to provide 
exemptions only to a small number of hospitals where the ability to 
accurately or timely submits claims has been directly impacted. We will 
continue to monitor extraordinary circumstance exception requests to 
ensure that the process we are adopting in this final rule supports the 
goals of the HAC Reduction Program. However, we do not intend to modify 
the criteria for an extraordinary circumstance exception at this time. 
We do not anticipate a need to establish an appeals process for 
extraordinary circumstance exception determinations.
    Comment: One commenter asked if an exception for FY 2015 will be 
granted if an extraordinary circumstance occurred prior to 
implementation of the final rule.
    Response: We are finalizing the extraordinary circumstance 
exception policy beginning in FY 2016, as was proposed. Therefore, 
exceptions may only be granted for circumstances occurring on or after 
October 1, 2015.
    After consideration of the public comments we received, we are 
finalizing the extraordinary circumstance exception policy as proposed.

H. Simplified Cost Allocation Methodology for Hospitals (Sec.  412.302)

1. Background
    The Medicare hospital cost report employs a cost-finding 
methodology to allocate direct and indirect costs using statistics 
appropriate to each department within a hospital. The costs of 
nonrevenue-producing cost centers (general service or overhead cost 
centers) are allocated to each other and to the revenue-producing cost 
centers using statistical bases and related statistics that measure the 
amount of service furnished by each cost center to the other cost 
centers (42 CFR 413.24(b) and (d)). In this regard, cost-finding is the 
process of recasting the data derived from the accounts ordinarily kept 
by a hospital to ascertain costs of the various types of services 
furnished (42 CFR 413.24(b)(1)).
    In the FY 1997 IPPS final rule (61 FR 46214 through 46215), CMS 
implemented the simplified cost allocation methodology at 42 CFR 
412.302(d)(4) for hospitals as an alternative to the standard cost-
finding methodology. The simplified cost allocation methodology reduces 
the number of statistical bases that a hospital must maintain. Under 
the simplified cost allocation methodology, a hospital must use a 
prescribed list of statistical bases, without deviation, as set forth 
in the Provider Reimbursement Manual (PRM), Part II (CMS Pub. 15-2), 
Chapter 40, Section 4020, Form CMS-2552. The simplified cost allocation 
methodology was devised in response to concerns expressed by the 
hospital industry over 20 years ago regarding the high costs of the 
recordkeeping required under the cost reporting rules. Since 
implementation of the simplified cost allocation methodology, there 
have been advances in technology of recordkeeping for hospitals, 
resulting in less arduous and costly recordkeeping. It was expected 
that, although use of the simplified cost allocation methodology by 
hospitals would result in reduced recordkeeping costs, it also would 
likely result in reduced Medicare payments to hospitals.
    In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 
50080), we created standard cost centers for Magnetic Resonance Imaging 
(MRI) and computed tomography (CT) scans, and required that hospitals 
report the costs and charges for these services under new cost centers 
on the Medicare cost report Form CMS-2552-10. The new standard cost 
centers for MRIs and CT scans were effective for cost reporting periods 
beginning on or after May 1, 2010.
    Beginning in FY 2014, we started to calculate the MS-DRG relative 
weights using 19 CCRs, including distinct CCRs for MRIs and CT scans. 
In addition, beginning in the CY 2014 OPPS, we started to calculate the 
OPPS relative payment weights using distinct CCRs for MRIs and CT 
scans. Some stakeholders expressed concern that CMS was not 
appropriately determining the cost of advanced imaging for inpatient 
and outpatient hospital services because, when the costs of hospitals 
that use the simplified cost allocation methodology are included in 
cost determinations, less precise CCRs are generated. This is because 
the simplified cost allocation methodology requires a hospital to use

[[Page 49582]]

square footage instead of dollar value for capital-related moveable 
equipment. In response to public comments on the FY 2014 IPPS/LTCH PPS 
proposed rule (78 FR 27486) and the CY 2014 OPPS/ASC proposed rule (78 
FR 43547), in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50521 through 
50523) and in the CY 2014 OPPS/ASC final rule with comment period (78 
FR 74843 through 74847), we encouraged hospitals to use the statistical 
basis of ``dollar value'' for the costs of capital-related movable 
equipment, especially for costly MRI and CT imaging equipment, to 
support a more precise cost allocation and, therefore, more precise 
CCRs. However, a hospital that obtained approval from their MAC, under 
Section 2313 of the Provider Reimbursement Manual (PRM), Part I (CMS 
Pub. 15-1), to use the simplified cost allocation methodology set forth 
in Section 4020 of CMS Pub. 15-2 was restricted by the required 
statistical basis of ``square footage'' for costs of capital-related 
movable equipment. We recommended that hospitals use the statistical 
basis of the dollar value or use the ``Direct Assignment of General 
Service Cost'' method by requesting MAC approval in accordance with 
Section 2307 of CMS Pub. 15-1.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24514 through 
24515), we proposed to eliminate the simplified cost allocation 
methodology because, as discussed above, the allocation of the costs of 
capital-related movable equipment using the required basis (square 
footage) under the simplified cost allocation methodology, instead of 
the recommended basis (dollar value) yields less precise calculated 
CCRs. We stated in the proposed rule that, currently, less than 1 
percent of hospitals have elected to use the simplified cost allocation 
methodology. Based on FY 2013 HCRIS data, we stated that only 9 of 
1,269 CAHs and 23 of 4,389 hospitals other than CAHs used the 
simplified cost allocation methodology. Furthermore, we stated that we 
believe that advances in technology have reduced the cost of 
recordkeeping, allowing hospitals to maintain accurate statistical data 
and affording them the flexibility to change to a more precise 
allocation methodology.
2. Proposed Regulatory Change
    The regulations applicable to the election of the simplified cost 
allocation methodology are located in 42 CFR 412.302. For the reasons 
set forth in section IV.H.1. of the preamble of the FY 2016 IPPS/LTCH 
proposed rule (80 FR 24514 through 24515), we proposed to amend Sec.  
412.302 by revising paragraph (d)(4) to eliminate a hospital's ability 
to elect the simplified cost allocation methodology under the terms and 
conditions provided in the instructions for CMS Form 2552 for cost 
reporting periods beginning on or after October 1, 2015.
3. Summary of Public Comments, Our Responses, and Final Changes
    We set forth below summaries of the public comments that we 
received and our responses to those public comments.
    Comment: Commenters questioned the accuracy of CMS' data as cited 
in the proposed rule with regard to the number of hospitals that use 
the simplified cost allocation methodology. The commenters stated that 
if the data included hospitals that answered ``Yes'' to the question on 
Worksheet S-2, line 149 of the Medicare cost report, ``Was there a 
change to the simplified cost-finding method?'', the CMS' data were 
incorrect. Commenters pointed out that hospitals that answered ``Yes'' 
to this question are only those hospitals that changed their cost-
finding method to the simplified cost allocation methodology. A few 
commenters suggested that the number of hospitals using the simplified 
cost allocation methodology was closer to 2,000 if the number captures 
those hospitals that used the square footage statistic for both the 
``building and fixtures'' and ``movable equipment'' cost centers.
    Response: We appreciate the commenters' concerns regarding the 
accuracy of the data cited in the proposed rule regarding the number of 
hospitals that currently use the simplified cost allocation 
methodology. In response to the commenters, we reassessed the data for 
the 5,658 hospitals reported in the FY 2013 HCRIS, based on the 
statistical basis reported for each general services cost center, and 
found that there are less than 100 hospitals using the simplified cost 
allocation methodology. We agree with the commenters' conclusions that 
capturing hospitals who answered ``Yes'' to the question on Worksheet 
S-2, line 149 of the Medicare cost report will not represent the number 
of hospitals who use the simplified cost allocation methodology. We 
believe the commenters' concerns regarding the accuracy of the data 
result from a misconception of what it means to use the simplified cost 
allocation methodology. The simplified cost allocation methodology is 
only indicated by hospitals that use the entire list of the statistical 
bases as required by Section 4020 of CMS Pub. 15-2. We based the data 
cited in the proposed rule on the FY 2013 HCRIS data and selected only 
those hospitals that used the entire list of statistical bases as 
required by and set forth in Section 4020 of CMS Pub. 15-2. Hospitals 
that used one or more, but not all, of the statistical bases are not 
using the simplified cost allocation methodology and were not included 
in our data analysis in the proposed rule because the simplified cost 
allocation methodology is only denoted by hospitals that use each and 
every statistical basis on the prescribed list in Section 4020 of CMS 
Pub. 15-2. For example, hospitals that use square footage as a 
statistical basis for both the ``building and fixtures'' and ``movable 
equipment'' cost centers, but deviate from any one of the other 
statistical bases required from the list of 19 cost centers under the 
simplified cost allocation methodology, are not using the simplified 
cost allocation methodology.
    Using the FY 2013 HCRIS data, we applied filters using the 19 
statistical bases required by the simplified cost allocation 
methodology and determined that less than 100 hospitals used the 
simplified cost allocation methodology. We began with a total hospital 
population of 5,658 from the FY 2013 HCRIS. First, we applied a filter 
to the 5,658 hospitals for the ``buildings and fixtures'' and ``movable 
equipment'' cost centers using square footage as the statistical basis 
for the simplified cost allocation methodology and determined that 
3,337 hospitals used this basis. In so doing, we were able to eliminate 
2,321 hospitals that were not using the simplified cost allocation 
methodology's basis of square footage for these cost centers. We then 
applied a second filter to the 3,337 hospitals for the ``laundry and 
linen'' cost center using patient days as the statistical basis for the 
simplified cost allocation methodology and determined that 1,008 
hospitals used patient days. After applying the second filter, we were 
able to eliminate an additional 2,329 hospitals that may have used 
square footage but were not using the simplified cost allocation 
methodology's basis of patient days for this cost center; in most 
cases, hospitals used pounds of laundry or an alternative basis not 
within the simplified cost allocation methodology. We next applied a 
third filter to the resulting 1,008 hospitals for the ``dietary'' cost 
center using patient days as the statistical basis for the simplified 
cost allocation methodology and determined that 687 hospitals used 
patient days. After applying the third

[[Page 49583]]

filter, we were able to eliminate an additional 321 hospitals that were 
not using the simplified cost allocation methodology's basis of patient 
days for this cost center. With the resulting 687 hospitals, we next 
applied a fourth filter for the ``nursing administration'' cost center 
using nursing salaries as the statistical basis for the simplified cost 
allocation methodology and determined that 523 hospitals used nursing 
salaries. In this manner, we continued filtering through the simplified 
cost allocation methodology's remaining costs centers and corresponding 
statistical bases and ended with a result of less than 100 hospitals 
using the simplified cost allocation methodology.
    In our original data analysis set forth in the proposed rule, we 
excluded hospitals with cost centers that were listed in the HCRIS 
report as blank because we assumed that if a cost center was blank, a 
hospital was not using the simplified cost allocation methodology. 
However, upon revisiting the data following the receipt of public 
comments, we determined that if a cost center was blank, it did not 
necessarily mean the hospital was not using the simplified cost 
allocation methodology. In this regard, we broadened the filters to 
include hospitals with the blank cost centers which broadened the 
population. Within this larger population, we concluded that there were 
more hospitals using the simplified cost allocation methodology than 
originally cited in the proposed rule. Although this second data 
analysis was more conservative and included a larger population, we 
still found that less than 100 hospitals are using the simplified cost 
allocation methodology.
    Comment: Some commenters stated that CMS should explore 
alternatives to eliminating the simplified cost allocation methodology 
rather than disrupting the cost reporting practices of a large number 
of hospitals that do not use ``dollar value'' to allocate capital-
related moveable equipment.
    Response: We appreciate the commenters' concerns and believe that 
it is important to minimize disruption of hospital cost reporting 
practices, while at the same time allowing hospitals to use a more 
precise statistical allocation basis of dollar value. Therefore, in 
response to comments, in this final rule, rather than eliminating the 
simplified cost allocation methodology as we proposed, we are modifying 
the simplified cost allocation methodology to permit the use of either 
dollar value or square footage as the statistical basis for capital-
related moveable equipment. With this modification, we believe there 
will be no disruption of cost reporting practices for hospitals, 
regardless of whether or not they use the simplified cost allocation 
methodology. While hospitals currently using the standard cost-finding 
method of allocation may also use an approved alternative statistical 
basis of square footage for capital-related moveable equipment and can 
request approval to change back to the recommended and more precise 
statistical allocation basis of dollar value, hospitals using the 
simplified cost allocation methodology are not afforded this same 
flexibility to change to dollar value as a statistical basis for 
capital-related moveable equipment. Currently, under the simplified 
cost allocation methodology, there can be no deviation from the 
prescribed statistical bases for any of the cost centers as set forth 
in the PRM (CMS Pub. 15-2, Chapter 40, Section 4020, Form CMS-2552-10). 
Under our modified policy, hospitals that use the simplified cost 
allocation methodology (that is, hospitals that use each and every 
statistical basis within the list of cost centers under the simplified 
cost allocation methodology) may continue their use of these 
statistical bases, with the added flexibility to request approval to 
use the dollar value statistical basis for capital-related moveable 
equipment. In this regard, hospitals using the simplified cost 
allocation methodology will no longer be required to use the square 
footage statistical basis for capital-related moveable equipment but 
will be provided greater flexibility to request approval to use the 
statistical basis of dollar value which may be better suited to their 
cost allocation needs. We note that hospitals currently using one or 
more, but not all, of the statistical bases under the simplified cost 
allocation methodology are not considered to be using the simplified 
cost allocation methodology. Rather, they are considered to be using 
the standard cost-finding methodology with approved alternative 
statistical bases. These hospitals may continue to use these previously 
approved statistical bases. As discussed above and in the proposed 
rule, we believe that advances in recordkeeping information technology 
since the simplified cost allocation methodology was devised almost 20 
years ago have afforded hospitals the ability to more accurately track 
data and costs with relative ease and to more quickly recall such data 
than in the past. Thus, we believe that hospitals should use the cost 
allocation methodology that results in the most precise cost 
allocation.
    Comment: A few commenters suggested that CMS provide data to 
support its belief that using dollar value as a statistic for capital-
related moveable equipment will result in more precise CCRs and will 
outweigh the additional reporting burden to hospitals.
    Response: We appreciate the commenters' concerns surrounding the 
perceived burden to hospitals and the use of dollar value as a 
statistic for capital-related moveable equipment to support more 
precise CCRs. As noted in the proposed rule, beginning in FY 2014, we 
started to calculate the MS-DRG relative weights using 19 CCRs, 
including distinct CCRs for MRIs and CT scans. In addition, beginning 
in the CY 2014 OPPS, we started to calculate the OPPS relative payment 
weights using distinct CCRs for MRIs and CT scans. In public comments, 
some stakeholders, including the hospital industry, expressed concern 
that CMS was not appropriately determining the cost of advanced imaging 
for inpatient and outpatient hospital services because, when the costs 
of hospitals that use the simplified cost allocation methodology, or 
square footage as a statistical basis for capital-related moveable 
equipment, are included in cost determinations, less precise CCRs are 
generated. In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50077), we 
notified hospitals of the need and importance of properly reporting the 
capital costs of moveable equipment on the Medicare cost report and 
recommended that hospitals use the statistical allocation method of 
``dollar value'' for costs on Worksheet A, Column 2 for Capital-Related 
Costs--Moveable Equipment, or by requesting contractor approval in 
accordance with Section 2307 of CMS Pub. 15-1 to use the ``direct 
assignment'' allocation method. In the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53283), we reiterated this recommendation so that when distinct 
CCRs for MRI and CT scan would be proposed, the CCRs would fairly and 
accurately represent the cost of these costly imaging equipment. We 
encouraged hospitals to use the statistical basis of ``dollar value'' 
for the costs of capital-related movable equipment, especially for 
costly MRI and CT imaging equipment.
    Dollar value is the statistical basis that uses the actual cost of 
the asset being depreciated and more accurately allocates costs among 
the cost centers using those assets. In the CY 2014 OPPS/ASC final rule 
with comment period, we indicated that commenters had expressed concern 
that the use of square footage as the statistical basis of allocation 
``results in CCRs that lack face validity'' (78 FR 74843 through 
74847). It has been CMS' longstanding

[[Page 49584]]

policy that hospitals use dollar value as the recommended default 
statistical basis for capital-related moveable equipment. As discussed 
above, currently under the simplified cost allocation methodology, 
hospitals are required to use square footage as the statistical basis 
for capital-related moveable equipment. Thus, we are finalizing a 
policy that affords hospitals using the simplified cost allocation 
methodology the flexibility to use either square footage or dollar 
value as a statistical basis for capital-related moveable equipment. 
However, we encourage all hospitals, regardless of their cost-finding 
methodology, to use dollar value as a statistical basis for the 
capital-related moveable equipment cost center because we believe it 
results in more precise CCRs.
    Comment: Some commenters believed that, despite advances in 
technology and recordkeeping for hospitals, the elimination of the 
simplified cost allocation methodology would create a significant 
administrative burden.
    Response: We appreciate the commenters' concern regarding the 
additional burden to hospitals with the elimination of the simplified 
cost allocation methodology. As discussed earlier, we are not 
finalizing our proposal to eliminate the simplified cost allocation 
methodology. Instead, we are modifying the simplified cost allocation 
methodology to give hospitals greater flexibility to request approval 
from their MACs to use the statistical basis of dollar value for 
capital-related moveable equipment. In this regard, we do not foresee 
any burden to any hospitals. Instead, we believe greater flexibility is 
being afforded.
    In summary, after consideration of the public comments we received, 
we are not finalizing our proposal to eliminate the simplified cost 
allocation methodology. Instead, we are modifying the simplified cost 
allocation methodology set forth at CMS Pub. 15-2, Chapter 40, Section 
4020, to provide additional flexibility to hospitals that use the 
simplified cost allocation methodology by allowing them to obtain 
approval from their MACs to use an alternative statistical basis of 
dollar value for capital-related moveable equipment. In this regard, 
hospitals using the simplified cost allocation methodology will no 
longer be restricted to using square footage as a statistical basis for 
capital-related moveable equipment. Instead, hospitals using the 
simplified cost allocation methodology may obtain MAC approval in 
accordance with the instructions set forth in Section 2313 of CMS Pub. 
15-1 to use either square footage or dollar value as the statistical 
basis for capital-related moveable equipment. However, we encourage all 
hospitals, regardless of their cost-finding methodology, to use dollar 
value as a statistical basis for the capital-related moveable equipment 
cost center because we believe it results in more precise CCRs.
    Hospitals that are not currently using the simplified cost 
allocation methodology but desire to do so will need to obtain approval 
from their MACs, consistent with our current policy set forth at 
Section 2313 of CMS Pub. 15-1. MACs will approve new requests to use 
the simplified cost allocation methodology if the hospital demonstrates 
that the maintenance of the new statistics is less costly and the use 
does not result in inappropriately shifting costs.
    Hospitals that are not using the simplified cost allocation 
methodology but are using one or more, but not all, of the statistical 
bases from the cost center list under the simplified cost allocation 
methodology in Section 4020, Chapter 40 of CMS Pub. 15-2 and have been 
permitted to do so by their MACs, will continue to be permitted to 
request such usage from their MACs.

I. Rural Community Hospital Demonstration Program

1. Background
    Section 410A(a) of Public Law 108-173 required the Secretary to 
establish a demonstration program to test the feasibility and 
advisability of establishing ``rural community'' hospitals to furnish 
covered inpatient hospital services to Medicare beneficiaries. The 
demonstration pays rural community hospitals under a reasonable cost-
based methodology for Medicare payment purposes for covered inpatient 
hospital services furnished to Medicare beneficiaries. A rural 
community hospital, as defined in section 410A(f)(1), is a hospital 
that--
     Is located in a rural area (as defined in section 
1886(d)(2)(D) of the Act) or is treated as being located in a rural 
area under section 1886(d)(8)(E) of the Act;
     Has fewer than 51 beds (excluding beds in a distinct part 
psychiatric or rehabilitation unit) as reported in its most recent cost 
report;
     Provides 24-hour emergency care services; and
     Is not designated or eligible for designation as a CAH 
under section 1820 of the Act.
    Section 410A(a)(4) of Public Law 108-173 specified that the 
Secretary was to select for participation no more than 15 rural 
community hospitals in rural areas of States that the Secretary 
identified as having low population densities. Using 2002 data from the 
U.S. Census Bureau, we identified the 10 States with the lowest 
population density in which rural community hospitals were to be 
located in order to participate in the demonstration: Alaska, Idaho, 
Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, 
Utah, and Wyoming (source: U.S. Census Bureau, Statistical Abstract of 
the United States: 2003).
    CMS originally solicited applicants for the demonstration in May 
2004; 13 hospitals began participation with cost reporting periods 
beginning on or after October 1, 2004. In 2005, 4 of these 13 hospitals 
withdrew from the program and converted to CAH status. This left nine 
hospitals participating at that time. In 2008, we announced a 
solicitation for up to six additional hospitals to participate in the 
demonstration program. Four additional hospitals were selected to 
participate under this solicitation. These four additional hospitals 
began under the demonstration payment methodology with the hospital's 
first cost reporting period starting on or after July 1, 2008. At that 
time, 13 hospitals were participating in the demonstration.
    Five hospitals (3 of the hospitals were among the 13 hospitals that 
were original participants in the demonstration program and 2 of the 
hospitals were among the 4 hospitals that began the demonstration 
program in 2008) withdrew from the demonstration program during CYs 
2009 and 2010. (Three of these hospitals indicated that they would be 
paid more for Medicare inpatient hospital services under the rebasing 
option allowed under the SCH methodology provided for under section 122 
of the Medicare Improvements for Patients and Providers Act of 2008 
(Pub. L. 110-275). One hospital restructured to become a CAH, and one 
hospital closed.) In CY 2011, one hospital that was among the original 
set of hospitals that participated in the demonstration withdrew from 
the demonstration. These actions left seven of the originally 
participating hospitals (that is, hospitals that were selected to 
participate in either 2004 or 2008) participating in the demonstration 
program as of June 1, 2011.
    Sections 3123 and 10313 of the Affordable Care Act (Pub. L. 111-
148) amended section 410A of Public Law 108-173, changing the rural 
community hospital demonstration program in several ways. First, the 
Secretary is required to conduct the demonstration program for an 
additional 5-year period, to begin on the date immediately following 
the last day of the initial 5-

[[Page 49585]]

year period. Furthermore, in the case of a rural community hospital 
that is participating in the demonstration program as of the last day 
of the initial 5-year period, the Affordable Care Act requires the 
Secretary to provide for the continued participation of such rural 
hospital in the demonstration program during the 5-year extension 
period, unless the hospital makes an election to discontinue 
participation.
    In addition, the Affordable Care Act provides that, during the 5-
year extension period, the Secretary shall expand the number of States 
with low population densities determined by the Secretary to 20. 
Furthermore, the Secretary is required to use the same criteria and 
data that the Secretary used to determine the States for the initial 5-
year period. The Affordable Care Act also allows not more than 30 rural 
community hospitals in such States to participate in the demonstration 
program during the 5-year extension period.
    We published a solicitation for applications for additional 
participants in the rural community hospital demonstration program in 
the Federal Register on August 30, 2010 (75 FR 52960). Applications 
were due on October 14, 2010. The 20 States with the lowest population 
density that were eligible for the demonstration program are: Alaska, 
Arizona, Arkansas, Colorado, Idaho, Iowa, Kansas, Maine, Minnesota, 
Mississippi, Montana, Nebraska, Nevada, New Mexico, North Dakota, 
Oklahoma, Oregon, South Dakota, Utah, and Wyoming (source: U.S. Census 
Bureau, Statistical Abstract of the United States: 2003). We approved 
19 new hospitals for participation in the demonstration program. We 
determined that each of these new hospitals would begin participating 
in the demonstration with its first cost reporting period beginning on 
or after April 1, 2011.
    Three of these 19 hospitals declined participation prior to the 
start of the cost reporting periods for which they would have begun the 
demonstration. In addition to the 7 hospitals that were selected in 
either 2004 or 2008, the new selection led to a total of 23 hospitals 
in the demonstration. During CY 2013, one additional hospital among the 
set selected in 2011 withdrew from the demonstration, similarly citing 
a relative financial advantage to returning to the customary SCH 
payment methodology, which left 22 hospitals participating in the 
demonstration.
    In addition, section 410A(c)(2) of Public Law 108-173 required 
that, in conducting the demonstration program under this section, the 
Secretary must ensure that the aggregate payments made by the Secretary 
do not exceed the amount which the Secretary would have paid if the 
demonstration program under this section was not implemented. This 
requirement is commonly referred to as ``budget neutrality.'' 
Generally, when we implement a demonstration program on a budget 
neutral basis, the demonstration program is budget neutral in its own 
terms; in other words, the aggregate payments to the participating 
hospitals do not exceed the amount that would be paid to those same 
hospitals in the absence of the demonstration program. Typically, this 
form of budget neutrality is viable when, by changing payments or 
aligning incentives to improve overall efficiency, or both, a 
demonstration program may reduce the use of some services or eliminate 
the need for others, resulting in reduced expenditures for the 
demonstration program's participants. These reduced expenditures offset 
increased payments elsewhere under the demonstration program, thus 
ensuring that the demonstration program as a whole is budget neutral or 
yields savings. However, the small scale of this demonstration program, 
in conjunction with the payment methodology, makes it extremely 
unlikely that this demonstration program could be viable under the 
usual form of budget neutrality.
    Specifically, cost-based payments to participating small rural 
hospitals are likely to increase Medicare outlays without producing any 
offsetting reduction in Medicare expenditures elsewhere. Therefore, a 
rural community hospital's participation in this demonstration program 
is unlikely to yield benefits to the participant if budget neutrality 
were to be implemented by reducing other payments for these same 
hospitals.
    In the past 11 IPPS final rules, spanning the period for which the 
demonstration program has been implemented, we have adjusted the 
national inpatient PPS rates by an amount sufficient to account for the 
added costs of this demonstration program, thus applying budget 
neutrality across the payment system as a whole rather than merely 
across the participants in the demonstration program. As we discussed 
in the FYs 2005 through 2015 IPPS final rules (69 FR 49183; 70 FR 
47462; 71 FR 48100; 72 FR 47392; 73 FR 48670; 74 FR 43922, 75 FR 50343, 
76 FR 51698, 77 FR 53449, 78 FR 50740, and 79 FR 50141, respectively), 
we believe that the language of the statutory budget neutrality 
requirements permits the agency to implement the budget neutrality 
provision in this manner.
    In general terms, in each of these previous years, we used 
available cost reports for the participating hospitals to derive an 
estimate of the additional costs attributable for the demonstration. 
Prior to FY 2013, we used finalized, or settled, cost reports, as 
available, and ``as submitted'' cost reports for hospitals for which 
finalized cost reports were not available. Annual market basket 
percentage increase amounts provided by the CMS Office of the Actuary 
reflecting the growth in the prices of inputs for inpatient hospitals 
were applied to these cost amounts. In the FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53452), we used ``as submitted'' cost reports (for cost 
reporting periods ending in CY 2010) for each hospital participating in 
the demonstration in estimating the costs of the demonstration. In 
addition, in FY 2013, we incorporated different update factors (the 
market basket percentage increase and the applicable percentage 
increase, as applicable, to several years of data as opposed to solely 
using the market basket percentage increase) for the calculation of the 
budget neutrality offset amount. Finally, in each of the previous 
years, an annual update factor provided by the CMS Office of the 
Actuary reflecting growth in the volume of inpatient operating services 
also was applied. For the budget neutrality calculations in the IPPS 
final rules for FYs 2005 through 2011, the annual volume adjustment 
applied was 2 percent; for the IPPS final rules for FYs 2012, 2013, 
2014, and 2015, it was 3 percent. For a detailed discussion of our 
budget neutrality offset calculations, we refer readers to the IPPS 
final rule applicable to the fiscal year involved.
    In general, for FYs 2005 through 2009, we based the budget 
neutrality offset estimate on the estimated cost of the demonstration 
in an earlier given year. For these periods, we derived that estimated 
cost by subtracting the estimated amount that would otherwise be paid 
without the demonstration in an earlier given year from the estimated 
amount for the same year that would be paid under the demonstration 
under the reasonable cost-based methodology authorized by section 410A 
of Public Law 108-173. The reasonable cost-based methodology authorized 
by section 410A of Public Law 108-173, as amended, is hereafter 
referred to as the ``reasonable cost methodology.'' (We ascertained the 
estimated amount that would be paid in an earlier given year under the 
reasonable cost methodology and the estimated amount that would 
otherwise be paid without the

[[Page 49586]]

demonstration in an earlier given year from ``as submitted'' cost 
reports that were submitted by the hospitals prior to the inception of 
the demonstration.) We then updated the estimated cost described above 
to the current year by multiplying it by the market basket percentage 
increases applicable to the years involved and the applicable annual 
volume adjustment. For the FY 2010 IPPS/RY 2010 LTCH PPS final rule, 
data from finalized cost reports reflecting the participating 
hospitals' experience under the demonstration were available. 
Specifically, the finalized cost reports for the first 2 years of the 
demonstration, that is, cost reports for cost reporting years beginning 
in FYs 2005 and 2006 (CYs 2004, 2005, and 2006) were available. These 
data showed that the actual costs of the demonstration for these years 
exceeded the amounts originally estimated in the respective final rules 
for the budget neutrality adjustment. In the FY 2010 IPPS/RY 2010 LTCH 
PPS final rule, we included in the budget neutrality offset amount an 
amount in addition to the estimate of the demonstration costs in that 
fiscal year. This additional amount was based on the amount that the 
costs of the demonstration for FYs 2005 and 2006 exceeded the budget 
neutrality offset amounts finalized in the IPPS rules applicable for 
those years.
    Following upon the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we 
continued to propose a methodology for calculating the budget 
neutrality offset amount to account for both the estimated 
demonstration costs in the upcoming fiscal year and an amount by which 
the actual demonstration costs corresponding to an earlier, given year 
(which would be known once finalized cost reports became available for 
that year) exceeded the budget neutrality offset amount finalized in 
the corresponding year's IPPS final rule. However, we noted in the FYs 
2011, 2012, and 2013 IPPS final rules that, because of a delay 
affecting the settlement process for cost reports for IPPS hospitals 
occurring on a larger scale than merely for the demonstration, we were 
unable to finalize this component of the budget neutrality offset 
amount accounting for the amount by which the actual demonstration 
costs in a given year exceeded the budget neutrality offset amount 
finalized in the corresponding year's IPPS final rule for cost reports 
of demonstration hospitals dating to those beginning in FY 2007.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53449 through 
53453), we adopted changes to the methodology for calculating the 
budget neutrality offset amount in an effort to further improve and 
refine the methodology. We noted that the revised methodology varied, 
in part, from the methodology finalized in the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51698 through 51705). We refer readers to the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53449 through 53453) for a detailed 
discussion of the methodology we used for FY 2013. We noted that, 
although we made changes to certain aspects of the budget neutrality 
offset amount calculation for FY 2013, several core components of the 
methodology remained unchanged. For example, we continued to include in 
the budget neutrality offset amount the estimate of the demonstration 
costs for the upcoming fiscal year and the amount by which the actual 
demonstration costs corresponding to an earlier year (which would be 
determined once we have finalized cost reports for that year) exceeded 
the budget neutrality offset amount finalized in the corresponding 
year's IPPS final rule.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50739 through 
50744), we determined the final budget neutrality offset amount to be 
applied to the FY 2014 IPPS rates to be $52,589,741. This amount was 
comprised of two distinct components: (1) The final resulting 
difference between the total estimated FY 2014 reasonable cost amount 
to be paid under the demonstration to the 22 participating hospitals 
for covered inpatient hospital services, and the total estimated amount 
that would otherwise be paid to such hospitals in FY 2014 without the 
demonstration (this amount was $46,549,861); and (2) the amount by 
which the actual costs of the demonstration for FY 2007 (as shown in 
the finalized cost reports for cost reporting periods beginning in FY 
2007 for the 9 hospitals that participated in the demonstration during 
FY 2007) exceeded the budget neutrality offset amount that was 
finalized in the FY 2007 IPPS final rule (this amount was $6,039,880).
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50141 through 
50145), we determined the final budget neutrality offset amount to be 
applied to the FY 2015 IPPS rates to be $64,566,915. This amount was 
comprised of two distinct components: (1) The final resulting 
difference between the total estimated FY 2015 reasonable cost amount 
to be paid under the demonstration to the 22 participating hospitals 
for covered inpatient hospital services, and the total estimated amount 
that would otherwise be paid to such hospitals in FY 2015 without the 
demonstration (this amount was $54,177,144); and (2) the amount by 
which the actual costs of the demonstration for FY 2008 (as shown in 
the finalized cost reports for cost reporting periods beginning in FY 
2008 for the hospitals that participated in the demonstration during FY 
2008) exceeded the budget neutrality offset amount that was finalized 
in the FY 2008 IPPS final rule (this amount was $10,389,771).
2. FY 2016 Budget Neutrality Offset Amount
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24518), in 
general, we proposed to use the established methodology used in FY 2015 
(79 FR 50141 through 50145), with some modifications as discussed 
below, for determining the budget neutrality offset amount to be 
applied to the FY 2016 national IPPS rates to reflect the costs of the 
demonstration. We proposed to use ``as submitted'' cost reports ending 
in CY 2013 as the basis for estimating the reasonable cost amounts for 
covered services under the demonstration, as well as the amounts that 
would be paid absent the demonstration. As in previous years' IPPS 
rules, we believe that because these are the most recent available cost 
reports, they will be an accurate predictor of these amounts.
    As discussed in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24518), although the proposed methodology for FY 2016 is similar to 
that for the past several rules, we note that the demonstration will 
have begun to phase out by the beginning of FY 2016, and because of 
this, we believe additional calculations would be appropriate. The 7 
``originally participating hospitals,'' that is, those hospitals that 
began the demonstration between 2005 and 2009, will have ended their 
participation in the 5-year extension period authorized by the 
Affordable Care Act prior to the start of FY 2016. Therefore, we 
proposed that the financial experience of these hospitals would not 
factor into the estimated reasonable cost amount and the estimated 
amounts that would otherwise be paid without the demonstration for FY 
2016.
    The participation period for the 15 hospitals that entered the 
demonstration in 2011 and 2012 through the solicitation that followed 
the Affordable Care Act amendments expanding the demonstration program 
and that are still participating in the demonstration will end on a 
rolling basis according to the end dates of the hospitals' cost report 
periods, respectively, from April 30, 2016, through December 31, 2016. 
As further discussed below, our proposed methodology for estimating the 
reasonable cost amounts for covered

[[Page 49587]]

inpatient hospital services under the demonstration, as well as the 
amounts that would otherwise be paid without the demonstration, would 
reflect the fact that some of the hospitals within this cohort will 
participate in the demonstration for only a fraction of the 12 months 
in FY 2016. Of the 15 hospitals that entered the demonstration in 2011 
and 2012 under the Affordable Care Act expansion, 11 hospitals are 
scheduled to end the demonstration on or before September 30, 2016; 8 
of these 11 hospitals are scheduled to end the demonstration prior to 
September 30, 2016.
    For each of these 8 hospitals, we proposed that the FY 2016 
estimated reasonable cost amount and the estimated amount that would 
otherwise be paid without the demonstration derived from the ``as 
submitted'' cost reports for cost reporting periods ending in CY 2013 
be prorated according to the ratio of the number of months between 
October 1, 2015 and the end of the hospital's cost reporting period in 
relation to the entire 12-month period. (For example, if a hospital's 
cost reporting period end date is June 30, 2016, the factor to be 
multiplied by the estimated reasonable cost amount and the estimated 
amount that would otherwise be paid without the demonstration from the 
calendar year end 2013 cost report is 0.75.) For the 7 hospitals that 
would end the demonstration on either September 30, 2016 or December 
31, 2016, estimates of these amounts would correspond to the amounts 
indicated in the calendar year end 2013 cost reports.
    We note that the 7 hospitals that started the demonstration between 
FYs 2005 and 2009 also will have ended their participation on a rolling 
basis during FY 2015. In the FY 2015 IPPS/LTCH PPS final rule, in 
accordance with the policy we finalized in the FY 2015 IPPS/LTCH PPS 
final rule, we based the estimate of the cost of the demonstration for 
FY 2015 on the financial experience as indicated on these hospitals' CY 
2012 ``as submitted'' cost reports (as discussed earlier) without 
making any adjustment to reflect the fact that hospitals would be 
ending at different points during FY 2015. We believe this methodology 
was reasonable because only 5 hospitals are ending their participation 
in the demonstration before September 30, 2015, out of the 22 hospitals 
on which the estimate of the cost of the demonstration for that year 
was based. Furthermore, as discussed previously, the methodology stated 
in this and previous rules for determining the costs of the 
demonstration in a given fiscal year entails the comparison of the 
actual costs of the demonstration as determined from finalized cost 
reports for that fiscal year (when they are available) to the estimated 
amount identified for that fiscal year in the corresponding fiscal 
year's final rule. Consistent with this policy, this second step will 
be used to reconcile any differences between the estimated and actual 
demonstration costs for FY 2015 once finalized cost reports for cost 
reporting periods beginning in FY 2015 are available. Although we 
believe that our methodology for estimating costs for FY 2015 was 
reasonable, for FY 2016, we proposed a more refined methodology to 
estimate the costs of the demonstration; that is, one that entails 
prorating, as discussed above, the estimated reasonable cost amount and 
the estimated amounts that would otherwise be paid without the 
demonstration as indicated on the ``as submitted'' cost reports for 
cost reporting periods ending in CY 2013 based on the number of months 
that each hospital will have participated in the demonstration during 
FY 2016.
    Similar to previous years, we proposed the methodology for 
calculating the budget neutrality offset amount to proceed in several 
steps, as follows:
    Step 1: For each of the 15 hospitals that will be participating in 
the demonstration during FY 2016, we proposed to identify the general 
reasonable cost amount calculated under the reasonable cost methodology 
for covered inpatient hospital services for the period of participation 
during FY 2016 based on ``as submitted'' cost reports ending in CY 
2013. As discussed above, we proposed that the basis of this estimate 
for each hospital scheduled to participate for part of FY 2016 would be 
the fraction of the number of months that the hospital will be 
participating out of the 12 months within FY 2016 multiplied by the 
reasonable cost amount for covered inpatient hospital services 
indicated on the ``as submitted'' cost report ending in CY 2013.
    Given that 8 hospitals will be participating in the demonstration 
for only part of FY 2016, we believe that such a methodology of 
prorating represents an appropriate refinement to the methodology 
established in previous rules for estimating the reasonable cost amount 
paid under the demonstration because each hospital's relevant cost 
experience, respectively, which this estimated amount reflects, would 
apply for the specific number of months for which it is participating 
in the demonstration in FY 2016. We believe that applying the relevant 
fraction, representing the number of months that the hospital will have 
participated during FY 2016 out of the 12 months in the fiscal year, 
will lead to more precise estimates.
    Because section 410A of Public Law 108-173 stipulates that swing-
bed services are to be included among the covered inpatient hospital 
services for which the demonstration payment methodology applies, we 
proposed to include the cost of these services, as reported on the ``as 
submitted'' cost reports ending in CY 2013 for the hospitals that 
provided swing-bed services in CY 2013, similarly prorated by the 
fraction of the number of months that the hospital will be 
participating out of the total number of months within FY 2016.
    Similar to the methodology applied in FY 2015, we proposed to sum 
the two above-referenced amounts to calculate the general total 
estimated FY 2013 reasonable cost amount for covered inpatient hospital 
services for all participating hospitals. Next, we proposed to multiply 
the derived sum by the FY 2014, FY 2015, and FY 2016 IPPS market basket 
percentage increases, which are formulated by the CMS Office of the 
Actuary. We proposed to use the final FY 2016 IPPS market basket 
percentage increase in this final rule. We proposed to multiply this 
product of the prorated reasonable cost amount for all 15 hospitals 
(based on CY 2013 ``as submitted'' cost reports) and the market basket 
percentage increases applicable to the years involved by a 3-percent 
annual volume adjustment for FYs 2014, 2015, and 2016. The result was 
the proposed total estimated FY 2016 reasonable cost amount for covered 
inpatient hospital services for all hospitals participating in FY 2016.
    We proposed to apply the IPPS market basket percentage increases 
applicable for FYs 2014 through 2016 to the reasonable cost amount 
derived from CY 2013 cost reports described earlier to model the 
estimated FY 2016 reasonable cost amount under the demonstration. We 
proposed to use the IPPS market basket percentage increases because we 
believe that these update factors appropriately indicate the trend of 
increase in inpatient hospital operating costs under the reasonable 
cost methodology involved. The 3-percent annual volume adjustment was 
stipulated by the CMS Office of the Actuary and is being used because 
it is intended to reflect the tendency of hospitals' inpatient 
caseloads to increase. Because inpatient caseloads for small hospitals 
may fluctuate, we proposed to incorporate into the estimate of 
demonstration costs a factor

[[Page 49588]]

to allow for a potential increase in inpatient hospital services.
    Step 2: For each of the 15 hospitals that will be participating in 
FY 2016, we proposed to identify the general estimated amount that 
would otherwise be paid in FY 2016 under applicable payment 
methodologies for covered inpatient hospital services (as indicated on 
the ``as submitted'' cost report for cost reporting periods ending in 
CY 2013) if the demonstration was not implemented. Similar to Step 1, 
we proposed that the basis of this estimate for each hospital 
participating for part of FY 2016 would be the fraction of the number 
of months that the hospital will be participating out of the 12 months 
within FY 2016 multiplied by the estimated amount that would otherwise 
be paid for these services as indicated on the ``as submitted'' cost 
report ending in CY 2013. We believe that such a methodology of 
prorating represents an appropriate refinement to the methodology 
established in previous rules for estimating the amount that otherwise 
would be paid without the demonstration because each hospital's 
relevant costs and claims experiences, respectively, which this 
estimated amount reflects, would apply for the specific number of 
months for which it is participating in the demonstration in FY 2016. 
As we stated in Step 1, we believe that applying the relevant fraction, 
representing the number of months that the hospital will have 
participated during FY 2016 out of the 12 months in the fiscal year, 
will lead to more precise estimates.
    Similarly, as in Step 1, for the hospitals that provide swing-bed 
services, we proposed to include the amount that would otherwise be 
paid for these services without the demonstration, as reported on the 
``as submitted'' cost reports ending in CY 2013 for the hospitals that 
provided swing-bed services in CY 2013. We proposed to prorate, as 
appropriate, the estimated amount that would otherwise be paid for 
these services (as indicated on the ``as submitted'' cost report for 
cost reporting periods ending in CY 2013) by the fraction of the number 
of months that the hospital will be participating in FY 2016 out of the 
total number of months within FY 2016, and include this amount in the 
total FY 2013 general estimated amount that would otherwise be paid for 
covered inpatient hospital services without the demonstration.
    Similar to the methodology applied in FY 2015, we proposed to sum 
these two amounts and multiply the derived sum by the FYs 2014, 2015, 
and 2016 IPPS applicable percentage increases. We proposed to use the 
final FY 2016 applicable percentage increase in this final rule. This 
methodology differs from Step 1, in which we proposed to apply the IPPS 
market basket percentage increases to the sum of the hospitals' general 
total FY 2013 estimated reasonable cost amount for covered inpatient 
hospital services. We believe that the IPPS applicable percentage 
increases are appropriate update factors to estimate the amounts that 
would generally otherwise be paid without the demonstration. This is 
because IPPS payments would constitute the majority of payments that 
would otherwise be made without the demonstration and the applicable 
percentage increase is the factor used under the IPPS to update the 
inpatient hospital payment rates. We proposed then to multiply this 
product by a 3-percent annual volume adjustment for FYs 2014, 2015, and 
2016. The result represents the proposed general total estimated FY 
2016 amount that would otherwise be paid for covered inpatient hospital 
services without the demonstration to the hospitals that would be 
participating in FY 2016.
    Step 3: We proposed to subtract the amount derived in Step 2 
(representing the sum of estimated amounts that generally would 
otherwise be paid to the participating hospitals for covered inpatient 
hospital services for FY 2016 if the demonstration had not been 
implemented) from the amount derived in Step 1 (representing the sum of 
the estimated reasonable cost amount that generally would be paid under 
the demonstration to all participating hospitals for covered inpatient 
hospital services for FY 2016). We proposed that the resulting 
difference would represent one component of the estimated amount for 
which an adjustment to the FY 2016 national IPPS rates would be 
calculated (as further discussed below).
    For the FY 2016 proposed rule, the resulting difference was 
$26,195,949 (80 FR 24520). This estimated amount was based on the 
specific assumptions identified regarding the data sources used, that 
is, ``as submitted'' recently available cost reports. We stated in the 
proposed rule that if updated data became available prior to the FY 
2016 IPPS/LTCH PPS final rule, we would use them to the extent 
appropriate to estimate the costs for the demonstration program in FY 
2016. Therefore, we indicated that the estimated budget neutrality 
offset amount may change in the final rule, depending on the 
availability of updated data.
    Step 4: We proposed to include in the budget neutrality offset 
amount the amount by which the actual demonstration costs corresponding 
to an earlier given year (which would be determined once we have 
finalized cost reports for that year) differs from the budget 
neutrality offset amount finalized in the corresponding year's IPPS 
final rule. (In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50145), we 
calculated the amount by which the actual costs of the demonstration in 
FY 2008 exceeded the budget neutrality offset amount that was finalized 
in the FY 2008 IPPS final rule. The corresponding differences for FYs 
2005, 2006, and 2007 were identified and included in the budget 
neutrality offset amounts in previous years' IPPS final rules.) At the 
time of development of the FY 2016 IPPS/LTCH PPS proposed rule, 
finalized cost reports for cost reporting periods beginning in FY 2009 
were available for the 10 hospitals that completed a cost report period 
starting in FY 2009. These cost reports have been issued by the MACs as 
finalized, and they have been subjected to review processes specific to 
the calculations for cost-based payment as determined by the payment 
methodology for the demonstration. We note that CMS has issued a notice 
of reopening for several of these cost reports pertaining to an issue 
that affects hospitals nationwide. However, we stated in the FY 2016 
IPPS/LTCH PPS proposed rule (80 FR 24520) that it was not yet known if, 
or to what extent, the calculations for budget neutrality under the 
demonstration would be affected in the event of a reopening of these 
cost reports. Until such a determination is made, we indicated we 
believe that it would be appropriate to use these cost reports for our 
calculations under Step 4 for FY 2016 in order to take into account the 
actual costs of the demonstration for FY 2009 as soon as possible and 
to enhance the accuracy of the budget neutrality offset calculation (80 
FR 24520).
    Therefore, in the proposed rule, we identified the difference 
between the actual cost of the demonstration as indicated on these 
finalized FY 2009 cost reports and the budget neutrality offset amount 
that was identified in the FY 2009 IPPS final rule (73 FR 48670 through 
48671), and we proposed to adjust the current year's budget neutrality 
offset amount by that difference. We stated that if there is a 
reopening that necessitates a recalculation for any of these reports, 
we would conduct another calculation once the affected cost reports are 
revised and finalized to determine the difference between the cost of 
the demonstration as reflected on the

[[Page 49589]]

revised and finalized cost reports and the amount that was included in 
the budget neutrality offset amount for FY 2009 as identified in the FY 
2009 IPPS final rule (taking into account any amount already included 
in the finalized budget neutrality offset amount in this FY 2016 IPPS/
LTCH PPS final rule that reflects an adjustment based on FY 2009 cost 
reports). We indicated that if finalized cost reports for demonstration 
hospitals that participated in FY 2010 or FY 2011 are available prior 
to this FY 2016 IPPS/LTCH PPS final rule, we intended to adjust the 
budget neutrality offset amount for FY 2016 for any amounts by which 
the finalized costs of the demonstration for the year (FY 2010 or FY 
2011) differ from the amounts included in the budget neutrality offset 
finalized in the respective year's IPPS final rule that indicate the 
estimated cost of the demonstration for that fiscal year.
    As further discussed below, we noted in the proposed rule that Step 
4 would result in the amount indicating the actual cost of the 
demonstration for FY 2009 (determined from the current finalized FY 
2009 cost reports described in Step 4) being less than the amount that 
was originally identified in the FY 2009 IPPS final rule as the 
estimated cost of the demonstration. Therefore, we proposed to include 
that component as a negative adjustment to the budget neutrality offset 
amount for FY 2016 (as explained below).
    Step 5: The total budget neutrality offset amount that we proposed 
to apply in determining the budget neutrality adjustment to the FY 2016 
IPPS rates used the sum of the amounts derived in Steps 3 and 4. Each 
of these amounts represents a discrete calculation, reflecting the two-
stage process of ensuring budget neutrality for the demonstration: (1) 
Estimating the costs of the demonstration prospectively for the 
upcoming fiscal year from historical ``as submitted'' cost reports 
(Step 3), and (2) then retrospectively reconciling the difference 
between this estimate for a prior fiscal year and the actual costs as 
recorded on finalized cost reports for the specific fiscal year (Step 
4).
    Therefore, for the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24521), we proposed to incorporate the following components into the 
calculation of the total budget neutrality offset:
    (a) The amount, derived from Step 3, representing the difference 
between the sum of the estimated reasonable cost amounts that would be 
paid under the demonstration to participating hospitals for covered 
inpatient hospital services for FY 2016 and the sum of the estimated 
amounts that would generally be paid if the demonstration had not been 
implemented. This amount would be based on ``as submitted'' cost 
reports for cost reporting periods ending in CY 2013, and would be 
prorated according to the number of months that each hospital will have 
participated in the demonstration in FY 2016 out of the 12-month fiscal 
year period. This amount was $26,195,949.
    (b) The amount, as derived from Step 4, by which the actual costs 
of the demonstration for FY 2009 (as shown in the finalized cost 
reports for the 10 hospitals that completed a cost reporting period 
beginning in FY 2009) differ from the budget neutrality offset amount 
that was finalized in the FY 2009 IPPS final rule. Analysis of this set 
of cost reports shows that the budget neutrality offset amount that was 
finalized in the FY 2009 IPPS final rule exceeds the actual cost of the 
demonstration by $8,457,452.
    For FY 2016, the total budget neutrality offset amount that we 
proposed to apply was the amount determined under item (a) of Step 5 
($26,195,949) minus the amount determined under item (b) of Step 5 
($8,457,452), or $17,738,497. We proposed to subtract the amount under 
item (b) from that under item (a) because the amount under item (b) 
represents the amount by which the budget neutrality offset finalized 
in the FY 2009 IPPS final rule exceeded the actual costs of the 
demonstration for FY 2009. Accordingly, we proposed to reduce the 
budget neutrality offset amount for FY 2016 by that amount (80 FR 
24521).
    We stated in the proposed rule that if updated data became 
available prior to this FY 2016 IPPS/LTCH PPS final rule, we would use 
them to the extent appropriate to determine the budget neutrality 
offset amount for FY 2016. Therefore, we indicated that the amount of 
the budget neutrality offset may change in this FY 2016 IPPS/LTCH PPS 
final rule based on the availability of updated data. In addition, 
similar to previous years, we proposed that if finalized cost reports 
for all of the demonstration hospitals that participated in an 
applicable year (FY 2010 or FY 2011) are available prior to the FY 2016 
IPPS/LTCH PPS final rule, we would adjust the budget neutrality offset 
amount to reflect the difference between the actual cost of the 
demonstration for the year (FY 2010 or FY 2011) and the budget 
neutrality offset amount applicable to such year as finalized in the 
respective year's final rule, as explained in Step 4. The resulting 
total would be the amount for which an adjustment to the national IPPS 
rates would be made.
    We did not receive any public comments on our proposed budget 
neutrality offset methodology, as discussed above. Therefore, we are 
finalizing the FY 2016 budget neutrality offset methodology as 
proposed, with the modifications discussed below, that will be used to 
derive the respective components that comprise the budget neutrality 
offset amount for which the adjustment to the national IPPS rates is 
calculated for FY 2016.
    Step 1: In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24521), 
we stated that if updated data became available prior to the FY 2016 
IPPS/LTCH PPS final rule, we would use them to the extent appropriate 
to determine the budget neutrality offset amount for FY 2016. We also 
stated that the budget neutrality offset amount may change in the final 
rule, based on the availability of updated data. In addition, in the FY 
2016 IPPS/LTCH PPS proposed rule (80 FR 24519 through 24520), we 
proposed to use the final FY 2016 IPPS market basket percentage and the 
final FY 2016 applicable percentage increase in our calculation of the 
demonstration costs for FY 2016. Therefore, in order to derive the 
estimate of the demonstration costs for the 15 hospitals that will be 
participating in the demonstration during FY 2016 (that is, the 
difference between the estimate of the reasonable cost amount and the 
estimated amount that would otherwise be paid without the 
demonstration), we will use the final FY 2016 IPPS market basket 
percentage and applicable percentage increase provided by the CMS 
Office of the Actuary. These update factors are specified in section 
IV.A. of the preamble of this final rule. Accordingly, with this 
modification, the resulting estimate of costs of the demonstration for 
FY 2016 for the 15 hospitals participating in the demonstration in FY 
2016 is $26,044,620, representing one component of the amount for which 
the adjustment to the national IPPS rates is calculated.
    Step 2: We are identifying the difference between the actual cost 
of the demonstration for FY 2009 as indicated in the finalized cost 
reports for hospitals that participated in FY 2009 and that had cost 
reporting periods beginning in FY 2009 (this amount is $14,332,936), 
and the budget neutrality offset amount that was identified in the FY 
2009 IPPS final rule (this amount is $22,790,388) (73 FR 48671). We are 
including that difference ($8,457,452) in the FY 2016 budget neutrality 
offset amount, as further explained below. As stated in

[[Page 49590]]

the proposed rule, if there is a reopening that necessitates a 
recalculation for any of these reports, we will conduct another 
calculation once the affected reports are revised and finalized to 
determine the difference between the costs of the demonstration as 
reflected in the revised and finalized cost reports and the amount that 
was included in the budget neutrality offset amount for FY 2009 as 
identified in the FY 2009 IPPS final rule (taking into account any 
amount already included in the finalized budget neutrality offset 
amount in the FY 2016 IPPS/LTCH PPS final rule that reflects an 
adjustment based on FY 2009 cost reports).
    Step 3: In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24520 
through 24521), we proposed that if finalized cost reports for 
demonstration hospitals that participated in FY 2010 or FY 2011 are 
available prior to the FY 2016 IPPS/LTCH PPS final rule, we would 
adjust the budget neutrality offset amount for FY 2016 to reflect the 
difference between the actual cost of the demonstration for the year 
(FY 2010 or FY 2011) and the amount included in the budget neutrality 
offset finalized in the respective year's IPPS final rule that 
indicates the estimated cost of the demonstration for that fiscal year. 
We have obtained finalized cost reports for cost reporting periods 
beginning in FY 2010 for the 9 hospitals whose cost reporting periods 
began in FY 2010, and thus are including in the budget neutrality 
offset amount for FY 2016 the difference between the actual cost of the 
demonstration in FY 2010 as indicated in these finalized cost reports, 
and the budget neutrality offset amount finalized for FY 2010 in the 
applicable IPPS final rule indicating the estimated cost of the 
demonstration for FY 2010. We discuss below several particular elements 
of the IPPS final rules for FYs 2010 and 2011 (74 FR 43922 through 
43924 and 75 FR 50344 through 50345) that are relevant to conducting 
this analysis:
    (a) The budget neutrality offset amount as set forth in the FY 2010 
IPPS final rule (74 FR 43923 through 43924) included two different 
components. First, it included the estimate of the costs of the 
demonstration for FY 2010 for the 11 hospitals that were scheduled to 
participate in the demonstration as of the date the FY 2010 IPPS final 
rule was issued (this amount was $15,081,251). Second, the amounts by 
which the actual costs of the demonstration program in FYs 2005 and 
2006, respectively, exceeded the budget neutrality offset amounts 
identified in the IPPS final rules for those years were incorporated as 
additional, discrete amounts into the budget neutrality offset amount 
for FY 2010 (we note that, because these amounts do not reflect the 
estimated demonstration costs for FY 2010, they are not included in our 
calculation under this Step 3).
    (b) Given that when the FY 2010 IPPS final rule was published, the 
demonstration was expected to end in FY 2010, the estimate of the costs 
of the demonstration for FY 2010 for the 11 hospitals that were 
scheduled to participate in FY 2010 was calculated in the FY 2010 IPPS 
final rule using a prorating methodology similar to that described 
above for the estimate for FY 2016. Thus, the fraction of the number of 
months that the hospital was scheduled to participate in the 
demonstration during FY 2010 out of the 12-month fiscal year period 
served as the basis for estimating the reasonable cost amount that 
would be paid under the demonstration and the amount that would have 
been paid without the demonstration in FY 2010.
    (c) Following upon the extension of the demonstration in 2010, as 
required by the Affordable Care Act, the FY 2011 IPPS final rule (75 FR 
50344 through 50345) incorporated into the budget neutrality offset 
amount the estimated costs of the demonstration for FY 2010 that were 
not accounted for in the FY 2010 IPPS final rule because, in that final 
rule, we calculated the cost for FY 2010 assuming that for a subset of 
hospitals the demonstration would end before the end of that fiscal 
year. (This amount was $6,488,221.)
    Therefore, the estimated costs of the demonstration for FY 2010 
(and the budget neutrality offset amount relating to these costs) were 
finalized in the FYs 2010 and 2011 IPPS final rules, as discussed 
above. Accordingly, we are summing these two amounts, specified in the 
FYs 2010 and 2011 IPPS final rules ($15,081,251 and $6,488,221 
respectively). This summed amount is $21,569,472. In this final rule, 
we are determining the difference between this amount and the actual 
costs of the demonstration in FY 2010. The actual cost of the 
demonstration in FY 2010 is determined from finalized cost reports for 
the hospitals that participated in the demonstration and that had cost 
reporting periods beginning in FY 2010; that amount is $16,817,922. 
Therefore, the estimated costs of the demonstration identified in the 
applicable final rules ($21,569,472) exceeded the actual costs of the 
demonstration ($16,817,922) by $4,751,550 for FY 2010.
    Step 4: The amounts determined respectively in Steps 1, 2, and 3, 
each represent a discrete calculation, reflecting the following two-
stage process of ensuring budget neutrality for the demonstration: (1) 
Estimating the costs of the demonstration prospectively for the 
upcoming fiscal year from historical cost reports (Step 1); and (2) 
then retrospectively reconciling the difference between this estimate 
for a prior fiscal year and the actual costs as recorded on finalized 
cost reports for the specific fiscal year (Steps 2 and 3). Therefore, 
for this FY 2016 IPPS/LTCH PPS final rule, we are incorporating the 
following components into the calculation of the total budget 
neutrality offset:
    (a) The amount, derived from Step 1, representing the difference 
between the sum of the estimated reasonable cost amounts to be paid 
under the demonstration to participating hospitals for covered 
inpatient hospital services for FY 2016 and the sum of the estimated 
amounts that would generally be paid in FY 2016 if the demonstration 
had not been implemented. This amount is based on ``as submitted'' cost 
reports for cost reporting periods ending in CY 2013, and is prorated 
according to the number of months that each hospital will have 
participated in the demonstration in FY 2016 out of the 12-month fiscal 
year period. This amount is $26,044,620.
    (b) The amount, as derived from Step 2, by which the actual costs 
of the demonstration for FY 2009 (as shown in the finalized cost 
reports for the 10 hospitals that completed a cost reporting period 
beginning in FY 2009) differ from the budget neutrality offset amount 
that was finalized in the FY 2009 IPPS final rule. Analysis of this set 
of cost reports shows that the budget neutrality offset amount that was 
finalized in the FY 2009 IPPS final rule exceeds the actual cost of the 
demonstration by $8,457,452 for FY 2009.
    (c) The amount, as derived from Step 3, by which the actual costs 
of the demonstration for FY 2010 (as shown in the finalized cost 
reports for the 9 hospitals that completed a cost reporting period 
beginning in FY 2010) differ from the amount that was finalized as the 
costs of the demonstration for FY 2010 in the FYs 2010 and 2011 IPPS 
final rules. Analysis of this set of cost reports shows that the budget 
neutrality offset amount that was finalized to account for the 
demonstration costs in FY 2010 (as set forth in the FYs 2010 and 2011 
IPPS final rules as discussed above) exceeds the actual cost of the 
demonstration for FY 2010 by $4,751,550.
    For FY 2016, the total budget neutrality offset amount that we are 
applying to the national IPPS rates is:

[[Page 49591]]

The amount determined under item (a) of Step 4 ($26,044,620) minus the 
amount determined under item (b) of Step 4 ($8,457,452) minus the 
amount determined under item (c) of Step 4 ($4,751,550). We are 
subtracting the amounts under items (b) and (c) from that under item 
(a) because the amounts under items (b) and (c) represent the amount by 
which the budget neutrality offset finalized in the applicable IPPS 
final rules (FYs 2009, 2010, and 2011) exceeded the actual costs of the 
demonstration for FYs 2009 and 2010, respectively. Accordingly, we are 
reducing the budget neutrality offset amount under (a) of Step 4 by the 
amounts in (b) and (c) of Step 4, for a total FY 2016 budget neutrality 
offset amount of $12,835,618. This is the final budget neutrality 
offset amount for which the adjustment to the national IPPS rates for 
FY 2016 is calculated. (We discuss the final payment rate adjustment 
that is required to ensure budget neutrality of the demonstration 
program for FY 2016 (the budget neutrality adjustment factor) in 
section II.A.4.f. of the Addendum to this final rule.)
    Finally, in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24521), 
we indicated that we were considering whether to propose in future 
rulemaking that the calculation of the final costs of the demonstration 
for a fiscal year reflect that some of the participating hospitals 
would otherwise have been eligible for the payment adjustment for low-
volume hospitals in that fiscal year if they had not participated in 
the demonstration. Our policy under the demonstration is that hospitals 
participating in the demonstration are not able to receive the low-
volume payment adjustment in addition to the reasonable cost-based 
payment authorized by section 410A of Public Law 108-173. We refer 
readers to Change Request 7505, dated July 22, 2011, available on the 
CMS Web site at: http://www.cms.gov. Section 1886(d)(12) of the Act 
provides for a payment adjustment to account for the higher costs per 
discharge for low-volume hospitals under the IPPS, effective FY 2005 
(69 FR 49099 through 49102). We note that sections 3125 and 10314 of 
the Affordable Care Act provided for temporary changes in the 
qualifying criteria and payment adjustment for low-volume hospitals for 
FYs 2011 and 2012, which have been extended by subsequent legislation: 
Through FY 2013, by the American Taxpayer Relief Act of 2012 (ATRA) 
(Pub. L. 112-240) (78 FR 50610 through 50613); through March 31, 2014, 
by the Pathway for SGR Reform Act (Pub L. 113-67) (79 FR 15022 through 
15025); through March 31, 2015, by the Protecting Access to Medicare 
Act of 2014 (Pub. L. 113-93) (79 FR 49998 through 50001); and most 
recently through September 30, 2017, by section 204 of the Medicare 
Access and CHIP Reauthorization Act of 2015 (Pub. L. 114-10). The 
extension under section 204 of Public Law 114-10 is discussed in 
section IV.L. of the preamble of this final rule. These temporary 
changes have increased the number of hospitals that are eligible to 
receive the low-volume hospital payment adjustment.
    To the extent a hospital would have received a low-volume hospital 
payment adjustment if it had not participated in the demonstration, we 
believe it would be reasonable to take this into account in future 
rulemaking in determining what the hospital would have otherwise been 
paid in an applicable year without the demonstration. Because this 
payment adjustment has not been factored into the estimation of 
payments that otherwise would have been paid under the demonstration, 
such a proposal would require detailed consideration of the data 
sources and methodology that would be used to determine which among the 
demonstration hospitals would have otherwise been eligible for the low-
volume payment adjustment and to estimate the amount of the adjustment. 
We invited public comments on this issue.
    We did not receive any public comments on this issue. We will 
continue to examine this issue and consider which data sources and 
methodology would be appropriate for determining which among the 
demonstration hospitals would have otherwise been eligible for the low-
volume payment adjustment and for estimating the amount of that 
adjustment. We may address this issue again in the FY 2017 IPPS/LTCH 
PPS proposed rule.
    We also intend to discuss in the FY 2017 IPPS/LTCH PPS proposed 
rule how we propose to reconcile the budget neutrality offset amounts 
identified in the IPPS final rules for FYs 2011 through 2016 with the 
actual costs of the demonstration for those years, considering the fact 
that the demonstration will end December 31, 2016.

J. Changes to MS-DRGs Subject to the Postacute Care Transfer Policy 
(Sec.  412.4)

1. Background
    Existing regulations at Sec.  412.4(a) define discharges under the 
IPPS as situations in which a patient is formally released from an 
acute care hospital or dies in the hospital. Section 412.4(b) defines 
acute care transfers, and Sec.  412.4(c) defines postacute care 
transfers. Our policy set forth in Sec.  412.4(f) provides that when a 
patient is transferred and his or her length of stay is less than the 
geometric mean length of stay for the MS-DRG to which the case is 
assigned, the transferring hospital is generally paid based on a 
graduated per diem rate for each day of stay, not to exceed the full 
MS-DRG payment that would have been made if the patient had been 
discharged without being transferred.
    The per diem rate paid to a transferring hospital is calculated by 
dividing the full MS-DRG payment by the geometric mean length of stay 
for the MS-DRG. Based on an analysis that showed that the first day of 
hospitalization is the most expensive (60 FR 45804), our policy 
generally provides for payment that is twice the per diem amount for 
the first day, with each subsequent day paid at the per diem amount up 
to the full MS-DRG payment (Sec.  412.4(f)(1)). Transfer cases also are 
eligible for outlier payments. In general, the outlier threshold for 
transfer cases, as described in Sec.  412.80(b), is equal to the fixed-
loss outlier threshold for nontransfer cases (adjusted for geographic 
variations in costs), divided by the geometric mean length of stay for 
the MS-DRG, and multiplied by the length of stay for the case, plus 1 
day.
    We established the criteria set forth in Sec.  412.4(d) for 
determining which DRGs qualify for postacute care transfer payments in 
the FY 2006 IPPS final rule (70 FR 47419 through 47420). The 
determination of whether a DRG is subject to the postacute care 
transfer policy was initially based on the Medicare Version 23.0 
GROUPER (FY 2006) and data from the FY 2004 MedPAR file. However, if a 
DRG did not exist in Version 23.0 or a DRG included in Version 23.0 is 
revised, we use the current version of the Medicare GROUPER and the 
most recent complete year of MedPAR data to determine if the DRG is 
subject to the postacute care transfer policy. Specifically, if the MS-
DRG's total number of discharges to postacute care equals or exceeds 
the 55th percentile for all MS-DRGs and the proportion of short-stay 
discharges to postacute care to total discharges in the MS-DRG exceeds 
the 55th percentile for all MS-DRGs, CMS will apply the postacute care 
transfer policy to that MS-DRG and to any other MS-DRG that shares the 
same base MS-DRG. In the preamble to the FY 2006 IPPS final rule (70 FR 
47419), we stated that we will

[[Page 49592]]

not revise the list of DRGs subject to the postacute care transfer 
policy annually unless we are making a change to a specific DRG.
    To account for MS-DRGs subject to the postacute care policy that 
exhibit exceptionally higher shares of costs very early in the hospital 
stay, Sec.  412.4(f) also includes a special payment methodology. For 
these MS-DRGs, hospitals receive 50 percent of the full MS-DRG payment, 
plus the single per diem payment, for the first day of the stay, as 
well as a per diem payment for subsequent days (up to the full MS-DRG 
payment (Sec.  412.4(f)(6)). For an MS-DRG to qualify for the special 
payment methodology, the geometric mean length of stay must be greater 
than 4 days, and the average charges of 1-day discharge cases in the 
MS-DRG must be at least 50 percent of the average charges for all cases 
within the MS-DRG. MS-DRGs that are part of an MS-DRG severity level 
group will qualify under the MS-DRG special payment methodology policy 
if any one of the MS-DRGs that share that same base MS-DRG qualifies 
(Sec.  412.4(f)(6)).
2. Changes to the Postacute Care Transfer MS-DRGs for FY 2016
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24522), we 
discussed that, based on our annual review of MS-DRGs, we had 
identified two proposed new MS-DRGs that we proposed to include on the 
list of MS-DRGs subject to the postacute care transfer policy. As we 
discussed in section II.G. of the preamble of the proposed rule (80 FR 
24349 through 24410), in response to public comments and based on our 
analysis of FY 2014 MedPAR claims data, we proposed to make changes to 
MS-DRGs, effective for FY 2016.
    As discussed in section II.G.3.b. of the preamble of the proposed 
rule (80 FR 24356 through 24361), we proposed to modify the MS-DRG 
assignment of certain cardiovascular procedures currently assigned to 
MS-DRGs 246 (Percutaneous Cardiovascular Procedures with Drug-Eluting 
Stent with MCC or 4+ Vessels/Stents), 247 (Percutaneous Cardiovascular 
Procedures with Drug-Eluting Stent without MCC), 248 (Percutaneous 
Cardiovascular Procedures with Non-Drug Eluting Stent with MCC or 4+ 
Vessels/Stents), 249 (Percutaneous Cardiovascular Procedures with Non-
Drug Eluting Stent without MCC), 250 (Percutaneous Cardiovascular 
Procedures without Coronary Artery Stent with MCC), and 251 
(Percutaneous Cardiovascular Procedures without Coronary Artery Stent 
without MCC) to improve the clinical homogeneity of these MS-DRGs and 
reflect the resource cost of specialized equipment. We proposed to 
create new MS-DRGs 273 and 274 (Percutaneous Intracardiac Procedures 
with and without MCC, respectively) and to reassign the procedures 
performed within the heart chambers using intracardiac techniques from 
their existing assignment in MS-DRGs 246 through 251 to the two 
proposed new MS-DRGs.
    To improve clinical coherence for the various cardiovascular 
procedures assigned to MS-DRGs 237 and 238 (Major Cardiovascular 
Procedures with and without MCC, respectively), as discussed in section 
II.G.3.e. of the preamble of the proposed rule (80 FR 24362 through 
24379), we also proposed to delete MS-DRGs 237 and 238 and to create 
five new proposed MS-DRGs. Proposed new MS DRGs 268 and 269 (Aortic and 
Heart Assist Procedures Except Pulsation Balloon with MCC and without 
MCC, respectively) would contain the more complex, more invasive aortic 
and heart assist procedures assigned to MS-DRGs 237 and 238. Proposed 
new MS-DRGs 270 (Other Major Cardiovascular Procedures with MCC), 271 
(Other Major Cardiovascular Procedures with CC), and 272 (Other Major 
Cardiovascular Procedures without CC/MCC) would include the less 
complex, less invasive cardiovascular procedures assigned to MS-DRGs 
237 and 238.
    In light of these proposed changes to the MS-DRGs for FY 2016, 
according to the regulations under Sec.  412.4(c), we evaluated these 
proposed MS-DRGs against the general postacute care transfer policy 
criteria using the FY 2014 MedPAR data. If an MS-DRG qualified for the 
postacute care transfer policy, we also evaluated that MS-DRG under the 
special payment methodology criteria according to regulations at Sec.  
412.4(f)(6). We continue to believe it is appropriate to reassess MS-
DRGs when proposing reassignment of procedures and/or diagnostic codes 
that would result in material changes to an MS-DRG. As a result of our 
review, we proposed to update the list of MS-DRGs that are subject to 
the postacute care transfer policy to include the proposed new MS-DRGs 
273 and 274. We determined that existing MS-DRGs 246 through 251 do not 
qualify for the postacute care transfer policy and would not meet the 
review criteria for FY 2016. Proposed new MS-DRGs 268 through 272 also 
would not qualify for postacute care transfer policy status.
    We did not receive any public comments on our proposals. Therefore, 
we are finalizing our proposals to update the list of MS-DRGs that are 
subject to the postacute care transfer policy to include new MS-DRGs 
273 and 274. We omitted data for MS-DRGs 246 through 251 from the table 
published in the proposed rule (80 FR 24522 through 24523) and stated 
they did not meet review criteria. However, because we proposed changes 
to MS-DRGs 246 through 251 due to the reassignment of procedures to new 
MS-DRGs 273 and 274, we are including data for MS-DRGs 246 through 251 
in the table in this final rule that show that MS-DRGs 246 through 251 
do not qualify for the postacute care transfer policy for FY 2016. New 
MS-DRGs 268 through 272 also do not qualify for postacute care transfer 
policy status for FY 2016. The table below lists the MS-DRGs that are 
subject to the postacute care transfer policies for FY 2016.

                             List of MS-DRGs That Are Subject to Review of Postacute Care Transfer Policy Status in FY 2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                           Percent of short-
                                                                                           Postacute care                   stay postacute    Postacute
                                                                                              transfers      Short-stay     care transfers       care
                New MS-DRG                           MS-DRG Title            Total cases        (55th      postacute care    to all cases      transfer
                                                                                             percentile:      transfers          (55th          policy
                                                                                               1,395)                         percentile:       status
                                                                                                                               7.8005%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
246.......................................  Percutaneous Cardiovascular            32,542           9,305           1,490          * 4.5787          No.
                                             Procedures with Drug-Eluting
                                             Stent with MCC or 4+ Vessels/
                                             Stents.
247.......................................  Percutaneous Cardiovascular            85,648           8,054             669          * 0.7811          No.
                                             Procedures with Drug-Eluting
                                             Stent without MCC.

[[Page 49593]]

 
248.......................................  Percutaneous Cardiovascular             9,727           3,486             455          * 4.6777          No.
                                             Procedures with Non-Drug
                                             Eluting Stent with MCC or 4+
                                             Vessels/Stents.
249.......................................  Percutaneous Cardiovascular            17,331           2,817             169          * 0.9751          No.
                                             Procedures with Non-Drug
                                             Eluting Stent without MCC.
250.......................................  Percutaneous Cardiovascular             3,720         * 1,094             183          * 4.9194          No.
                                             Procedures without Coronary
                                             Artery Stent with MCC.
251.......................................  Percutaneous Cardiovascular             6,974           * 799              51          * 0.7313          No.
                                             Procedures without Coronary
                                             Artery Stent without MCC.
268.......................................  Aortic and Heart Assist                 4,464           2,178             268          * 6.0036          No.
                                             Procedures Except Pulsation
                                             Balloon with MCC.
269.......................................  Aortic and Heart Assist                19,382           3,617               0               * 0          No.
                                             Procedures Except Pulsation
                                             Balloon without MCC.
270.......................................  Other Major Cardiovascular             15,141           5,964             719          * 4.7487          No.
                                             Procedures with MCC.
271.......................................  Other Major Cardiovascular             10,368           4,027             532          * 5.1312          No.
                                             Procedures with CC.
272.......................................  Other Major Cardiovascular              4,785           * 880              54          * 1.1285          No.
                                             Procedures without CC/MCC.
273.......................................  Percutaneous Intracardiac               6,602           2,654             646            9.7849         Yes.
                                             Procedures with MCC.
274.......................................  Percutaneous Intracardiac              15,812           2,445             140          * 0.8854     * * Yes.
                                             Procedures without MCC.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Indicates a current postacute care transfer policy criterion that the MS-DRG did not meet.
** As described in the policy at 42 CFR 412.4(d)(3)(ii)(D), MS-DRGs that share the same base MS-DRG will all qualify under the postacute care transfer
  policy if any one of the MS-DRGs that share that same base MS-DRG qualifies.

    In addition, in the FY 2016 IPPS/LTCH PPS proposed rule, we 
determined that proposed new MS-DRGs 273 and 274 also would meet the 
criteria for the special payment methodology. Therefore, we proposed 
that the two proposed new MS-DRGs would be subject to the MS-DRG 
special payment methodology, effective FY 2016.
    We did not receive any public comments on our proposal. Therefore, 
we are finalizing our proposal that new MS-DRGs 273 and 274 will be 
subject to the MS-DRG special payment methodology, effective FY 2016. 
The table below lists the MS-DRGs that are subject to the special 
payment policy for FY 2016.

                     List of MS-DRGs That Are Subject to Special Payment Policy for FY 2016
----------------------------------------------------------------------------------------------------------------
                                                                                    50 Percent of
                                                                       Average         average        Special
          New MS-DRG               MS-DRG Title    Geometric mean   charges of 1-    charges for      payment
                                                   length of stay  day discharges     all cases        policy
                                                                                    within MS-DRG      status
----------------------------------------------------------------------------------------------------------------
273...........................  Percutaneous                  6.1         $67,126         $60,588  Yes.
                                 Intracardiac
                                 Procedures with
                                 MCC.
274...........................  Percutaneous                  2.6               0               0  * Yes.
                                 Intracardiac
                                 Procedures
                                 without MCC.
----------------------------------------------------------------------------------------------------------------
* As described in the policy at 42 CFR 412.4(d)(6)(iv), MS-DRGs that share the same base MS-DRG will all qualify
  under the MS-DRG special payment policy if any one of the MS-DRGs that share that same base MS-DRG qualifies.

    The postacute care transfer status and special payment policy 
status of these MS-DRGs are reflected in Table 5 associated with this 
final rule, which is listed in section VI. of the Addendum to this 
final rule and available via the Internet on the CMS Web site.

K. Short Inpatient Hospital Stays

    We noted in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24523) 
that hospitals and physicians continue to voice their concern with 
parts of the 2-midnight rule finalized in the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50943 through 50954). We indicated that we were 
considering this feedback carefully, as well as recent MedPAC 
recommendations, and expected to include a further discussion of the 
broader set of issues related to short inpatient hospital stays, long 
outpatient stays with observation services, and the related -0.2 
percent IPPS payment adjustment in the CY 2016 hospital outpatient 
prospective payment system proposed rule. We refer readers to the 
proposal and related discussion of these issues that were included in 
the CY 2016 OPPS/ASC proposed rule that appeared in the Federal 
Register on July 8, 2015 (80 FR 39348). We will respond to public 
comments received on these issues in response to the CY 2016 OPPS/ASC 
proposed rule in the CY 2016 OPPS/ASC final rule with comment period 
(which is expected to be issued in November 2015). To be assured 
consideration, public comments must be

[[Page 49594]]

submitted in response to the CY 2016 OPPS/ASC proposed rule, and 
received no later than 5 p.m. EST on August 31, 2015. The CY 2016 OPPS/
ASC proposed rule contains further instructions on submitting public 
comments (80 FR 39200).

L. Interim Final Rule With Comment Period Implementing Legislative 
Extensions Relating to the Payment Adjustment for Low-Volume Hospitals 
and the Medicare-Dependent, Small Rural Hospital (MDH) Program

1. Recent Legislation
    The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), 
Public Law 114-10, enacted on April 16, 2015, extended the Medicare-
dependent, small rural hospital (MDH) program as well as certain 
provisions relating to payment to low-volume hospitals under the IPPS. 
Section 204 of the MACRA extended the temporary changes to the low-
volume hospital qualifying criteria and payment adjustment under the 
IPPS, originally provided for by the Affordable Care Act, for 
discharges occurring on or after April 1, 2015 through FY 2017 
(September 30, 2017). Section 205 of the MACRA extended the MDH program 
for hospital discharges occurring on or after April 1, 2015 through FY 
2017 (September 30, 2017). Due to the timing of the development of the 
FY 2016 IPPS/LTCH PPS proposed rule and the enactment of the MACRA, we 
were unable to address these legislative extensions in that proposed 
rule.
2. Payment Adjustment for Low-Volume Hospitals (Sec.  412.101)
a. Background
    Section 1886(d)(12) of the Act provides for an additional payment 
to each qualifying low-volume hospital that is paid under IPPS 
beginning in FY 2005, and the low-volume hospital payment policy is set 
forth in the regulations at 42 CFR 412.101. Sections 3125 and 10314 of 
the Affordable Care Act provided for a temporary change in the low-
volume hospital payment policy for FYs 2011 and 2012. Specifically, the 
provisions of the Affordable Care Act amended the qualifying criteria 
for low-volume hospitals to specify, for FYs 2011 and 2012, that a 
hospital qualifies as a low-volume hospital if it is more than 15 road 
miles from another subsection (d) hospital and has less than 1,600 
discharges of individuals entitled to, or enrolled for, benefits under 
Medicare Part A during the fiscal year. In addition, the statute as 
amended by the Affordable Care Act, provides that the low-volume 
hospital payment adjustment (that is, the percentage increase) is to be 
determined using a continuous linear sliding scale ranging from 25 
percent for low-volume hospitals with 200 or fewer discharges of 
individuals entitled to, or enrolled for, benefits under Medicare Part 
A in the fiscal year to 0 percent for low-volume hospitals with greater 
than 1,600 discharges of such individuals in the fiscal year. We 
revised the regulations governing the low-volume hospital policy at 
Sec.  412.101 to reflect the changes to the qualifying criteria and the 
payment adjustment for low-volume hospitals according to the provisions 
of the Affordable Care Act in the FY 2011 IPPS/LTCH PPS final rule (75 
FR 50238 through 50275 and 50414).
    The temporary changes to the low-volume hospital qualifying 
criteria and payment adjustment originally provided for by the 
Affordable Care Act have been extended by subsequent legislation as 
follows: Through FY 2013 by the American Taxpayer Relief Act of 2012 
(ATRA), Public Law 112-240; through March 31, 2014, by the Pathway for 
SGR Reform Act of 2013, Public Law 113-167; through March 31, 2015, by 
the Protecting Access to Medicare Act of 2014 (PAMA), Public Law 113-
93; and most recently through FY 2017 by section 204 of the Medicare 
Access and CHIP Reauthorization Act of 2015 (MACRA), Public Law 114-10. 
The extension provided by section 204 of the MACRA is discussed in 
greater detail in section IV.L.2.b. of the preamble of this interim 
final rule with comment period. For additional details on the 
implementation of the previous extensions, through March 31, 2015, of 
the temporary changes to the low-volume hospital qualifying criteria 
and payment adjustment originally provided for by the Affordable Care 
Act, we refer readers to the following Federal Register documents: The 
FY 2013 IPPS notice (78 FR 14689 through 14691); the FY 2014 IPPS/LTCH 
PPS final rule (78 FR 50611 through 50612); the FY 2014 IPPS interim 
final rule with comment period (79 FR 15022 through 15025); the FY 2014 
IPPS notice (79 FR 34444 through 34446); and the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 49998 through 50001).
b. Implementation of Provisions of the MACRA for FY 2015
    Section 204 of the MACRA provided for an extension of the temporary 
changes to the low-volume hospital qualifying criteria and payment 
adjustment for discharges occurring on or after April 1, 2015, through 
FY 2017 (that is, for discharges occurring on or before September 30, 
2017). We addressed the extension of the temporary changes to the low-
volume hospital payment policy for the last half of FY 2015, that is, 
for discharges occurring on or after April 1, 2015, through September 
30, 2015, in instructions issued in Change Request 9197, Transmittals 
3263 and 3281. (We note that Change Request 9197 was originally issued 
on May 22, 2015 as Transmittal 3263, and reissued on June 5, 2015 as 
Transmittal 3281 to correct a date in Attachment 3, draft Notification 
to Provider letter. All other information remained the same.) 
Generally, hospitals that were receiving the low-volume hospital 
payment adjustment for FY 2015 as of March 31, 2015 would continue to 
have low-volume hospital status for the second half of FY 2015, as long 
as the hospital continued to meet the applicable qualifying low-volume 
hospital criteria.
    In the instructions issued in Change Request 9197, for discharges 
occurring on or after April 1, 2015, through September 30, 2015, 
consistent with the existing regulations at Sec.  412.101(b)(2)(ii), we 
state that the same discharge data used for the low-volume adjustment 
for discharges occurring during the first half of FY 2015 will continue 
to be used for discharges occurring during the last half of FY 2015, as 
these data were the most recent available data at the time of the 
development of the FY 2015 payment rates. Specifically, for FY 2015 
discharges occurring on or after April 1, 2015, through September 30, 
2015, the low-volume hospital qualifying criteria and payment 
adjustment (percentage increase) is determined using FY 2013 Medicare 
discharge data from the March 2014 update of the MedPAR files. These 
discharge data can be found in Table 14 of the Addendum to the FY 2015 
IPPS/LTCH PPS final rule, which is available via the Internet on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2015-IPPS-Final-Rule-Home-Page-Items/FY2015-Final-Rule-Tables.html. We note that, consistent with past 
practice, Table 14 is a list of IPPS hospitals with fewer than 1,600 
Medicare discharges and is not a listing of the hospitals that qualify 
for the low-volume adjustment for FY 2015; it does not reflect whether 
or not the hospital meets the mileage criterion (that is, the hospital 
must also be located more than 15 road miles from any other IPPS 
hospital). In order to receive the applicable low-volume hospital 
payment adjustment (percentage increase) for FY 2015 discharges, a 
hospital must meet both

[[Page 49595]]

the discharge and mileage criteria. We discuss the conforming changes 
to the regulations at Sec.  412.101 consistent with the extension of 
the temporary changes to the low-volume hospital definition and payment 
adjustment provided by section 204 of the MACRA in section IV.L.2.c. of 
the preamble of this interim final rule with comment period.
c. Low-Volume Hospital Definition and Payment Adjustment for FY 2016
    As discussed above, under section 1886(d)(12) of the Act, as 
amended by section 204 of the MACRA, the temporary changes in the low-
volume hospital payment policy originally provided by the Affordable 
Care Act and extended through subsequent legislation, are effective 
through FY 2017. Under the prior extension, in accordance with section 
105 of PAMA, those temporary changes in the low-volume hospital payment 
policy were to be in effect for discharges on or before March 31, 2015 
only. Due to the timing of the development of the FY 2016 IPPS/LTCH PPS 
proposed rule and the enactment of the MACRA, we were unable to address 
the extension of the changes in the low-volume hospital payment policy 
for FY 2016 (or the last half of FY 2015, as discussed in section 
IV.L.2.b. of the preamble of this interim final rule with comment 
period) in that proposed rule. In this interim final rule with comment 
period, we are revising the regulations at Sec.  412.101 to conform to 
the provisions of section 204 of the MACRA.
    To implement the low-volume hospital payment adjustment for FY 2016 
consistent with provisions of the MACRA, in accordance with existing 
Sec.  412.101(b)(2)(ii) and consistent with our historical approach, we 
are updating the discharge data source used to identify qualifying low-
volume hospitals and calculate the payment adjustment (percentage 
increase). Under existing Sec.  412.101(b)(2)(ii), for the applicable 
fiscal years, a hospital's Medicare discharges from the most recently 
available MedPAR data, as determined by CMS, are used to determine if 
the hospital meets the discharge criteria to receive the low-volume 
payment adjustment in the current year. The applicable low-volume 
percentage increase, as originally provided for by the Affordable Care 
Act, is determined using a continuous linear sliding scale equation 
that results in a low-volume hospital payment adjustment ranging from 
an additional 25 percent for hospitals with 200 or fewer Medicare 
discharges to a zero percent additional payment adjustment for 
hospitals with 1,600 or more Medicare discharges. For FY 2016, 
consistent with our historical policy, qualifying low-volume hospitals 
and their payment adjustment will be determined using the most recently 
available Medicare discharge data from the March 2015 update of the FY 
2014 MedPAR file, as these data are the most recent data available. 
Table 14 listed in the Addendum of the FY 2016 IPPS/LTCH PPS final rule 
(which is available via the Internet on the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/01_overview.asp) lists the 
``subsection (d)'' hospitals with fewer than 1,600 Medicare discharges 
based on the claims data from this FY 2014 MedPAR file and their 
potential low-volume payment adjustment for FY 2016. Consistent with 
past practice, we note that this list of hospitals with fewer than 
1,600 Medicare discharges in Table 14 does not reflect whether or not 
the hospital meets the mileage criterion. Eligibility for the low-
volume hospital payment adjustment for FY 2016 also will be dependent 
upon meeting the mileage criterion specified at Sec.  
412.101(b)(2)(ii); that is, the hospital must be located more than 15 
road miles from any other IPPS hospital. In other words, eligibility 
for the low-volume hospital payment adjustment for FY 2016 also is 
dependent upon meeting (in the case of a hospital that did not qualify 
for the low-volume hospital payment adjustment in FY 2015) or 
continuing to meet (in the case of a hospital that did qualify for the 
low-volume hospital payment adjustment in FY 2015) the mileage 
criterion specified at revised Sec.  412.101(b)(2)(ii) (that is, the 
hospital is located more than 15 road miles from any other subsection 
(d) hospital).
    In order to receive a low-volume hospital payment adjustment under 
Sec.  412.101 for FY 2016, consistent with our previously established 
procedure, a hospital must notify and provide documentation to its MAC 
that it meets the discharge and distance requirements under Sec.  
412.101(b)(2)(ii), as revised. Specifically, for FY 2016, a hospital 
must make a written request for low-volume hospital status that is 
received by its MAC no later than September 1, 2015, in order for the 
applicable low-volume hospital payment adjustment to be applied to 
payments for its FY 2016 discharges occurring on or after October 1, 
2015. Under this procedure, a hospital that qualified for the low-
volume payment adjustment in FY 2015 may continue to receive a low-
volume payment adjustment for FY 2016 without reapplying if it 
continues to meet the Medicare discharge criterion established for FY 
2016 and the mileage criterion. However, the hospital must send written 
verification that is received by its MAC no later than September 1, 
2015, stating that it continues to be more than 15 miles from any other 
``subsection (d)'' hospital. This written verification could be a brief 
letter to the MAC stating that the hospital continues to meet the low-
volume hospital distance criterion as documented in a prior low-volume 
hospital status request. If a hospital's written request for low-volume 
hospital status for FY 2016 is received after September 1, 2015, and if 
the MAC determines that the hospital meets the criteria to qualify as a 
low-volume hospital, the MAC will apply the applicable low-volume 
hospital payment adjustment to determine the payment for the hospital's 
FY 2016 discharges, effective prospectively within 30 days of the date 
of its low-volume hospital status determination, consistent with past 
practice.

    (For additional details on our established process for the low-
volume hospital payment adjustment, we refer readers to the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53408) and the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 50000 through 50001).)

    In this interim final rule with comment period, we are making 
conforming changes to the existing regulations text at Sec.  412.101 to 
reflect the extension of the changes to the qualifying criteria and the 
payment adjustment methodology for low-volume hospitals through FY 2017 
(that is, through September 30, 2017) in accordance with section 204 of 
the MACRA. In general, these conforming changes consist of replacing 
the phrase ``through FY 2014, and the portion of FY 2015 before April 
1, 2015'' with ``through FY 2017'' each place it appears, and replacing 
the phrase ``the portion of FY 2015 beginning on April 1, 2015, and 
subsequent fiscal years'' with the phrase ``FY 2018 and subsequent 
fiscal years'' each place it appears. Specifically, we are revising 
paragraphs (b)(2)(i), (b)(2)(ii), (c)(1), (c)(2), and (d) of Sec.  
412.101. Under these revisions to Sec.  412.101, beginning with FY 
2018, consistent with section 1886(d)(12) of the Act, as amended, the 
low-volume hospital qualifying criteria and payment adjustment 
methodology will revert to that which was in effect prior to the 
amendments made by the Affordable Care Act and subsequent legislation 
(that is, the low-volume hospital payment adjustment policy in effect 
for FYs 2005 through 2010).

[[Page 49596]]

3. Medicare-Dependent, Small Rural Hospital (MDH) Program (Sec.  
412.108)
a. Background for MDH Program
    Section 1886(d)(5)(G) of the Act provides special payment 
protections, under the IPPS, to a Medicare-dependent, small rural 
hospital (MDH). (For additional information on the MDH program and the 
payment methodology, we refer readers to the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51683 through 51684).)
    Since the extension of the MDH program through FY 2012 provided by 
section 3124 of the Affordable Care Act, the MDH program has been 
extended by subsequent legislation as follows: First, section 606 of 
the ATRA (Pub. L. 112-240) extended the MDH program through FY 2013 
(that is, for discharges occurring before October 1, 2013). Second, 
section 1106 of the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) 
extended the MDH program through the first half of FY 2014 (that is, 
for discharges occurring before April 1, 2014). Third, section 106 of 
the PAMA (Pub. L. 113-93) extended the MDH program through the first 
half of FY 2015 (that is, for discharges occurring before April 1, 
2015). Most recently, section 205 of the MACRA (Pub. L. 114-10) 
extended the MDH program though FY 2017 (that is, for discharges 
occurring before October 1, 2017). For additional information on the 
extensions of the MDH program after FY 2012, we refer readers to the 
following Federal Register documents: The FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53404 through 53405 and 53413 through 53414); the FY 2013 
IPPS notice (78 FR 14689); the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50647 through 50649); the FY 2014 interim final rule with comment 
period (79 FR 15025 through 15027); the FY 2014 notice (79 FR 34446 
through 34449); and the FY 2015 IPPS/LTCH PPS final rule (79 FR 50022 
through 50024).
b. MACRA Provisions for Extension of the MDH Program
    Section 205 of the MACRA provided for an extension of the MDH 
program for discharges occurring on or after April 1, 2015, through FY 
2017 (that is, for discharges occurring on or before September 30, 
2017). Specifically, section 205 of the MACRA amended sections 
1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act by striking 
``April 1, 2015'' and inserting ``October 1, 2017''. Section 205 of the 
MACRA also made conforming amendments to sections 1886(b)(3)(D)(i) and 
1886(b)(3)(D)(iv) of the Act.
    In this interim final rule with comment period, we are making 
conforming changes to the regulations at Sec.  412.108(a)(1) and 
(c)(2)(iii) to reflect the extension of the MDH program provided for by 
the MACRA. Due to the timing of the development of the FY 2016 IPPS/
LTCH PPS proposed rule and the enactment of the MACRA, we were unable 
to address the extension of the MDH program for FY 2016 (or the last 
half of FY 2015) in that proposed rule. After the MACRA was enacted, we 
addressed the extension of the MDH program for the last half of FY 2015 
(that is, for discharges occurring on or after April 1, 2015, through 
September 30, 2015) in instructions issued in Change Request 9197, 
Transmittals 3263 and 3281. (We note that Change Request 9197 was 
originally issued May 22, 2015 as Transmittal 3263, and reissued June 
5, 2015 as Transmittal 3281 to correct a date in Attachment 3, draft 
Notification to Provider letter. All other information remained the 
same.)
    As explained in Change Request 9197, consistent with the previous 
extensions of the MDH program and the regulations at Sec.  412.108, 
generally, a provider that was classified as an MDH as of March 31, 
2015, was reinstated as an MDH effective April 1, 2015, with no need to 
reapply for MDH classification. However, if the MDH had classified as 
an SCH or cancelled its rural classification under Sec.  412.103(g) 
effective on or after April 1, 2015, the effective date of MDH status 
may not be retroactive to April 1, 2015. For more details regarding MDH 
status for the second half of FY 2015, we refer the reader to Change 
Request 9197.
4. Responses to Comments
    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge and 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this document, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble of that document.
5. Waiver of Notice of Proposed Rulemaking and Delay in Effective Date
    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment prior to a rule taking 
effect in accordance with section 553(b) of the Administrative 
Procedure Act (APA) and section 1871 of the Act. In addition, in 
accordance with section 553(d) of the APA and section 1871(e)(1)(B)(i) 
of the Act, we ordinarily provide a delay in the effective date of a 
substantive rule. For substantive rules that constitute major rules, in 
accordance with 5 U.S.C. 801, we ordinarily provide a 60-day delay in 
the effective date. None of the processes or effective date 
requirements apply, however, when the rule in question is interpretive, 
a general statement of policy, or a rule of agency organization, 
procedure, or practice. They also do not apply when the statute 
establishes rules to be applied, leaving no discretion or gaps for an 
agency to fill in through rulemaking. In addition, an agency may waive 
notice-and-comment rulemaking, as well as any delay in effective date, 
when the agency for good cause finds that notice and public comment on 
the rule as well the effective date delay are impracticable, 
unnecessary, or contrary to the public interest. In cases where an 
agency finds good cause, the agency must incorporate a statement of 
this finding and its reasons in the rule issued.
    Sections 204 and 205 of the MACRA require the agency to make the 
changes to the payment adjustment for low-volume hospitals and the MDH 
program set forth in sections IV.B. and C. of the preamble of this 
interim final rule with comment period, effective April 1, 2015 through 
September 30, 2017. We are conforming our regulations at Sec.  412.101 
and Sec.  412. 108 to specific statutory requirements contained in 
sections 204 and 205 of the MACRA or that directly result from those 
statutory requirements and informing the public of the procedures and 
practices the agency will follow to ensure compliance with those 
statutory provisions. To the extent that notice-and-comment rulemaking 
or a delay in effective date, or both, would otherwise apply, we 
believe that there is good cause to waive such requirements and to 
implement the requirements of section 204 and 205 of the MACRA through 
an interim final rule with comment period. Specifically, we find it 
unnecessary to undertake notice-and-comment rulemaking in this instance 
because this interim final rule with comment period sets forth the 
requirements for the extension of the temporary changes to the payment 
adjustment for low-volume hospitals and the extension of the MDH 
program as prescribed by the MACRA, as well as procedures and practices 
that directly result from those statutory requirements. As changes 
related to requirements of section 204 and 205 of the MACRA outlined in 
this interim final rule with comment period have already taken effect, 
it also would be impracticable to undertake notice-and-comment 
rulemaking.

[[Page 49597]]

    For the reasons outlined, we find good cause to waive the notice of 
proposed rulemaking for the requirements for the extension of the 
temporary changes to the payment adjustment for low-volume hospitals 
and the extension of the MDH program as prescribed by the sections 204 
and 205 of the MACRA and implement these provisions on an interim final 
basis. Even though we are waiving notice of proposed rulemaking 
requirements and are issuing these provisions on an interim basis, we 
are providing a 60-day public comment period. For these reasons, we 
also find that a waiver of any delay in effective date, if it were 
otherwise applicable, is necessary to comply with the requirements of 
section 204 and 205 of the MACRA. Therefore, we find good cause to 
waive notice-and-comment procedures as well as any delay in the 
effective dates for these MACRA requirements.
6. Collection of Information Requirements
    This interim final rule with comment period does not impose 
information collection and recordkeeping requirements. Consequently, it 
need not be reviewed by the Office of Management and Budget under the 
authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 35).
7. Impact of Legislative Extensions
a. Effects of the Payment Adjustment for Low-Volume Hospitals for FY 
2016
    Based on the latest available data, we estimate that approximately 
593 hospitals will qualify as a low-volume hospital in FY 2016. We 
project that the extension for FY 2016 of the temporary changes to the 
low-volume hospital definition and the payment adjustment methodology 
provided for by the MACRA will result in an increase in payments of 
approximately $322 million in FY 2016 as compared to payments to 
qualifying hospitals without the extension of the temporary changes to 
the low-volume hospital definition and the payment adjustment 
methodology.
b. Effects of the Extension of the MDH Program for FY 2016
    As discussed above, in this interim final rule with comment period, 
we are making conforming changes to the regulations at Sec.  
412.108(a)(1) and (c)(2)(iii) to reflect the extension of the MDH 
program provided for by the MACRA. Hospitals that qualify as MDHs 
receive the higher of operating IPPS payments made under the Federal 
standardized amount or the payments made under the Federal standardized 
amount plus 75 percent of the amount by which the hospital-specific 
rate (a hospital-specific cost-based rate) exceeds the Federal 
standardized amount. Based on the latest available data we have for 163 
MDHs, we project that 90 MDHs will receive the blended payment (that 
is, the Federal standardized amount plus 75 percent of the amount by 
which the hospital-specific rate exceeds the Federal standardized 
amount) for FY 2016. We estimate that those hospitals will experience 
an overall increase in payments of approximately $96 million as 
compared to payments they would have received had the MDH program not 
been extended for FY 2016.

V. Changes to the IPPS for Capital-Related Costs

A. Overview

    Section 1886(g) of the Act requires the Secretary to pay for the 
capital-related costs of inpatient acute hospital services in 
accordance with a prospective payment system established by the 
Secretary. Under the statute, the Secretary has broad authority in 
establishing and implementing the IPPS for acute care hospital 
inpatient capital-related costs. The IPPS for capital-related costs was 
initially implemented in the Federal fiscal year (FY) 1992 IPPS final 
rule (56 FR 43358), in which we established a 10-year transition period 
to change the payment methodology for Medicare hospital inpatient 
capital-related costs from a reasonable cost-based methodology to a 
prospective methodology (based fully on the Federal rate).
    FY 2001 was the last year of the 10-year transition period 
established to phase in the IPPS for hospital inpatient capital-related 
costs. For cost reporting periods beginning in FY 2002, capital IPPS 
payments are based solely on the Federal rate for almost all acute care 
hospitals (other than hospitals receiving certain exception payments 
and certain new hospitals). (We refer readers to the FY 2002 IPPS final 
rule (66 FR 39910 through 39914) for additional information on the 
methodology used to determine capital IPPS payments to hospitals both 
during and after the transition period.)
    The basic methodology for determining capital prospective payments 
using the Federal rate is set forth in Sec.  412.312 of the 
regulations. For the purpose of calculating capital payments for each 
discharge, the standard Federal rate is adjusted as follows:
    (Standard Federal Rate) x (DRG Weight) x (Geographic Adjustment 
Factor (GAF)) x (COLA for hospitals located in Alaska and Hawaii) x (1 
+ Capital DSH Adjustment Factor + Capital IME Adjustment Factor, if 
applicable).
    In addition, under Sec.  412.312(c), hospitals also may receive 
outlier payments under the capital IPPS for extraordinarily high-cost 
cases that qualify under the thresholds established for each fiscal 
year.

B. Additional Provisions

1. Exception Payments
    The regulations at Sec.  412.348 provide for certain exception 
payments under the capital IPPS. The regular exception payments 
provided under Sec. Sec.  412.348(b) through (e) were available only 
during the 10-year transition period. For a certain period after the 
transition period, eligible hospitals may have received additional 
payments under the special exceptions provisions at Sec.  412.348(g). 
However, FY 2012 was the final year hospitals could receive special 
exceptions payments. For additional details regarding these exceptions 
policies, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51725).
    Under Sec.  412.348(f), a hospital may request an additional 
payment if the hospital incurs unanticipated capital expenditures in 
excess of $5 million due to extraordinary circumstances beyond the 
hospital's control. Additional information on the exception payment for 
extraordinary circumstances in Sec.  412.348(f) can be found in the FY 
2005 IPPS final rule (69 FR 49185 and 49186).
2. New Hospitals
    Under the capital IPPS, Sec.  412.300(b) of the regulations defines 
a new hospital as a hospital that has operated (under previous or 
current ownership) for less than 2 years and lists examples of 
hospitals that are not considered new hospitals. In accordance with 
Sec.  412.304(c)(2), under the capital IPPS a new hospital is paid 85 
percent of its allowable Medicare inpatient hospital capital-related 
costs through its first 2 years of operation, unless the new hospital 
elects to receive full prospective payment based on 100 percent of the 
Federal rate. We refer readers to the FY 2012 IPPS/LTCH PPS final rule 
(76 FR 51725) for additional information on payments to new hospitals 
under the capital IPPS.
3. Hospitals Located in Puerto Rico
    Section 412.374 of the regulations provides for the use of a 
blended payment amount for prospective payments for capital-related 
costs to

[[Page 49598]]

hospitals located in Puerto Rico. Accordingly, under the capital IPPS, 
we compute a separate payment rate specific to Puerto Rico hospitals 
using the same methodology used to compute the national Federal rate 
for capital-related costs. In general, hospitals located in Puerto Rico 
are paid a blend of the applicable capital IPPS Puerto Rico rate and 
the applicable capital IPPS Federal rate. Capital IPPS payments to 
hospitals located in Puerto Rico are computed based on a blend of 25 
percent of the capital IPPS Puerto Rico rate and 75 percent of the 
capital IPPS Federal rate. For additional details on capital IPPS 
payments to hospitals located in Puerto Rico, we refer readers to the 
FY 2012 IPPS/LTCH PPS final rule (76 FR 51725).

C. Annual Update for FY 2016

    The annual update to the capital PPS Federal and Puerto Rico-
specific rates, as provided for at Sec.  412.308(c), for FY 2016 is 
discussed in section III. of the Addendum to this final rule.
    We note that, in section II.D. of the preamble of this final rule, 
we present a discussion of the MS-DRG documentation and coding 
adjustment, including previously finalized policies and historical 
adjustments, as well as the recoupment adjustment to the standardized 
amounts under section 1886(d) of the Act that we are finalizing for FY 
2016 in accordance with the amendments made to section 7(b)(1)(B) of 
Public Law 110-90 by section 631 of the ATRA. Because section 631 of 
the ATRA requires CMS to make a recoupment adjustment only to the 
operating IPPS standardized amount, we are not making a similar 
adjustment to the national or Puerto Rico capital IPPS rates (or to the 
operating IPPS hospital-specific rates or the Puerto Rico-specific 
standardized amount). This approach is consistent with our historical 
approach regarding the application of the recoupment adjustment 
authorized by section 7(b)(1)(B) of Public Law 110-90.

VI. Changes for Hospitals Excluded From the IPPS

A. Rate-of-Increase in Payments to Excluded Hospitals for FY 2016

    Certain hospitals excluded from a prospective payment system, 
including children's hospitals, 11 cancer hospitals, and hospitals 
located outside the 50 States, the District of Columbia, and Puerto 
Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa) receive payment for 
inpatient hospital services they furnish on the basis of reasonable 
costs, subject to a rate-of-increase ceiling. A per discharge limit 
(the target amount as defined in Sec.  413.40(a) of the regulations) is 
set for each hospital based on the hospital's own cost experience in 
its base year, and updated annually by a rate-of-increase percentage. 
For each cost reporting period, the updated target amount is multiplied 
by total Medicare discharges during that period and applies as an 
aggregate upper limit (the ceiling as defined in Sec.  413.40(a)) of 
Medicare payments for total inpatient operating costs for a hospital's 
cost reporting period. In accordance with Sec.  403.752(a) of the 
regulations, RNHCIs also are subject to the rate-of-increase limits 
established under Sec.  413.40 of the regulations discussed above.
    As explained in the FY 2006 IPPS final rule (70 FR 47396 through 
47398), beginning with FY 2006, we have used the percentage increase in 
the IPPS operating market basket to update the target amounts for 
children's hospitals, cancer hospitals, and RNHCIs. Consistent with 
Sec. Sec.  412.23(g), 413.40(a)(2)(ii)(A), and 413.40(c)(3)(viii), we 
also have used the percentage increase in the IPPS operating market 
basket to update the target amounts for short-term acute care hospitals 
located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, 
and American Samoa. As we finalized in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50156 through 50157), we will continue to use the 
percentage increase in the FY 2010-based IPPS operating market basket 
to update the target amounts for children's hospitals, cancer 
hospitals, RNHCIs, and short-term acute care hospitals located in the 
U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa for FY 2016 and subsequent fiscal years. Accordingly, for FY 
2016, the rate-of-increase percentage to be applied to the target 
amount for these children's hospitals, cancer hospitals, RNHCIs, and 
short-term acute care hospitals located in the U.S. Virgin Islands, 
Guam, the Northern Mariana Islands, and American Samoa is the FY 2016 
percentage increase in the FY 2010-based IPPS operating market basket.
    For the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24525), based on 
IHS Global Insight, Inc.'s 2015 first quarter forecast, we estimated 
that the FY 2010-based IPPS operating market basket update for FY 2016 
was 2.7 percent (that is, the estimate of the market basket rate-of-
increase). We indicated in the proposed rule that if more recent data 
became available for the final rule, we would use them to calculate the 
IPPS operating market basket update for FY 2016. For this FY 2016 IPPS/
LTCH PPS final rule, based on IHS Global Insight, Inc.'s 2015 second 
quarter forecast (which is the most recent data available), we 
calculated the FY 2010-based IPPS operating market basket update for FY 
2016 to be 2.4 percent. Therefore, the FY 2016 rate-of-increase 
percentage that is applied to the FY 2015 target amounts in order to 
calculate the FY 2016 target amounts for children's hospitals, cancer 
hospitals, RNHCIs, and short-term acute care hospitals located in the 
U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa is 2.4 percent, in accordance with the applicable regulations at 
42 CFR 413.40.

B. Report on Adjustment (Exceptions) Payments

    Section 4419(b) of Public Law 105-33 requires the Secretary to 
publish annually in the Federal Register a report describing the total 
amount of adjustment payments made to excluded hospitals and hospital 
units by reason of section 1886(b)(4) of the Act during the previous 
fiscal year.
    The process of requesting, adjusting, and awarding an adjustment 
payment is likely to occur over a 2-year period or longer. First, 
generally, an excluded hospital must file its cost report for the 
fiscal year in accordance with Sec.  413.24(f)(2) of the regulations. 
The MAC reviews the cost report and issues a notice of provider 
reimbursement (NPR). Once the hospital receives the NPR, if its 
operating costs are in excess of the ceiling, the hospital may file a 
request for an adjustment payment. After the MAC receives the 
hospital's request in accordance with applicable regulations, the MAC 
or CMS, depending on the type of adjustment requested, reviews the 
request and determines if an adjustment payment is warranted. This 
determination is sometimes not made until more than 180 days after the 
date the request is filed because there are times when the request 
applications are incomplete and additional information must be 
requested in order to have a completed request application. However, in 
an attempt to provide interested parties with data on the most recent 
adjustment payments for which we have data, we are publishing data on 
adjustment payments that were processed by the MAC or CMS during FY 
2014.
    The table below includes the most recent data available from the 
MACs and CMS on adjustment payments that were adjudicated during FY 
2014. As indicated above, the adjustments made during FY 2014 only 
pertain to cost reporting periods ending in years prior

[[Page 49599]]

to FY 2013. Total adjustment payments given to excluded hospitals 
during FY 2014 are $1,515,104. The table depicts for each class of 
hospitals, in the aggregate, the number of adjustment requests 
adjudicated, the excess operating costs over the ceiling, and the 
amount of the adjustment payments.

------------------------------------------------------------------------
                                            Excess cost     Adjustment
      Class of hospital         Number     over ceiling      payments
------------------------------------------------------------------------
Children's..................          1       $1,140,682        $829,567
Cancer......................  ..........  ..............  ..............
Religious Nonmedical Health           2          729,557         685,537
 Care Institution (RNHCI)...
                             -------------------------------------------
    Total...................          3        1,870,239       1,515,104
------------------------------------------------------------------------

C. Out of Scope Comments Relating to Critical Access Hospitals (CAHs) 
Inpatient Services

    In response to the FY 2016 IPPS/LTCH PPS proposed rule, we received 
the following public comment relating to conditions for payment for 
inpatient services furnished in critical access hospitals (CAHs), which 
we consider to be outside of the scope of the FY 2016 proposed rule.
    One commenter specifically addressed the requirement that, for 
inpatient CAH services to be payable under Medicare Part A, a physician 
must certify that the individual may reasonably be expected to be 
discharged or transferred to a hospital within 96 hours after admission 
to the CAH (section 1814(a)(8) of the Act; 42 CFR 424.15). The 
commenter stated that this certification is inconsistent with the 
congressional intent of the CAH program and should be eliminated. The 
commenter stated that CAHs provide high quality and cost-efficient 
care, which allows Medicare beneficiaries living in rural areas to 
receive this care close to home. The commenter noted that some CAHs 
have established general surgery programs, which allow senior citizens 
to receive surgical services in a nearby and familiar location. 
However, the commenter believed that the 96-hour certification 
requirement for payment of inpatient services furnished in a CAH 
prohibits CAHs from receiving payment for providing these surgical 
services.
    We acknowledge the commenter's concerns. However, because we did 
not specifically propose any changes related to the 96-hour 
certification requirement for CAH inpatient services, we consider this 
comment to be outside the scope of the proposed rule and are not 
addressing the comment at this time. We note that the 96-hour 
certification requirement was last addressed in the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 50163 through 50165).

VII. Changes to the Long-Term Care Hospital Prospective Payment System 
(LTCH PPS) for FY 2016

A. Background of the LTCH PPS

1. Legislative and Regulatory Authority
    Section 123 of the Medicare, Medicaid, and SCHIP (State Children's 
Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA) 
(Pub. L. 106-113) as amended by section 307(b) of the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(BIPA) (Pub. L. 106-554) provides for payment for both the operating 
and capital-related costs of hospital inpatient stays in long-term care 
hospitals (LTCHs) under Medicare Part A based on prospectively set 
rates. The Medicare prospective payment system (PPS) for LTCHs applies 
to hospitals that are described in section 1886(d)(1)(B)(iv) of the 
Act, effective for cost reporting periods beginning on or after October 
1, 2002.
    Section 1886(d)(1)(B)(iv)(I) of the Act defines an LTCH as a 
hospital which has an average inpatient length of stay (as determined 
by the Secretary) of greater than 25 days. Section 
1886(d)(1)(B)(iv)(II) of the Act also provides an alternative 
definition of LTCHs: specifically, a hospital that first received 
payment under section 1886(d) of the Act in 1986 and has an average 
inpatient length of stay (as determined by the Secretary of Health and 
Human Services (the Secretary)) of greater than 20 days and has 80 
percent or more of its annual Medicare inpatient discharges with a 
principal diagnosis that reflects a finding of neoplastic disease in 
the 12-month cost reporting period ending in FY 1997.
    Section 123 of the BBRA requires the PPS for LTCHs to be a ``per 
discharge'' system with a diagnosis-related group (DRG) based patient 
classification system that reflects the differences in patient 
resources and costs in LTCHs.
    Section 307(b)(1) of the BIPA, among other things, mandates that 
the Secretary shall examine, and may provide for, adjustments to 
payments under the LTCH PPS, including adjustments to DRG weights, area 
wage adjustments, geographic reclassification, outliers, updates, and a 
disproportionate share adjustment.
    In the August 30, 2002 Federal Register, we issued a final rule 
that implemented the LTCH PPS authorized under the BBRA and BIPA (67 FR 
55954). For the initial implementation of the LTCH PPS (FYs 2003 
through FY 2007), the system used information from LTCH patient records 
to classify patients into distinct long-term care diagnosis-related 
groups (LTC-DRGs) based on clinical characteristics and expected 
resource needs. Beginning in FY 2008, we adopted the Medicare severity 
long-term care diagnosis-related groups (MS-LTC-DRGs) as the patient 
classification system used under the LTCH PPS. Payments are calculated 
for each MS-LTC-DRG and provisions are made for appropriate payment 
adjustments. Payment rates under the LTCH PPS are updated annually and 
published in the Federal Register.
    The LTCH PPS replaced the reasonable cost-based payment system 
under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) 
(Pub. L. 97-248) for payments for inpatient services provided by an 
LTCH with a cost reporting period beginning on or after October 1, 
2002. (The regulations implementing the TEFRA reasonable cost-based 
payment provisions are located at 42 CFR part 413.) With the 
implementation of the PPS for acute care hospitals authorized by the 
Social Security Amendments of 1983 (Pub. L. 98-21), which added section 
1886(d) to the Act, certain hospitals, including LTCHs, were excluded 
from the PPS for acute care hospitals and were paid their reasonable 
costs for inpatient services subject to a per discharge limitation or 
target amount under the TEFRA system. For each cost reporting period, a 
hospital-specific ceiling on payments was determined by multiplying the 
hospital's updated target amount by the number of total current year 
Medicare discharges. (Generally, in this section

[[Page 49600]]

VII. of the preamble of this final rule, when we refer to discharges, 
we describe Medicare discharges.) The August 30, 2002 final rule 
further details the payment policy under the TEFRA system (67 FR 
55954).
    In the August 30, 2002 final rule, we provided for a 5-year 
transition period from payments under the TEFRA system to payments 
under the LTCH PPS. During this 5-year transition period, an LTCH's 
total payment under the PPS was based on an increasing percentage of 
the Federal rate with a corresponding decrease in the percentage of the 
LTCH PPS payment that is based on reasonable cost concepts, unless an 
LTCH made a one-time election to be paid based on 100 percent of the 
Federal rate. Beginning with LTCHs' cost reporting periods beginning on 
or after October 1, 2006, total LTCH PPS payments are based on 100 
percent of the Federal rate.
    In addition, in the August 30, 2002 final rule, we presented an in-
depth discussion of the LTCH PPS, including the patient classification 
system, relative weights, payment rates, additional payments, and the 
budget neutrality requirements mandated by section 123 of the BBRA. The 
same final rule that established regulations for the LTCH PPS under 42 
CFR part 412, subpart O, also contained LTCH provisions related to 
covered inpatient services, limitation on charges to beneficiaries, 
medical review requirements, furnishing of inpatient hospital services 
directly or under arrangement, and reporting and recordkeeping 
requirements. We refer readers to the August 30, 2002 final rule for a 
comprehensive discussion of the research and data that supported the 
establishment of the LTCH PPS (67 FR 55954).
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51733 through 51743) for a chronological summary of the main 
legislative and regulatory developments affecting the LTCH PPS through 
the annual update cycles prior to the FY 2014 rulemaking cycle. In 
addition, in this rule, we discuss the provisions of the Pathway for 
SGR Reform Act of 2013 (Pub. L. 113-67), enacted on December 26, 2013, 
and the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 113-
97), enacted on March 27, 2014, both of which affect the LTCH PPS. In 
section VII.B. of the preamble of this final rule, we discuss our 
finalized policies to implement the provisions of section 1206(a) of 
Public Law 113-67, which amended section 1886(m) of the Act by adding 
paragraph (6) and established, among other things, patient-level 
criteria for payments under the LTCH PPS for implementation beginning 
with FY 2016, and our changes to the calculation of the greater than 
25-day average length of stay criteria, consistent with the statute, in 
section VII.F. of the preamble of this final rule. In section VII.E. of 
the preamble of this final rule, as discussed in the preamble, we are 
finalizing several technical clarifications relating to our 
implementation of the new statutory moratoria on the establishment of 
new LTCHs and LTCH satellite facilities (subject to certain defined 
exceptions) and the new statutory moratorium on bed increases in 
existing LTCHs under section 1206(b)(2) of Public Law 113-67, as 
amended.
2. Criteria for Classification as an LTCH
a. Classification as an LTCH
    Under the regulations at Sec.  412.23(e)(1), to qualify to be paid 
under the LTCH PPS, a hospital must have a provider agreement with 
Medicare. Furthermore, Sec.  412.23(e)(2)(i), which implements section 
1886(d)(1)(B)(iv)(I) of the Act, requires that a hospital have an 
average Medicare inpatient length of stay of greater than 25 days to be 
paid under the LTCH PPS. Alternatively, Sec.  412.23(e)(2)(ii) states 
that, for cost reporting periods beginning on or after August 5, 1997, 
a hospital that was first excluded from the PPS in 1986 and can 
demonstrate that at least 80 percent of its annual Medicare inpatient 
discharges in the 12-month cost reporting period ending in FY 1997 have 
a principal diagnosis that reflects a finding of neoplastic disease 
must have an average inpatient length of stay for all patients, 
including both Medicare and non-Medicare inpatients, of greater than 20 
days.
b. Hospitals Excluded From the LTCH PPS
    The following hospitals are paid under special payment provisions, 
as described in Sec.  412.22(c) and, therefore, are not subject to the 
LTCH PPS rules:
     Veterans Administration hospitals.
     Hospitals that are reimbursed under State cost control 
systems approved under 42 CFR part 403.
     Hospitals that are reimbursed in accordance with 
demonstration projects authorized under section 402(a) of the Social 
Security Amendments of 1967 (Pub. L. 90-248) (42 U.S.C. 1395b-1) or 
section 222(a) of the Social Security Amendments of 1972 (Pub. L. 92-
603) (42 U.S.C. 1395b-1 (note)) (Statewide all-payer systems, subject 
to the rate-of-increase test at section 1814(b) of the Act).
     Nonparticipating hospitals furnishing emergency services 
to Medicare beneficiaries.
3. Limitation on Charges to Beneficiaries
    In the August 30, 2002 final rule, we presented an in-depth 
discussion of beneficiary liability under the LTCH PPS (67 FR 55974 
through 55975). This discussion was further clarified in the RY 2005 
LTCH PPS final rule (69 FR 25676). In keeping with those discussions, 
if the Medicare payment to the LTCH is the full LTC-DRG payment amount, 
consistent with other established hospital prospective payment systems, 
Sec.  412.507 currently provides that an LTCH may not bill a Medicare 
beneficiary for more than the deductible and coinsurance amounts as 
specified under Sec. Sec.  409.82, 409.83, and 409.87 and for items and 
services specified under Sec.  489.30(a). However, under the LTCH PPS, 
Medicare will only pay for days for which the beneficiary has coverage 
until the short-stay outlier (SSO) threshold is exceeded. If the 
Medicare payment was for a SSO case (Sec.  412.529), and that payment 
was less than the full LTC-DRG payment amount because the beneficiary 
had insufficient remaining Medicare days, the LTCH is currently also 
permitted to charge the beneficiary for services delivered on those 
uncovered days (Sec.  412.507). In light of our finalized policies to 
implement section 1206(a) of Public Law 113-67, we also need to address 
beneficiary charges in the context of the new site neutral payment 
rate. Therefore, in section VII.B.7.c. of the preamble of this final 
rule, we are finalizing proposals to amend the existing regulations 
relating to the limitation on charges to address beneficiary charges 
under the new LTCH PPS payment rate.
4. Administrative Simplification Compliance Act (ASCA) and Health 
Insurance Portability and Accountability Act (HIPAA) Compliance
    Claims submitted to Medicare must comply with both the 
Administrative Simplification Compliance Act (ASCA) (Pub. L. 107-105), 
and the Health Insurance Portability and Accountability Act of 1996 
(HIPAA) (Pub. L. 104-191). Section 3 of the ASCA requires that the 
Medicare Program deny payment under Part A or Part B for any expenses 
incurred for items or services for which a claim is submitted other 
than in an electronic form specified by the Secretary. Section 1862(h) 
of the Act (as added by section 3(a) of the ASCA) provides that the 
Secretary shall waive such denial in two

[[Page 49601]]

specific types of cases and may also waive such denial in such unusual 
cases as the Secretary finds appropriate (68 FR 48805). Section 3 of 
the ASCA operates in the context of the HIPAA regulations, which 
include, among other provisions, the transactions and code sets 
standards requirements codified under 45 CFR parts 160 and 162 
(generally known as the Transactions Rule). The Transactions Rule 
requires covered entities, including covered health care providers, to 
conduct certain electronic health care transactions according to the 
applicable transactions and code sets standards.
    The Department of Health and Human Services (HHS) has a number of 
initiatives designed to encourage and support the adoption of health 
information technology and promote nationwide health information 
exchange to improve health care. The Office of the National Coordinator 
for Health Information Technology (ONC) leads these efforts in 
collaboration with other agencies, including CMS and the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE). Through a 
number of activities, including several open government initiatives, 
HHS is promoting the adoption of electronic health record (EHR) 
technology certified under the ONC Health Information Technology (HIT) 
Certification Program developed to support secure, interoperable, 
health information exchange. The HIT Policy Committee (a Federal 
Advisory Committee) has recommended areas in which HIT certification 
under the ONC HIT Certification Program would help support providers 
that are eligible for the Medicare and Medicaid EHR Incentive Programs, 
such as long-term care and postacute care hospitals and behavioral 
health care providers. We believe that the use of certified EHRs by 
LTCHs (and other types of providers that are ineligible for the 
Medicare and Medicaid EHR Incentive Programs) can effectively and 
efficiently help providers improve internal care delivery practices, 
support the exchange of important information across care partners and 
during transitions of care, and could enable the reporting of 
electronically specified clinical quality measures (eCQMs) (as 
described elsewhere in this rule). More information on the ONC HIT 
Certification Program and efforts to develop standards applicable to 
LTCHs can be found by accessing the following Web sites and resources:
     http://www.healthit.gov/sites/default/files/generalcertexchangeguidance_final_9-9-13.pdf;
     http://www.healthit.gov/facas/FACAS/health-it-policy-committee/hitpc-workgroups/certificationadoption;
     http://wiki.siframework.org/LCC+LTPAC+Care+Transition+SWG; 
and
     http://wiki.siframework.org/Longitudinal+Coordination+of+Care.

B. Application of the Site Neutral Payment Rate (New Sec.  412.522)

1. Overview
    Section 1206 of Public Law 113-67 mandates significant changes to 
the payment system for LTCHs beginning with LTCH discharges occurring 
in cost reporting periods beginning on or after October 1, 2015. Under 
the current LTCH PPS, all discharges are paid under the LTCH PPS 
standard Federal payment rate (that is, payments calculated under the 
existing regulations, including adjustments, in Subpart O of 42 CFR 
part 412). Section 1206 requires the establishment of an alternate 
``site neutral'' payment rate for Medicare inpatient discharges from an 
LTCH that fail to meet certain statutorily defined criteria. Discharges 
that meet the criteria will continue to be paid the LTCH PPS standard 
Federal payment rate. Discharges that do not meet the statutory 
criteria will be paid at a new site neutral payment rate, as described 
below. We note that, for the remainder of this section, the phrase 
``LTCH PPS standard Federal payment rate case'' refers to an LTCH PPS 
case that meets the criteria for exclusion from the site neutral 
payment rate under section 1886(m)(6)(A)(ii) of the Act as discussed in 
section VII.B.3. of the preamble of this final rule, and the phrase 
``site neutral payment rate case'' refers to an LTCH PPS case that does 
not meet the statutory patient-level criteria and, therefore, is paid 
the applicable site neutral payment rate in accordance with section 
1886(m)(6)(A)(i) of the Act, as discussed in section VII.B.4. of the 
preamble of this final rule.
    Under section 1886(m)(6)(A) of the Act as added by section 1206(a) 
of Public Law 113-67, beginning in cost reporting periods starting on 
or after October 1, 2015, all LTCH discharges are paid according to the 
site neutral payment rate unless certain criteria are met. For LTCH 
cases that meet the criteria for exclusion, the site neutral payment 
rate does not apply and payment is made without regard to the 
provisions of section 1886(m)(6) of the Act. For cases that meet the 
criteria for exclusion from the site neutral payment rate, payment will 
continue to be based on the LTCH PPS standard Federal payment rate as 
determined in Sec.  412.523. As discussed in section VII.B.3. of the 
preamble of this final rule, under section 1886(m)(6)(A)(ii) of the 
Act, the criteria for exclusion from the site neutral payment rate are: 
(1) The discharge from the LTCH does not have a principal diagnosis 
relating to a psychiatric diagnosis or to rehabilitation; (2) admission 
to the LTCH was immediately preceded by discharge from a subsection (d) 
hospital; and (3) the immediately preceding stay in a subsection (d) 
hospital included at least 3 days in an intensive care unit (ICU) 
(referred to in this final rule as the ICU criterion) or the discharge 
from the LTCH is assigned to a MS-LTC-DRG based on the patient's 
receipt of ventilator services of at least 96 hours (referred to in 
this final rule as the ventilator criterion).
    In this section of the final rule, we discuss our proposed and 
finalized policies to implement the required changes to the LTCH PPS 
payment rate, as well as other related finalized policy provisions in 
accordance with section 1206(a) of Public Law 113-67 under the broad 
authority of section 123(a)(1) of the BBRA, as amended by section 
307(b) of the BIPA.
2. Application of the Site Neutral Payment Rate Under the LTCH PPS
    For FY 2016, in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24527), we proposed to add a new section to the regulations under 42 
CFR part 412 Subpart O (new Sec.  412.522) to establish the site 
neutral payment rate required by section 1886(m)(6) of the Act as added 
by section 1206(a)(1) of Public Law 113-67. Specifically, section 
1886(m)(6) of the Act requires that, beginning in cost reporting 
periods occurring on or after October 1, 2015, all LTCH discharges are 
paid under the site neutral payment rate unless certain criteria are 
met. All LTCH discharges that meet the criteria for exclusion from the 
site neutral payment rate will continue to be paid the LTCH PPS 
standard Federal payment rate. Accordingly, in this final rule, under 
the broad authority of section 123(a)(1) of the BBRA, as amended by 
section 307(b) of the BIPA and in accordance with section 1206(a) of 
Public Law 113-67, we are establishing policies to implement the 
statutory criteria for excluding cases from the site neutral payment 
rate under new Sec.  412.522(b), as well as establish the requirements 
for determining the site neutral payment rate for a given LTCH 
discharge under new Sec.  412.522(c) (as discussed in detail below).
    In addition, we proposed certain changes to Sec.  412.521 in light 
of our

[[Page 49602]]

implementation of the site neutral payment rate under new Sec.  412.522 
(80 FR 24527). We did not receive any public comments on our proposed 
changes to Sec.  412.521, and are adopting these proposals as final, 
without modification. Specifically, we are finalizing conforming 
changes to paragraph (a)(2) of Sec.  412.521 to include the new site 
neutral payment rate established in accordance with new Sec.  412.522 
as a method of payment under the LTCH PPS. We also are finalizing a 
technical change to the language in Sec.  412.521(a)(2) that currently 
refers to the Federal payment rate by changing the term from ``Federal 
payment rate'' to ``standard Federal payment rate'' in order to provide 
consistent terminology when referring to such a payment.
    Comment: Many commenters objected to the application of the new 
site neutral payment rate. Some commenters expressed concern that wound 
care is not categorically excluded from the application of the new site 
neutral payment rate and requested that CMS create such a categorical 
exclusion. Some of these commenters also requested that a study of the 
relative outcomes of wound care in LTCHs and other settings be 
conducted. Other commenters requested that CMS pay differently for site 
neutral payment rate cases treated in rural LTCHs, and recommended 
paying these hospitals for services performed on a cost basis similar 
to critical access hospitals (CAHs), or comparably to inpatient 
rehabilitation facilities (IRFs).
    Response: While we acknowledge that the new site neutral payment 
rate will be lower than the historic standard Federal payment rate for 
certain LTCH discharges, we do not have the authority to establish 
regulatory payment policy exceptions to pay rural LTCHs at any rate 
other than what is provided under the new dual payment rate structure 
under the LTCH PPS. Further, under the LTCH PPS we do not have the 
authority to pay anything other than the site neutral payment rate for 
any LTCH discharge that does not meet the exclusion criteria. The 
statute explicitly established the dual payment rate structure, which 
expressly provides that payment for all LTCH discharges will be 
calculated based on the new site neutral payment rate, unless the LTCH 
discharge meets the statutorily defined exclusion criteria to be paid 
based on the LTCH PPS standard Federal payment rate. Because the new 
site neutral payment rate and the exclusions apply to all LTCH 
discharges, further legislation would be required if we were to pay any 
rate other than the site neutral payment rate, or, where the exceptions 
to that rate apply, the LTCH PPS standard Federal payment rate. 
Furthermore, Congress did not provide any authority within the statute 
to delay implementation of the new dual rate LTCH PPS payment structure 
to allow time for a study to assess the relative outcomes of wound care 
in LTCHs compared to other settings. We note that CMS is currently 
engaged in many quality assessment initiatives, including in LTCHs and 
other postacute settings. In light of that ongoing work, we do not have 
current plans to conduct a separate study limited to outcomes for wound 
care cases in different settings. Further information on our quality 
initiatives is available on the CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/index.html.
    Comment: Several commenters expressed concerns that exclusion from 
the lower site neutral payment rate may be dependent upon events that 
may be outside of the LTCH's control. For example, the commenters 
stated that an LTCH would have no control over when a subsection (d) 
hospital submitted its claim for the immediately preceding subsection 
(d) hospital discharge, or whether an immediately preceding subsection 
(d) hospital discharge claim would contain a coding error such that the 
claim would fail to indicate that the patient received ICU services for 
at least 3 days. Given this lack of control, commenters expressed 
concern about our setting the LTCH PPS payment rates based in part upon 
the content of the subsection (d) hospital's claim.
    Response: We expect LTCHs and their referring hospitals to be 
closely engaged with each other in coordination of care efforts with 
regard to their referred patients. As part of these working 
relationships, we encourage each party to effectively communicate and 
exchange information to help ensure that LTCH claims are paid 
appropriately. We acknowledge the commenters' concerns. The new dual 
payment rate structure is, by statute, premised on events which 
occurred prior to the admission to the LTCH. We must look at what 
happens or did not happen in the immediately preceding subsection (d) 
hospital inpatient stay, and we believe that the IPPS claim is the best 
existing source of accurate and complete information for events which 
occurred during the IPPS hospital inpatient stay.
    In fact, we have considered the issues raised by the commenters in 
our development of the claims processing systems changes needed to 
implement the new dual rate LTCH PPS payment structure. We believe that 
these claims processing systems changes will appropriately identify all 
LTCH discharges, consistent with the statutory requirements under the 
new dual rate LTCH PPS payment structure, based on the best available 
data at the time the LTCH discharge claim is processed. Furthermore, 
our operational design of the claims processing system requirements 
under this new dual rate LTCH PPS payment structure also includes 
automatic prompts to appropriately adjust the LTCH PPS payment for an 
LTCH case if there is a change in either the subsection (d) hospital's 
claim information or the LTCH's claim information that would result in 
any change in payment (that is, from the site neutral payment rate to 
the LTCH PPS standard Federal payment rate or vice versa), consistent 
with the statutory criteria.
    However, we acknowledge that, as this is a new payment structure, 
it may not work flawlessly in each and every instance. In those rare 
instances where an obvious error occurs in the determination of the 
LTCH PPS payment amount for a particular case, LTCHs can contact their 
MACs and we will reevaluate our available information to ensure that 
the correct payment is made under current policies. We appreciate 
ongoing feedback from hospitals concerning ways to make these processes 
more efficient and cost effective, while continuing to ensure that LTCH 
claims are paid appropriately. As we gain experience under the revised 
LTCH PPS, we may modify some of our operational approaches.
    Comment: One commenter requested that CMS provide additional 
payment under the LTCH PPS for end-stage renal disease (ESRD) patients 
under the same circumstances as under the IPPS, noting that section 
1881(b) of the Act does not limit the adjustment to subsection (d) 
hospitals. The commenter believed that information included in its 
comment and an analysis previously provided to CMS supported its 
request for this additional payment amount.
    Response: Although we consider this comment to be outside the scope 
of the proposed rule, we note that we responded to the same suggestion 
in a detailed response in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50767). As discussed in that final rule, based on our analysis of FY 
2012 LTCH PPS claims data, the costs of treating ESRD patients in LTCHs 
are adequately reflected in data used to determine the MS-LTC-DRG 
relative weights for nondialysis MS-LTC-DRGs, and that the additional 
resources associated with

[[Page 49603]]

renal dialysis treatments are included in the LTCH PPS payments. 
Because the commenters failed to present any new evidence to contradict 
those conclusions, we continue to believe that the standard Federal 
payment rate accounts for these costs. Furthermore, as we discuss in 
section VII.B.7.b. of the preamble of this final rule, until we gain 
experience with the effects and implementation of the new site neutral 
payment rate and the types of cases paid at this rate, we believe that 
it is premature to consider whether additional payments are either 
necessary or appropriate. We may revisit this issue in the future, if 
data demonstrate such a change is warranted for either LTCH PPS 
standard Federal payment rate cases or site neutral payment rate cases.
    Comment: A few commenters expressed appreciation for the 
information added to the publically available FY 2014 LTCH MedPAR File 
for the proposed rule which identifies whether the LTCH discharge in 
the historical data is site neutral payment rate case or standard 
payment rate case (that is, meets the criteria for exclusion from the 
site neutral payment rate) had the new statutory patient criteria been 
in effect at the time of the discharge. Some commenters also requested 
additional information be added to the publically available IPPS & LTCH 
PPS MedPAR files, such as encrypted patient identifiers, and encrypted 
admission and discharge dates, along with the number of days the 
patient spent in the ICU in the immediately preceding IPPS hospital 
stay prior to admission to the LTCH. These commenters believe that such 
additional information is needed to determine which historical 
discharges were immediately preceded by a qualifying IPPS hospital stay 
and could be used to verify the payment rate designation (that is, site 
neural or standard) CMS has included in the publically available LTCH 
MedPAR file.
    Response: We understand that for commenters that would like to 
replicate the proposed LTCH PPS rates, factors and payment estimates 
presented in the proposed rule, it is necessary to be able to identify 
the LTCH discharges in the historical data that would be standard 
payment rate cases and the ones that would be site neutral payment rate 
cases (had the statutory criteria been in effect at the time of the 
discharge). We are also aware that currently the publically available 
IPPS and LTCH PPS MedPAR files do not contain any specified direct 
patient identifiers consistent with CMS's privacy and security 
standards and as outlined in the HIPAA Privacy Rule. (For additional 
information on CMS' privacy and security standards under the HIPAA 
Privacy Rule, we refer readers to the CMSWeb site at: http://www.cms.gov/Regulations-and-Guidance/HIPAA-Administrative-Simplification/HIPAAGenInfo/PrivacyandSecurityStandards.html, and for 
additional information on CMS' publically available Limited Data Set 
(LDS) files, we refer readers to the CMS Web site at: To http://cms.hhs.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/index.html.) It is for these reasons that, as noted by 
commenters, we added an identifier to the publically available FY 2014 
LTCH MedPAR File to identify the historical LTCH discharges in that 
file as standard payment rate cases or site neutral payment rate cases 
(had the statutory dual rate LTCH PPS payment structure been in effect 
at the time of the discharge). These are the same payment rate 
identifiers we used to develop the FY 2016 proposed rates, factors and 
payment estimates as described in the proposed rule. We believe that 
the addition of this payment rate identifier to the publically 
available LTCH MedPAR file provides sufficient information for 
commenters to replicate and evaluate the proposed rates, factors and 
payment estimates in the proposed rule. We considered adding the 
encrypted information requested by commenters to the publically 
available IPPS and LTCH PPS MedPAR files; however, we are not able to 
do so at this time because to add such specific direct patient 
identifiers would need to be done in conformance with CMS's privacy and 
security standards, including any requirements outlined in the HIPAA 
Privacy Rule. We are, however, adding the information on the number of 
days the patient spent in the ICU in an immediately preceding IPPS 
hospital stay prior to admission to the LTCH, as requested by 
commenters, since this aggregated count of days conforms with CMS's 
privacy and security standards because it does not result in the 
identification of specific beneficiaries. We believe including the 
count of days in the ICU from the immediately preceding IPPS hospital 
stay to the publically available MedPAR file will allow the public to 
adequately corroborate the indicator of the historical LTCH discharges 
as a standard payment rate case or a site neutral payment rate cases 
(had the statutory criteria been in effect at the time of the 
discharge).
3. Criteria for Exclusion From the Site Neutral Payment Rate
a. Statutory Provisions
    As stated earlier, section 1206(a) of Public Law 113-67 amended 
section 1886(m) of the Act by adding paragraph (6), which specifies 
that beginning in cost reporting periods starting on or after October 
1, 2015, all LTCH PPS discharges will be paid based on the site neutral 
payment rate unless certain criteria are met. In general, under section 
1886(m)(6)(A)(ii) of the Act, the criteria for exclusion from the site 
neutral payment rate are: The discharge from the LTCH does not have a 
principal diagnosis relating to a psychiatric diagnosis or to 
rehabilitation, the admission to the LTCH was immediately preceded by 
discharge from a subsection (d) hospital, and that immediately 
preceding stay in a subsection (d) hospital included at least 3 days in 
an intensive care unit (ICU) (referred to in this final rule as the ICU 
criterion) or the discharge from the LTCH is assigned to an MS-LTC-DRG 
based on the patient's receipt of at least 96 hours of ventilator 
services during the LTCH stay (referred to in this final rule as the 
ventilator criterion). Below we summarize our proposals and the public 
comments received, and provide our responses to those comments and the 
finalized policies to implement the statutory criteria for exclusion 
from the site neutral payment rate.
b. Implementation of the Criterion for a Principal Diagnosis Relating 
to a Psychiatric Diagnosis or to Rehabilitation
    Section 1886(m)(6)(A)(ii)(II) of the Act specifies that in order 
for an LTCH discharge to be excluded from payment under the site 
neutral payment rate, the LTCH discharge cannot have a principal 
diagnosis relating to a psychiatric diagnosis or to rehabilitation. To 
implement this criterion, under the broad authority of section 
123(a)(1) of the BBRA, as amended by section 307(b) of the BIPA and in 
accordance with section 1206(a) of Public Law 113-67, in the FY 2016 
IPPS/LTCH PPS proposed rule (80 FR 24528 through 24529), we proposed to 
identify cases with a principal diagnosis relating to a psychiatric 
diagnosis or to rehabilitation that would be assigned to specific MS-
LTC-DRG groupings that we believe indicate such principal diagnoses 
using the most recent version of the MS-LTC-DRGs. We invited public 
comments on our proposed approach and our proposed list of applicable 
MS-LTC-DRGs.

[[Page 49604]]

    Comment: Several commenters supported our proposal to identify 
discharges with a principal diagnosis relating to a psychiatric 
diagnosis or to rehabilitation using the specific MS-LTC-DRGs included 
in our proposal.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing without change our proposal to identify discharges with a 
principal diagnosis relating to a psychiatric diagnosis or to 
rehabilitation that are assigned to the specific MS-LTC-DRG groupings 
included in our proposal using the most recent version of the MS-LTC-
DRGs. (For additional information on the version of the MS-DRGs, and by 
extension the MS-LTC-DRGs, that is Version 33, we refer readers to 
section II.G. of the preamble of this final rule.)
    Accordingly, as we proposed, we are establishing that an LTCH 
discharge assigned to one of the following ICD-10 MS-LTC-DRG groupings 
in the most recent version of the MS-LTC-DRGs (that is, Version 33 for 
FY 2016) will be identified as a case with a principal diagnosis 
relating to a psychiatric diagnosis:
     MS-LTC-DRG 876 (O.R. Procedure with Principal Diagnosis of 
Mental Illness);
     MS-LTC-DRG 880 (Acute Adjustment Reaction & Psychosocial 
Dysfunction);
     MS-LTC-DRG 881 (Depressive Neuroses);
     MS-LTC-DRG 882 (Neuroses except Depressive);
     MS-LTC-DRG 883 (Disorders of Personality & Impulse 
Control);
     MS-LTC-DRG 884 (Organic Disturbances & Mental 
Retardation);
     MS-LTC-DRG 885 (Psychoses);
     MS-LTC-DRG 886 (Behavioral & Developmental Disorders);
     MS-LTC-DRG 887 (Other Mental Disorder Diagnoses);
     MS-LTC-DRG 894 (Alcohol/Drug Abuse or Dependence, Left 
Ama);
     MS-LTC-DRG 895 (Alcohol/Drug Abuse or Dependence, with 
Rehabilitation Therapy);
     MS-LTC-DRG 896 (Alcohol/Drug Abuse or Dependence, without 
Rehabilitation Therapy with MCC); and
     MS-LTC-DRG 897 (Alcohol/Drug Abuse or Dependence, without 
Rehabilitation Therapy without MCC).
    Furthermore, as we proposed, we also are establishing that an LTCH 
discharge assigned to one of the following ICD-10 MS-LTC-DRG groupings 
in the most recent version of the MS-LTC-DRGs (that is, Version 33 for 
FY 2016) will be identified as an LTCH discharge with a principal 
diagnosis relating to rehabilitation:
     MS-LTC-DRG 945 (Rehabilitation with CC/MCC); and
     MS-LTC-DRG 946 (Rehabilitation without CC/MCC).
    Under this finalized policy, as we proposed, an LTCH discharge 
grouped to any of the MS-LTC-DRG groupings listed above will not meet 
the criteria under new Sec.  412.522(b)(1)(i) to be excluded from the 
site neutral payment rate.
c. Addition of Definition of a ``Subsection (d) Hospital'' to LTCH 
Regulations
    The site neutral payment rate established in section 1206(a) of 
Public Law 113-67 includes several references to ``subsection (d) 
hospitals.'' The term ``subsection (d) hospital'' is defined in section 
1886(d)(1)(B) of the Act as a hospital that is located in 1 of the 50 
States or the District of Columbia that is not a psychiatric hospital, 
a rehabilitation hospital, a children's hospital, an LTCH, or a cancer 
hospital. However, section 1886(m)(6)(D) of the Act, as added by 
section 1206(a)(1) of Public Law 113-67, added that, for LTCH PPS 
purposes, any reference to a ``subsection (d) hospital'' is deemed to 
include a ``subsection (d) Puerto Rico hospital,'' which is defined by 
section 1886(d)(9)(A) of the Act (providing that the term ``subsection 
(d) Puerto Rico hospital'' means a hospital that is located in Puerto 
Rico and that would be considered a subsection (d) hospital (as defined 
in paragraph (d)(1)(B)) if it were located in 1 of the 50 States).
    Given these statutory provisions, as part of our implementation of 
section 1206(a) of Public Law 113-67, and under the broad authority 
under section 123(a)(1) of the BBRA, as amended by section 307(b) of 
the BIPA, in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24529), we 
proposed to add a definition of the term ``subsection (d) hospital'' to 
Sec.  412.503 (defined as any hospital qualifying as a subsection (d) 
hospital under section 1886(d)(1)(B) of the Act and any hospital 
located in Puerto Rico that would be qualified as a subsection (d) 
hospital under section 1886(d)(1)(B) of the Act if it were located in 1 
of the 50 States).
    Comment: Several commenters supported the proposed definition of a 
``subsection (d) hospital'' under the LTCH PPS.
    Response: We appreciate the commenters' support.
    After consideration of the public comments received, we are 
finalizing our proposal to add the proposed definition for a 
``subsection (d) hospital'' under Sec.  412.503, without change.
d. Interpretation of ``Immediately Preceded'' by a Subsection (d) 
Hospital Discharge
    Section 1886(m)(6)(A)(ii)(II) of the Act specifies that, in order 
to be excluded from payment under the site neutral payment rate, the 
LTCH discharge must meet the ICU criterion at section 
1866(m)(6)(A)(iii) of the Act or the ventilator criterion at section 
1866(m)(6)(A)(iv) of the Act. Both the ICU criterion and the ventilator 
criterion require that the LTCH admission be ``immediately preceded'' 
by a discharge from a subsection (d) hospital. Therefore, under the 
broad authority under section 123(a)(1) of the BBRA, as amended by 
section 307(b) of the BIPA, in the FY 2016 IPPS/LTCH PPS proposed rule 
(80 FR 24529 through 24530), we proposed to define the phrase 
``immediately preceded'' in the context of a discharge from a 
subsection (d) hospital. Specifically, we proposed that the discharged 
Medicare patient would have to depart the subsection (d) hospital and 
arrive for admission to the LTCH without having returned home or being 
admitted to any other inpatient setting, including an IRF, an IPF, or a 
SNF. As required by the statute, we proposed that any LTCH admission 
that did not qualify under this definition as having been ``immediately 
preceded'' by a discharge from a subsection (d) hospital would not be 
eligible to qualify for exclusion from the site neutral payment rate 
based on the ICU or the ventilator criterion. We proposed to codify 
these proposals at new Sec.  412.522(b)(1)(ii).
    To implement these policies, we proposed to look at the Medicare 
patient's discharge date on the subsection (d) hospital's claim, and 
compare it to the admission date on the LTCH's Medicare claim for the 
patient. In doing so, we proposed that the discharge date had to have 
occurred on the same date as the LTCH admission (or, for those rare 
circumstances where a patient is discharged from a subsection (d) 
hospital before the midnight census, but was not admitted to the LTCH 
until after the midnight census of that date of discharge, the day 
before the calendar date of the LTCH admission) if a patient's 
discharge were to qualify as being immediately preceded by a discharge 
from a subsection (d) hospital.
    We also proposed to condition eligibility for exclusion from the 
site neutral payment rate on the immediately preceding subsection (d) 
hospital's claim using of certain codes,

[[Page 49605]]

namely Patient Discharge Status Code 63, which signifies a patient was 
discharged or transferred to an LTCH, or Patient Discharge Status Code 
91, which signifies a patient was discharged/transferred to a Medicare-
certified LTCH with a planned acute care hospital inpatient 
readmission.
    In making these proposals, we also noted that our proposed 
interpretation of ``immediately preceded'' by a subsection (d) hospital 
would work in tandem with our existing interrupted stay policy at Sec.  
412.531. An interruption of stay occurs when, during the course of an 
LTCH hospitalization, the patient is discharged to an inpatient acute 
care hospital, an IRF, or a SNF for treatment for a service that is not 
available at the LTCH for a specified period followed by readmittance 
within a specified number of days to the same LTCH. In such cases, the 
care following readmission is considered a continuation of the care 
interrupted by the first discharge, so both ``halves'' of the LTCH 
episode of care are bundled, and Medicare makes a single payment based 
on the second date of discharge. As the two halves constitute a single 
episode of care, the discharge that is relevant to determining if that 
episode of care was immediately preceded by the required subsection (d) 
hospital stay is the care provided prior to the first admission to the 
LTCH. Using these concepts, any interruption of stay defined under 
Sec.  412.531 would not invalidate the immediately preceded status for 
the single episode of care--only the care provided prior to the first 
LTCH admission would be relevant.
    Comment: Some commenters generally supported CMS' proposal to 
define the phrase ``immediately preceded'' in the context of the 
subsection (d) hospital discharge occurring on the same calendar date 
as the LTCH admission (or, in certain rare circumstances, the calendar 
date before the date of the LTCH admission). However, many commenters 
expressed concern with CMS' proposal to require specific patient 
discharge status codes on the subsection (d) hospital claim. These 
commenters believed that reliance on these status codes was 
unnecessary, given the high percentage of LTCH admissions that occur on 
the same date as preceding subsection (d) hospital discharges, and 
noted that there is inconsistency in the use of discharge status codes 
by subsection (d) hospitals. The commenters also believed that it would 
be difficult and burdensome for LTCHs to get information from the 
referring hospital regarding the discharge status code. Some of these 
commenters suggested that CMS determine whether the immediately 
preceding requirement for LTCH discharges paid at the LTCH PPS standard 
Federal payment rate is met solely from information provided by the 
LTCH, such as through some form of self-attestation.
    Response: After considering the comments we received, we believe 
that reliance on the discharge and admission dates may adequately 
address our concerns and, therefore, we agree that requiring the 
presence of specific discharge status code(s) on the preceding 
subsection (d) hospital claim as a condition of qualifying for the 
exclusions from the site neutral payment rate may not be necessary at 
this time. We considered continuing to require the discharge status 
codes when LTCH admission occurred the day after the subsection (d) 
hospital discharge, which would allow additional time for intervening 
services to be received by the patient. However, the commenters' 
analyses showed that between 95 percent and 99 percent of LTCH 
admissions that occur within 1 day of a subsection (d) hospital 
discharge occur on the same date as the subsection (d) hospital 
discharge and provides adequate protection against inappropriate 
payments at this time. Based on this assessment, we are not finalizing 
the discharge status code requirements at this time. However, we may 
revisit this issue in future rulemaking, and may propose changes to 
this policy if reliance on the discharge and admission dates prove 
inadequate to determine appropriate payment. We also are taking this 
opportunity to remind all hospitals of their responsibility to bill 
accurately, including the use of the appropriate patient discharge 
status codes. Regarding the specific suggestions that we determine 
immediately preceding discharges based solely on LTCH claims, we do not 
believe such an approach would serve as adequate protection against 
misuses and inappropriate payments under the new dual rate LTCH PPS 
payment structure. We believe that claims data, which hospitals submit 
for Medicare payment, should be a reliable data source upon which to 
base a determination of whether an immediately preceding subsection (d) 
hospital stay occurred. When such reliable primary source data are 
available, we see little reason to rely on a secondary source, such as 
an LTCH conveying assurances of an immediately preceding discharge. We 
do not believe that it would be appropriate to rely upon, either 
presumptively or otherwise, an attestation or assertion about what the 
LTCH's may believe occurred in the previous subsection (d) hospital 
admission, when more reliable data are available directly from the 
subsection (d) hospital that delivered that preceding care rather than 
in our claims processing systems.
    After consideration of the public comments we received, we are 
finalizing our proposed policy that conditions eligibility for 
exclusion from the site neutral payment rate on the LTCH admission 
having been ``immediately preceded'' by a subsection (d) hospital stay, 
as evidenced by the admission to the LTCH occurring either on the date 
of or, in certain rare circumstances, the calendar date after the 
discharge from the preceding subsection (d) hospital. As discussed 
above, we are not finalizing our proposals regarding the discharge 
status codes as reported on the preceding subsection (d) hospital's 
claim. As finalized at new Sec.  412.522(b)(1)(ii), an LTCH discharge 
will be considered to have been immediately preceded by a discharge 
from a subsection (d) hospital if there was a direct admission from 
such a hospital, as evidenced by the dates of discharge and admission, 
to the LTCH.
e. Implementation of the Intensive Care Unit (ICU) Criterion
    Section 1886(m)(6)(A)(iii)(I) of the Act specifies that in order to 
be excluded from payment under the site neutral payment rate under the 
ICU criterion, the LTCH admission must be immediately preceded by a 
discharge from a subsection (d) hospital that included at least 3 days 
in an intensive care unit (ICU), as determined by the Secretary. In 
doing so, section 1886(m)(6)(A)(iii)(II) of the Act requires the use of 
data from revenue center codes 020X or 021X (or such successor codes as 
the Secretary may establish). As discussed in the proposed rule (80 FR 
24530), revenue center codes are reported on the hospital claim with 
revenue center code 020X (indicating intensive care), and the revenue 
center code 021X (indicating coronary care). Both of these revenue 
center codes are used to bill Medicare for services provided by 
``intensive care units (ICUs)'' as defined under our existing 
definition at Sec.  413.53(d) of the regulations, and, as indicated by 
the ``X'' in the revenue code descriptions both are further divided 
into subcategories that form a revenue center code series.
    As described in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24530), we proposed to implement the ICU criterion under new Sec.  
412.522(b)(2). In that section, we proposed that the claim

[[Page 49606]]

from the subsection (d) hospital that immediately preceded the 
admission to the LTCH had to indicate receipt of at least 3 days of 
care in an ICU using revenue center codes 020X or 021X (or such 
successor code as the Secretary may establish), the use of which must 
be consistent with our definition of an ICU under Sec.  413.53(d), in 
order to fulfill the ICU criterion for exclusion from the site neutral 
payment rate. We re refer readers to the FY 2016 IPPS/LTCH PPS proposed 
rule (80 FR 24530) for more information on the development of our 
proposal for the implementation of the ICU criterion under section 
1886(m)(6)(A)(iii) of the Act, including our explanation as to why we 
believe that our proposed implementation of the ICU criterion will work 
in tandem with our existing LTCH policies governing interrupted stays. 
As we noted in the context of our ``immediately preceded'' policy 
discussion above, because the two halves of an interrupted stay 
constitute a single episode of care (as shown by the issuance of a 
single payment), the discharge that is relevant to determining if that 
episode of care was immediately preceded by a subsection (d) hospital 
stay that included 3 days in the ICU is the first admission to the 
LTCH.
    Comment: Some commenters generally supported CMS' proposal to use 
the presence or absence of revenue center codes 020X or 021X on the 
preceding subsection (d) hospital claim as the basis for concluding 
that an LTCH admission was or was not preceded by a subsection (d) 
hospital stay including at least 3 days in the ICU, and, based on that 
finding, whether the LTCH admission was eligible for exclusion from the 
site neutral payment rate. Some commenters opined that CMS lacks the 
authority to exclude certain subsets of these codes. Other commenters 
disagreed with the proposal to rely on the subsection (d) hospital's 
reporting of these revenue center codes because doing so would increase 
administrative burdens imposed upon subsection (d) hospitals and LTCHs. 
Some commenters recommended that CMS adopt a policy by which compliance 
would be determined based solely on the information an LTCH submitted 
on its claims, others suggested reliance on self-attestation. Others 
suggested specific focus on, and the adoption of indicators based on, 
the severity of a patient's illness rather than relying on the use of 
revenue center codes. Some commenters also disagreed with CMS' proposal 
to define an ICU stay in a manner that required the subsection (d) 
hospital's adherence to Sec.  413.53(d), asserting that there was no 
statutory basis for such a requirement.
    Response: We appreciate the commenters' suggestions, but we 
disagree with the commenters who asserted we lacked the authority to 
exclude certain subsets of revenue center codes. The statute merely 
requires us to use data from the sequences of revenue center codes, not 
every code within the sequences. We also disagree with commenters who 
asserted that there is no legal obligation to require consistency 
between the use of revenue center codes 020X or 021X for purposes of 
determining LTCH PPS payment rates and the subsection (d) hospital's 
coding of its claim in a manner that complies with our definition of 
ICU services under Sec.  413.53(d). Hospitals must comply with all 
applicable requirements when they submit a claim for Medicare 
reimbursement. Section 1886(m)(6)(A)(iii) of the Act does not exempt 
subsection (d) hospitals from any of the requirements that govern their 
delivery of services, or their billing for those services. As such, the 
requirements governing their use of revenue center codes 020X or 021X 
on their claims are unchanged by our policy to use those codes as the 
basis for determining exclusion of an LTCH discharge from the site 
neutral payment rate. Furthermore, we also disagree with the commenters 
who suggested it would be appropriate to determine compliance with the 
ICU criterion based solely on data obtained from an LTCH's claim. 
Congress expressly mandated that the ICU criterion was to be based on 
events that occurred prior to the LTCH admission. The best source of 
data for what happened in a subsection (d) hospital is that subsection 
(d) hospital, and the information needed to determine ICU exclusion 
eligibility should be readily available on any properly billed 
subsection (d) hospital claim. Furthermore, given the potential for 
audit, and the penalties for filing false claims, we believe that 
claims data should be a reliable data source upon which to make a 
determination for exclusion from the site neutral payment rate under 
the ICU criteria. When such reliable primary source data is available, 
we see little reason to rely on a secondary source such as an LTCH 
conveying its understanding of the services received at the preceding 
subsection (d) hospital at the time of patient transfer. We do not 
believe that it would be appropriate to rely upon, presumptively or 
otherwise, assertions about the LTCH's understanding about the previous 
medical care received by the patient, when more reliable data is 
available directly from the subsection (d) hospital that provided that 
care in our claims processing systems. Again, as discussed above, we 
recognize the commenters' concerns and have in fact considered these 
issues in our development of claims processing systems changes to 
implement the new system. We believe that these systems changes will 
allow for appropriate payment for all LTCH discharges under the new 
dual rate LTCH PPS payment structure. As part of the relationship 
between referring IPPS hospitals and LTCHs, we encourage each party to 
communicate and exchange information to help ensure that LTCH claims 
are paid appropriately. While final payment of the LTCH claim will be 
based in part on information from preceding subsection (d) hospital's 
IPPS claim, we would encourage LTCHs to ask questions of the referring 
hospitals in order to ascertain all necessary information prior to 
admitting a patient. We may revisit these issues as we gain more 
experience under the revised LTCH PPS particularly if we observe an 
unusual change in hospital ICU coding behavior or if we become aware of 
data which demonstrates that use of particular codes within the 020X or 
021X are inappropriate bases for meeting the ICU criterion. We do, 
however, acknowledge that as this is a new payment structure, it may 
not work flawlessly in each and every instance. In those rare instances 
where obvious errors occur in the determination of the LTCH PPS payment 
amount for a particular case, LTCHs can contact their MACs and we will 
recheck our available information to ensure that correct payments are 
made under our policies.
    Comment: One commenter requested clarification of how the proposals 
to implement the ICU criterion would interact with CMS' existing 
interrupted stay policy.
    Response: As we previously noted in our discussion of our policies 
regarding the ``immediately preceded'' requirement, our dual rate LTCH 
PPS payment structure policies were designed to complement our existing 
interrupted stay policies. Both halves of an interrupted stay 
constitute a single episode of care (as demonstrated by the issuance of 
a single payment). As such interrupted stays have historically been 
treated as a single episode of care, we established in this final rule 
that the relevant subsection (d) hospital discharge for purposes of the 
payment of interrupted stays under the dual rate LTCH PPS payment 
structure is the first subsection (d) discharge. Under this policy, any 
time spent in a subsection

[[Page 49607]]

(d) hospital's ICU during an interrupted LTCH stay would not be 
considered in the evaluation of whether the interrupted LTCH stay met 
the ICU criterion because such care would not have immediately preceded 
the initial admission to the LTCH. Conversely, if the subsection (d) 
hospital discharge that immediately preceded the initial LTCH admission 
meets the ICU criterion (that is, includes at least 3 ICU days), and 
the period of time relating to an intervening interrupted stay does not 
include any days in a subsection (d) hospital's ICU, the ICU criterion 
would still be met because the initial LTCH admission fulfilled the ICU 
criterion for exclusion from the site neutral payment rate. However, we 
note that if the intervening stay in the acute care hospital is 10 days 
or longer (such that our interrupted stay policy would be inapplicable 
with respect to the readmission to the LTCH), in order for the second 
admission to meet the ICU criterion to be excluded from the site 
neutral payment rate, the acute care hospital stay would have to 
include at least 3 days in an ICU.
    After consideration of the public comments we received, we are 
finalizing without modification our proposal that at least 3 days of 
ICU services must be reported on the preceding subsection (d) hospital 
claim using revenue center codes 020X or 021X, and that such coding 
must be consistent with our policies governing ICU services under Sec.  
413.53(d) in order for an LTCH discharge to fulfill the requirements of 
the ICU criterion for exclusion from the site neutral payment rate. As 
we proposed, we are codifying this policy under new Sec.  
412.522(b)(2).
f. Implementation of the Ventilator Criterion
    Section 1886(m)(6)(A)(vi) of the Act specifies that in order to be 
excluded from payment under the site neutral payment rate under the 
ventilator criterion, the LTCH admission must be immediately preceded 
by a discharge from a subsection (d) hospital (as discussed in section 
VII.B.3.d. of the preamble of this final rule), and the LTCH discharge 
must be assigned to an MS-LTC-DRG based on the beneficiary's receipt of 
at least 96 hours of ventilator services in the LTCH. As we discussed 
in the preamble of the proposed rule (80 FR 24531), we proposed that, 
for the purposes of a discharge being excluded from the site neutral 
payment rate based on the ventilator criterion, the discharge must use 
the applicable procedure code to indicate that at least 96 hours of 
ventilator services were received during the LTCH stay. Currently, 
under the ICD-9-CM coding system, procedure code 96.72 (Continuous 
invasive mechanical ventilation for 96 consecutive hours or more) is 
used to describe such long-term mechanical ventilator services. As 
discussed in sections II.G.1.a. and VII.C. of the preamble of this 
final rule, the use of the ICD-10-CM/PCS coding system is required 
beginning October 1, 2015. Under the ICD-10-PCS coding system, 
procedure code 5A1955Z (Respiratory ventilation, greater than 96 
consecutive hours) describes such long-term mechanical ventilator 
services. Therefore, we further proposed, effective with discharges in 
cost reporting periods beginning on or after October 1, 2015, to 
determine if a discharge meets the requirements of the ventilator 
criterion in order to be eligible for exclusion from the site neutral 
payment rate based on whether the LTCH reports procedure code 5A1955Z 
on its hospital claim. If finalized, we proposed to place these 
requirements under new Sec.  412.522(b)(3).
    Under this proposal, any LTCH claims that do not report this 
procedure code would not meet the requirements of the ventilator 
criterion in order to be eligible for exclusion from the site neutral 
payment rate. For more detail regarding the ventilator criterion 
proposals and the alternatives that we had considered in developing 
those proposals (including the use of MS-LTC-DRGs in lieu of this 
procedure code), we refer readers to the FY 2016 IPPS/LTCH PPS proposed 
rule (80 FR 24531).
    Comment: Commenters generally supported CMS' proposal to determine 
whether an LTCH discharge meets the ventilator criterion based on the 
use of ICD-10-PCS procedure code 5A1955Z. However, some commenters 
expressed concern that CMS' proposal failed to identify and include 
cases that receive exactly 96 hours of ventilator services. The 
commenters pointed out that, under the statutory language, cases 
representing patients receiving exactly 96 hours of ventilation should 
also be paid the LTCH PPS standard Federal payment rate, assuming the 
other relevant criteria are met. Some commenters suggested that 
discharges identified by ICD-10-PCS procedure code 5A1945Z (Continuous 
invasive mechanical ventilation, 24--96 consecutive hours) and were 
grouped into one of the six long-term mechanical ventilator MS-LTC-DRGs 
(that is, MS-LTC-DRGs 003, 004, 207, 870, 927, 933) should also be used 
as an additional procedure code to identify discharges meeting the 
ventilator criterion. Doing so, they believed, would ensure proper 
payment of cases that received exactly 96 hours of ventilator services. 
Other commenters noted their belief that the statute does not require 
consecutive hours on ventilator services and, therefore, were concerned 
that the use of ICD-10-PCS procedure code 5A1945Z, which they believed 
specified more than 96 hours of continuous ventilation, would not 
recognize discharges that receive 96 hours or more of noncontinuous of 
ventilator services. For example, the commenters indicated that ICD-10-
PCS procedure code 5A1945Z may not appropriately account for hours used 
during ventilator weaning, which could discourage LTCHs from weaning 
patients off of ventilator services within less than 96 hours, if the 
number of hours provide during the weaning process would result in less 
than 96 hours of services being provided.
    Response: The commenters are correct in noting that the range of 
consecutive hours for mechanical ventilation services under the ICD-10-
PCS differs from the ICD-9-CM, with the primary difference being the 
handling of the 96th hour. The ICD-9-CM system provides three unique 
procedure codes for mechanical ventilator services based on the number 
of consecutive hours: ICD-9-CM procedure code 96.70 for an unspecified 
duration of service, ICD-9-CM procedure code 96.71 for services less 
than 96 consecutive hours in duration, and ICD-9-CM procedure code 
96.72 for services consisting of 96 consecutive hours or more. Whereas, 
the ICD-10-PCS provides three unique codes for mechanical ventilator 
services based on the number of consecutive hours with the following 
ranges: services consisting of less than 24 consecutive hours (ICD-10-
PCS procedure code 5A1935Z); services consisting of 24 to 96 
consecutive hours (ICD-10-PCS procedure code 5A1945Z); and services 
consisting of greater than 96 consecutive hours (ICD-10-PCS procedure 
code 5A1955Z). Consequently, under the ICD-10-PCS, mechanical 
ventilation services in duration of exactly 96 hours are no longer 
grouped in the same range as services consisting of more than 96 hours, 
as it is under ICD-9-CM system.
    We have considered the commenters' suggestions. While we agree that 
our proposed use of procedure code 5A1945Z would not identify a case 
where the patient received exactly 96 hours of ventilator services and 
that such a case should be paid the LTCH PPS standard Federal payment 
rate. Despite that, for the reasons noted below, we continue to believe 
that the

[[Page 49608]]

most appropriate means of implementing the ventilator criterion is by 
the use of ICD-10-PCS procedure code 5A1955Z.
    We first considered the commenters' suggested alternative method, 
but determined that it was not a viable option because, under the ICD-
10 coding guidelines and Version 33.0 MS-DRGs (discussed in section 
II.G.1.a. of this preamble) and by extension the MS-LTC-DRGs, 
discharges with ICD-10-PCS procedure code 5A1945Z (Respiratory 
ventilation, 24-96 consecutive hours), but not ICD-10-PCS procedure 
code 5A1955Z (Respiratory ventilation, greater than 96 consecutive 
hours), will not be grouped into any of the MS-LTC-DRGs suggested by 
the commenters. That is, the commenters' suggested alternative is not 
possible because the GROUPER logic for those MS-LTC-DRGs only includes 
ICD-10-PCS procedure code 5A1955Z. Furthermore, based on existing 
claims elements and ICD-10-PCS procedure codes' descriptions, we were 
unable to identify any feasible alternative procedure code to identify 
a case where the patient received exactly 96 hours of ventilator 
services, and the commenters did not provide any data or anecdotal 
evidence of such situations regularly occurring. We do not believe that 
many patients receive exactly 96 hours of ventilator services, and we 
expect that this problem will rarely, if ever, arise. However, if these 
rare instances occur, the LTCH should contact its MAC to have the 
appropriate LTCH PPS payment amount under the new dual rate LTCH PPS 
payment structure determined for any such claims (which should be coded 
with the appropriate use of ICD-10-PCS procedure code 5A1945Z).
    With respect to the commenters' concerns regarding counting the 
number of hours in which a patient is being weaned from mechanical 
ventilator services, the AHA Coding Clinic (4th Quarter 2014) instructs 
coders that, in general, ``[w]hen the patient is being weaned from 
mechanical ventilation, the entire duration of the weaning process is 
counted to determine the correct code assignment.'' We also refer 
readers to the AHA Coding Clinic guidelines, which provide guidance on 
determining the duration of mechanical ventilation services, including 
any weaning period. Therefore, we do not believe that the use of ICD-
10-PCS procedure code 5A1955Z, which specifies more than 96 hours of 
continuous ventilation, would discourage LTCHs from weaning patients of 
a ventilator in less than 96 hours because the use of this procedure 
code accounts for hours spent during the ventilator weaning process. 
However, we remind providers that providing medically unnecessary 
services to patients (including additional time on a ventilator in 
order to meet the requirements for exclusion from the site neutral 
payment rate) and reporting charges for such services constitutes 
fraudulent behavior for which we will monitor. We also intend to 
continue to monitor the appropriateness of the use of ICD-10-PCS 
procedure code 5A1955Z, and may propose alternative implementation 
measures for the ventilator criterion to the extent experience under 
the revised LTCH PPS demonstrates such action is necessary.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, and codifying our 
ventilator criterion under new Sec.  412.522.
4. Determination of the Site Neutral Payment Rate (New Sec.  
412.522(c))
a. General
    Section 1206(a) of Public Law 113-67 amended section 1886(m) of the 
Act by adding paragraph (6), which specifies that beginning with cost 
reporting periods starting on or after October 1, 2015, all LTCH PPS 
discharges are paid according to the site neutral payment rate unless 
certain criteria are met. In general, section 1886(m)(6)(B)(ii) of the 
Act specifies that the site neutral payment rate is the lower of the 
IPPS comparable per diem amount under Sec.  412.529(d)(4), including 
any applicable outlier payments under Sec.  412.525(a), or 100 percent 
of the estimated cost of the case. Consistent with the requirements of 
section 1886(m)(6)(B)(ii) of the Act, in the FY 2016 IPPS/LTCH PPS 
proposed rule (80 FR 24531 through 24532), we proposed under new Sec.  
412.522(c)(1) that the site neutral payment rate is the lower of the 
IPPS comparable per diem amount determined under Sec.  412.529(d)(4), 
including any applicable outlier payments under Sec.  412.525(a), or 
100 percent of the estimated cost of the case determined under Sec.  
412.529(d)(2).
    Under our proposed calculation of the site neutral payment rate, 
new Sec.  412.522(c)(1)(i) provides that the IPPS comparable per diem 
amount would be calculated using the same method used to determine an 
amount comparable to the hospital IPPS per diem amount as set forth in 
the existing regulations atSec.  412.529(d)(4), consistent with section 
1886(m)(6)(B)(ii)(I) of the Act. Specifically, in the RY 2007 LTCH PPS 
final rule (71 FR 27852 through 27853), we established a method to 
determine an amount payable under 42 CFR part 412, subpart O, that is 
comparable to what would otherwise be paid under the IPPS for the costs 
of inpatient operating services, which is commonly referred to as the 
``the IPPS comparable per diem amount.'' Accordingly, consistent with 
Sec.  412.529(d)(4), we proposed to determine the IPPS comparable per 
diem amount based on the standardized amount determined under Sec.  
412.64(c), adjusted by the applicable DRG weighting factors determined 
under Sec.  412.60 as specified at Sec.  412.64(g). We also proposed to 
further adjust this amount to account for differences in area wage 
levels based on geographic location using the applicable IPPS labor-
related share and the IPPS wage index for nonreclassified hospitals 
published in the annual IPPS final rule in accordance with Sec.  
412.525(c). For LTCHs located in Alaska and Hawaii, we proposed that 
this amount would be further adjusted by the applicable COLA factors 
established annually during the rulemaking cycle. We also proposed that 
the IPPS comparable per diem amount include an adjustment for treating 
a disproportionate share of low-income patients, consistent with the 
DSH payment adjustment under Sec.  412.106, as applicable, which would 
include a proxy adjustment for the uncompensated care payment (78 FR 
50765 through 50767). In the case of an LTCH that is a teaching 
hospital, we proposed that the IPPS comparable per diem amount include 
an IME payment adjustment, consistent with the formula set forth under 
Sec.  412.105, where the LTCH's IME cap (that is, the limit on the 
number of full-time equivalent (FTE) residents that may be counted for 
IME) would be imputed from the LTCH's direct GME cap as set forth at 
Sec.  413.79(c)(2). In addition, we proposed that the IPPS comparable 
per diem amount also include payment for inpatient capital-related 
costs, based on the capital IPPS Federal rate determined in accordance 
with Sec.  412.308(c), adjusted by the applicable IPPS DRG weighting 
factors. We proposed to further adjust the capital IPPS Federal rate by 
the applicable geographic adjustment factors based on the geographic 
location of the LTCH and the COLA factors for LTCHs located Alaska and 
Hawaii, consistent with Sec.  412.316. In addition, we proposed to 
include in this amount the adjustments to the capital IPPS Federal rate 
for DSH payments in accordance with Sec.  412.320 and IME payments in 
accordance with Sec.  412.322. Consistent with

[[Page 49609]]

Sec. Sec.  412.529(d)(4)(i)(B) and (C), we proposed to determine the 
IPPS comparable per diem amount by dividing the IPPS comparable payment 
amount described above by the geometric average length of stay of the 
specific MS-DRG under the IPPS and multiplying that amount by the 
covered days of the LTCH stay. We proposed that the IPPS comparable per 
diem amount is limited to the full comparable amount to what would 
otherwise be paid under the IPPS.
    Comment: Several commenters expressed concern regarding CMS' 
proposal to establish that the new LTCH site neutral payment rate as 
the lesser of the IPPS comparable per diem amount, or 100 percent of 
the estimated cost of the case. Specifically, the commenters stated 
that an LTCH would receive a lower payment than an IPPS hospital for 
treating the same type of case. Therefore, the commenters recommended 
that CMS pay LTCH site neutral payment rate cases the exact amount that 
would be paid for the case under the IPPS.
    Response: We acknowledge the commenters' concerns. However, section 
1886(m)(6)(B)(ii) of the Act specifies that the site neutral payment 
rate is the lower of the IPPS comparable per diem amount under Sec.  
412.529(d)(4), including any applicable outlier payments under Sec.  
412.525(a), or 100 percent of the estimated cost of the case. Without 
the enactment of further legislation, we do not have the authority to 
make any further adjustments to the calculation of the site neutral 
payment rate that would guarantee that payment for such a case would 
equal the exact amount paid for an identical discharge from an IPPS 
hospital.
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposal to establish that the 
site neutral payment rate is the lesser of the IPPS comparable per diem 
amount, or 100 percent of the estimated cost of the case.
    The IPPS comparable per diem amount described under Sec.  
412.529(d)(4) does not include additional payments for extraordinarily 
high-cost cases under the IPPS outlier policy. Therefore, consistent 
with the requirements of section 1886(m)(6)(B)(ii)(I) of the Act, under 
our proposed calculation of the site neutral payment rate under new 
Sec.  412.522(c)(1), we proposed to add any high-cost outlier (HCO) 
payment that may be payable under Sec.  412.525(a) to the IPPS 
comparable per diem amount. To do so, we also proposed to revise the 
HCO policy under existing Sec.  412.525(a) to provide for high-cost 
outlier payments under the site neutral payment rate calculated under 
proposed new Sec.  412.522(c) (as discussed in greater detail in 
section VII.B.7.b. of the preamble of this final rule). We proposed 
that site neutral payment rate cases receive an additional payment for 
HCOs that would be equal to 80 percent of the difference between the 
estimated cost of the case and the HCO threshold, which we are 
proposing would be the sum of site neutral payment rate for the case 
and the IPPS fixed-loss amount. We also proposed that HCO payments for 
site neutral payment rate cases would be budget neutral and proposed to 
apply a budget neutrality factor to the LTCH PPS payments for those 
cases to maintain budget neutrality. (For additional information on our 
revised HCO policy in regard to site neutral payment rate cases under 
Sec.  412.525(a), we refer readers to section VII.B.7.b. of the 
preamble of this final rule.)
    Comment: Commenters supported the proposal to under new Sec.  
412.522(c)(1) to include any applicable HCO payments specified in Sec.  
412.525(a) in the IPPS comparable per diem amount determined under 
Sec.  412.529(d)(4) when determining the payment for site neutral 
payment rate cases. We also received comments on our proposed revisions 
to the HCO policy under existing Sec.  412.525(a) to determine high-
cost outlier payments under the site neutral payment rate, which are 
discussed in section VII.B.7.b. of the preamble of this final rule.
    Response: We appreciate the commenters' support. We are adopting 
this proposal, without modification. As noted above, we refer readers 
to section VII.B.7.b. of the preamble of this final rule for a 
discussion of our revisions to the HCO policy under existing Sec.  
412.525(a) to determine high-cost outlier payments under the site 
neutral payment rate, and summations of the public comments we 
received, including our responses to those comments, and a statement of 
our final policy.
    Furthermore, under our proposed calculation of the site neutral 
payment rate, under proposed new Sec.  412.522(c)(1)(ii), we proposed 
to calculate 100 percent of the estimated cost of a case by multiplying 
the LTCH's hospital-specific cost-to-charge ratio (CCR) by the Medicare 
allowable charges for the LTCH case, which is the same method we use to 
determine SSO payments under Sec.  412.529(d)(2), as well as HCO 
payments under the HCO policy under Sec.  412.525(a). Consistent with 
our existing policies for computing CCRs under the LTCH PPS, we also 
proposed to apply the payment policies described under Sec. Sec.  
412.529(f)(4)(i) through (f)(4)(iii) to the calculation of the 
estimated cost of the case for site neutral payment rate cases under 
proposed new Sec.  412.522(c)(1)(ii). Under this proposal, the CCR 
applied at the time a claim is processed would generally be based on 
either the most recent settled cost report or the most recent 
tentatively settled cost report, whichever is from the latest cost 
reporting period. CMS may specify an alternative to the CCR otherwise 
applicable if we believe that the CCR being applied is inaccurate, in 
accordance with section 150.24 of Chapter 3 of the Medicare Claims 
Processing Manual (Pub. 100-4), or an LTCH may request an alternate 
(higher or lower) CCR based on its presentation of substantial evidence 
in support of that alternate. The CMS Regional Office must approve the 
request, and the MAC notifies the LTCH whenever a change is made to its 
CCR. The applicable MAC may also use the statewide average CCR that is 
established annually by CMS if it is unable to determine an accurate 
CCR for an LTCH under one of the circumstances specified at existing 
Sec.  412.529(f)(4)(iii) (that is, in general, for a new LTCH, when the 
LTCH's CCR exceeds 3 standard deviations from the corresponding 
national geometric mean CCR, and for an LTCH for which data to 
calculate a CCR are otherwise not available). These same CCR policies 
also are applicable under the LTCH PPS HCO policy (Sec. Sec.  
412.525(a)(4)(iv)(B) and (a)(4)(iv)(C)).
    We did not receive any public comments on our proposal to calculate 
100 percent of the estimated cost of a site neutral payment rate case 
by multiplying the LTCH's hospital-specific CCR by the Medicare 
allowable charges for the LTCH case, and to codify this policy under 
new Sec.  412.522(c)(1)(ii). Therefore, we are adopting that proposal, 
without modification.
    In the FY 2016 IPPS/LTCH PPS (80 FR 24532), we proposed to include 
a reconciliation adjustment to site neutral payment rate cases. 
Currently, under the LTCH PPS, payments for HCO and SSO cases may be 
subject to reconciliation at cost report settlement under Sec.  
412.525(a)(4)(iv)(D) and Sec.  412.529(f)(4)(iv), respectively. Under 
these policies, reconciliation is based on the CCR calculated using the 
CCR computed from the settled cost report that coincides with the 
discharge. Under our existing criteria, reconciliation occurs in 
instances where an LTCH's actual CCR for the cost reporting period 
fluctuates plus or minus 10 percentage points compared to the interim 
CCR used to calculate payments when a

[[Page 49610]]

claim is processed. We adopted this reconciliation policy for the LTCH 
PPS HCO and SSO cases because CCRs based on settled cost reports are 
not available when claims are processed unless significant delays are 
imposed on the payment of claims. (For additional information, we refer 
readers to the June 9, 2003 IPPS/LTCH PPS high-cost outlier final rule 
(68 FR 34507) and sections 150.26 through 150.28 of the Medicare Claims 
Processing Manual (Pub. 100-4).) Given the use of LTCH CCRs to 
calculate the estimated cost of cases under the proposed site neutral 
payment rate, we stated in the proposed rule that we believe that it 
would be equally appropriate to apply the current CCR reconciliation 
policy principles to site neutral payment rate payments. Therefore, we 
proposed under new Sec.  412.522(c)(4) to reconcile site neutral 
payment rate payments based on the CCR calculated using the settled 
cost report that coincides with the discharge. We also proposed that, 
at the time of any such reconciliation of site neutral payment rate 
payments, such payments be adjusted to account for the time value of 
any underpayments or overpayments. Any adjustment would be based upon a 
widely available index to be established in advance by the Secretary 
and will be applied from the midpoint of the cost reporting period to 
the date of reconciliation. The index that would be used to calculate 
the time value of money is the monthly rate of return that the Medicare 
Trust Fund earns, which can be found at: http://www.ssa.gov/OACT/ProgData/newIssueRates.html, consistent with our current reconciliation 
policy described in section 150.27 of Chapter 3 of the Medicare Claims 
Processing Manual (Pub. 100-4). Furthermore, we proposed that our 
existing policies governing CCRs for both HCO (under Sec. Sec.  
412.525(a)(4)(iv)(A) through (C)) and SSO payments (under Sec. Sec.  
412.529(f)(4)(i) through (iii)) would apply to the CCRs used to 
determine the estimated cost of a case under proposed new Sec.  
412.522(c)(4).
    Comment: Several commenters disagreed with CMS' proposal to apply 
our existing reconciliation policy to payments made for site neutral 
payment rate cases. The commenters stated that such a policy is 
unprecedented and contrary to the predictability of a PPS. They 
believed that applying a reconciliation policy to payments for site 
neutral payment rate cases would result in an adjustment to all LTCH 
site neutral payment rate cases for every LTCH at the conclusion of 
every cost reporting period.
    Response: We disagree with the commenters. Consistent with the 
current reconciliation policy, payments for site neutral payment rate 
cases would be subject to reconciliation only when certain criteria are 
met. As noted above and referenced by several commenters, the current 
criteria for reconciliation are presented in sections 150.26 through 
150.28 of the Medicare Claims Processing Manual (Pub. 100 4), and 
include the criterion that the LTCH's actual CCR must be plus or minus 
10 percentage points from the CCR used during that cost reporting 
period to trigger outlier payments. The purpose of the policy was not 
intended to automatically require that all payments for site neutral 
payment rate cases in every LTCH's cost reporting period be reconciled. 
Nevertheless, we understand the commenters' concerns regarding the need 
for predictability and stability in LTCH PPS payments. Therefore, we 
believe that it would be appropriate to generally postpone the 
implementation of a reconciliation policy for site neutral payments 
until we have gained more experience under the revised LTCH PPS. This 
approach would allow CMS the opportunity to review the existing 
reconciliation criteria, and revise, if appropriate, that criteria to 
identify the circumstances under which it would be appropriate to 
reconcile the entire site neutral payment rate payment amount, should 
it be determined that such a policy is warranted. However, we continue 
to believe that it is appropriate to include any HCO payments made to 
site neutral payment rate cases in our existing reconciliation policy. 
Such a policy provides for a consistent application of the 
reconciliation policy to both site neutral payment rate cases and LTCH 
PPS standard Federal payment rate cases, while we monitor whether it 
may be appropriate to apply a reconciliation policy to the entire site 
neutral payment rate as we gain experience under the revised LTCH PPS.
    Therefore, we are not finalizing the proposal to apply, under new 
Sec.  412.522(c)(4), a reconciliation policy to payments made for site 
neutral payment rate cases. However, we are finalizing the proposal to 
include any HCO payments made for site neutral payment rate cases under 
the existing reconciliation policy at Sec.  412.525(a)(4)(iv)(D). (As 
noted previously, our HCO policy for site neutral payment rate cases is 
discussed in detail in section VII.B.7.b. of the preamble of this final 
rule.)
b. Blended Payment Rate for FY 2016 and FY 2017
    Section 1886(m)(6)(B) of the Act establishes a transitional payment 
method for cases that will be paid the site neutral payment rate for 
LTCH discharges occurring in cost reporting periods beginning during FY 
2016 or FY 2017. For those discharges, the applicable site neutral 
payment rate is to be the blended payment rate specified in section 
1886(m)(6)(B)(iii) of the Act. For LTCH discharges occurring in cost 
reporting periods beginning during FY 2018 or later, the applicable 
site neutral payment rate will be the site neutral payment rate as 
defined in section 1886(m)(6)(B)(ii) of the Act.
    Section 1886(m)(6)(B)(iii) of the Act specifies that the blended 
payment rate is comprised of 50 percent of the site neutral payment 
rate for the discharge under section 1886(m)(6)(B)(ii) of the Act and 
50 percent of the LTCH PPS standard Federal payment rate that would 
have applied to the discharge if paragraph (6) of section 1886(m) of 
the Act had not been enacted. As previously discussed, we proposed to 
codify the site neutral payment rate specified under section 
1886(m)(6)(B)(ii) of the Act under proposed new Sec.  412.522(c)(1), as 
adjusted under proposed new Sec.  412.522(c)(2). Under proposed new 
Sec.  412.522(c)(1), the site neutral payment rate is the lower of the 
IPPS comparable per diem amount determined under Sec.  412.529(d)(4), 
including any applicable outlier payments under Sec.  412.525(a), or 
100 percent of the estimated cost of the case determined under Sec.  
412.529(d)(2). For purposes of the blended payment rate, we proposed 
that the payment rate that would otherwise be applicable if section 
1886(m)(6) of the Act had not been enacted would be the LTCH PPS 
standard Federal payment; which, in light of other proposals presented 
in the proposed rule, would be the LTCH PPS standard Federal payment 
rate that is applicable to discharges that meet the criteria for 
exclusion from the site neutral payment rate under proposed new Sec.  
412.522(a)(2). That rate is the LTCH PPS standard Federal payment rate 
determined under Sec.  412.523. Therefore, consistent with the 
requirements of section 1886(m)(6)(B)(ii) of the Act, in the FY 2016 
IPPS/LTCH PPS proposed rule (80 FR 24533), we proposed under proposed 
new Sec.  412.522(c)(3), for LTCH discharges occurring in cost 
reporting periods beginning on or after October 1, 2015, and on or 
before September 30, 2017 (that is, discharges occurring in cost 
reporting periods beginning during

[[Page 49611]]

FYs 2016 and 2017), that the payment amount for site neutral payment 
rate cases would be a blended payment rate, which would be calculated 
as 50 percent of the applicable site neutral payment rate amount for 
the discharge as determined under proposed new Sec.  412.522(c)(1) and 
50 percent of the applicable LTCH PPS standard Federal payment rate 
determined under Sec.  412.523. Under this proposal, the payment 
amounts determined under proposed new Sec.  412.522(c)(1) (the site 
neutral payment rate) and under Sec.  412.523 (the LTCH PPS standard 
Federal rate) would include any applicable adjustments, such as HCO 
payments, as applicable, consistent with the requirements under Sec.  
412.523(d). For example, the portion of the blended payment for the 
discharge that is based on proposed new Sec.  412.522(c)(3) would 
include 50 percent of any applicable site neutral payment rate HCO 
payment under our revised HCO payment policy (discussed in detail in 
section VII.B.7.b. of the preamble of this final rule), consistent with 
proposed new Sec.  412.522(c)(1)(i), which provides for HCO payments 
under Sec.  412.525(a). Similarly, the portion of the blended payment 
for the discharge that is based on the LTCH PPS standard Federal 
payment rate would include any applicable HCO payment under existing 
Sec.  412.525(a).
    Comment: Some commenters requested that CMS establish a longer 
transitional period for LTCHs to receive blended payments because of 
the concern that reduced payments to LTCHs under the revised LTCH PPS 
would create a negative impact on these providers.
    Response: We acknowledge the commenters' concerns. However, the 
blended payment rate provided under the statute is only applicable to 
LTCH discharges occurring during FY 2016 and FY 2017, and does not 
extend applicability to discharges occurring during cost reporting 
periods beginning in FY 2018 and subsequent fiscal years.
    After consideration of the public comments we received, we are 
finalizing our proposed policy, without modification.
c. LTCH PPS Standard Federal Payment Rate
    Section 1206(a) of Public Law 113-67 amended section 1886(m) of the 
Act by adding paragraph (6), which specifies that beginning with cost 
reporting periods starting on or after October 1, 2015, all LTCH PPS 
discharges are paid according to the site neutral payment rate, unless 
certain criteria are met. For detailed discussion of our proposed and 
finalized policies regarding the criteria for exclusion from the site 
neutral payment rate, we refer readers to section VII.B.3. of the 
preamble of this final rule. For LTCH cases that meet the criteria for 
exclusion from the site neutral payment rate, section 1886(m)(6)(A)(ii) 
of the Act specifies that the site neutral payment rate will not apply 
and payment will be made without regard to requirements of section 
1886(m)(6)(A)(ii) of the Act. Consistent with these statutory 
requirements, in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24533), 
we proposed under new Sec.  412.522(a)(2) that for LTCH discharges that 
meet the criteria for exclusion from site neutral payment rate under 
new Sec.  412.522(b), payment will be based on the LTCH PPS standard 
Federal payment rate as determined in Sec.  412.523. That is, under new 
Sec.  412.522(a)(2), LTCH PPS standard Federal payment rate cases would 
continue to be paid based on the LTCH PPS standard Federal payment 
rate. Under this policy, all of the existing payment adjustments under 
Sec.  412.525(d), that is, the adjustments for SSO cases under Sec.  
412.529, the adjustments for interrupted stays under Sec.  412.531, and 
the 25-percent threshold policy under Sec.  412.534 and Sec.  412.536, 
would still apply if appropriate. In addition, as discussed in greater 
detail in section VII.B.7.b. of the preamble of the proposed rule and 
this final rule, we proposed that our existing HCO policy would apply 
to LTCH PPS standard Federal payment rate cases, except that the 8 
percent HCO target would be established using only data from LTCH PPS 
standard Federal payment rate cases.
    We did not receive any public comments on our proposal to pay for 
LTCH discharges that meet the criteria for exclusion from the site 
neutral payment rate under new Sec.  412.522(a)(2) based on the LTCH 
PPS standard Federal payment rate. We are adopting this policy as 
final, without modification. We note that we proposed changes to the 
MS-LTC-DRG relative weight calculations and HCO policy for LTCH PPS 
standard Federal payment rate cases, which are discussed in in section 
VII.B.7. of the preamble of this final rule and include summations of 
the public comments we received and our responses.
5. Application of Certain Existing LTCH PPS Payment Adjustments to 
Payments Made Under the Site Neutral Payment Rate
    Consistent with current LTCH PPS payment policies for adjusting 
Federal prospective payments, under the broad authority under section 
123(a)(1) of the BBRA, as amended by section 307(b) of the BIPA, in the 
FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24533 through 24534), we 
proposed that certain existing payment adjustments under the special 
payment provisions set forth at existing Sec.  412.525(d), with the 
exception of the SSO adjustment described under Sec.  412.525(d)(1) 
would apply to site neutral payment rate cases. These adjustments 
include the interrupted stay policy and the 25-percent threshold 
policy. The current payment adjustment under the interrupted stay 
policy at Sec.  412.531 was developed and implemented prior to the 
statutory LTCH PPS dual rate payment structure and contains terms 
specific to payment based on the LTCH PPS standard Federal payment rate 
(such as LTC-DRG payment and Federal LTC-DRG prospective payment). 
Under our proposal, the site neutral payment rate would not be 
calculated based on the LTCH PPS standard Federal payment rate because 
the payment would generally be the lower of the IPPS comparable per 
diem amount (including any applicable outlier payments), or 100 percent 
of the estimated cost of the case. Consequently, in order to apply the 
provisions of the existing interrupted stay policy at Sec.  412.531 to 
site neutral payment rate cases, under proposed new Sec.  
412.522(c)(2)(ii), we proposed to specify that, for purposes of the 
application of the provisions of Sec.  412.531 to LTCH discharges 
described under Sec.  412.522(a)(1), the LTCH PPS standard payment-
related terms, such as ``LTC-DRG payment'', ``full Federal LTC-DRG 
prospective payment'', and ``Federal prospective payment,'' mean the 
site neutral payment rate calculated under proposed new Sec.  
412.522(c).
    We stated in the proposed rule that we believe that it is 
appropriate to apply these adjustments to the site neutral payment rate 
cases because the site neutral payment rate merely establishes an 
alternate payment amount under the LTCH PPS, as opposed to creating an 
exception from the LTCH PPS. Additionally, we believe that the policy 
concerns upon which these policies are based apply equally to payments 
made under the LTCH PPS site neutral payment rates and the standard 
Federal payment rates.
    We established the interrupted stay policy to address instances in 
which a patient is discharged from an LTCH and later readmitted to that 
LTCH within a certain amount of time. This kind of readmission to the 
LTCH represents a continuation or resumption of the initial, 
interrupted treatment, rather than a new episode of care. (For a

[[Page 49612]]

discussion of our implementation of the interrupted stay policy, we 
refer readers to the RY 2003 LTCH PPS final rule (67 FR 56002).) We 
continue to believe that the interrupted stay policy serves as an 
effective instrument to protect the Medicare Trust Fund from 
significant and inappropriate expenditures (78 FR 50768), and we do not 
believe that the site neutral payment rate will address these concerns 
unless the interrupted stay policy is applied to site neutral payment 
rate cases in the same manner as it is applied to standard Federal 
payment rate cases.
    The 25-percent threshold payment adjustment policy was implemented 
based on analyses of Medicare discharge data that indicated that 
patterns of patient shifting appeared to be occurring more for provider 
financial advantage than for patient benefit. In order to discourage 
such activity, a payment adjustment was applied to LTCH discharges of 
patients who were admitted to the LTCH from the same referring hospital 
in excess of an applicable percentage threshold (79 FR 50185). We refer 
readers to the detailed discussions of the 25-percent threshold payment 
adjustment policy for LTCH hospital-within-hospitals (HwHs) and LTCH 
satellite facilities in the FY 2005 IPPS/LTCH final rule (69 FR 49191 
through 49214) and its application to all other LTCHs in the RY 2008 
LTCH PPS final rule (72 FR 26919 through 26944), as well as our 
discussion in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50185 through 
50187), for additional details on the 25-percent threshold payment 
adjustment. We do not believe that the site neutral payment rate will 
address these patient shifting concerns unless the 25-percent threshold 
payment adjustment is applied to site neutral payment rate cases in the 
same manner as it is applied to LTCH PPS standard Federal payment rate 
cases.
    In considering the potential policy proposals, we recognized that 
there is a current statutory moratorium on the full implementation of 
the 25-percent threshold payment adjustment policy under section 
1206(b)(1)(A) of Public Law 113-67 that is scheduled to expire in FY 
2016. (For a discussion of our implementation of the current statutory 
moratorium on the full implementation of the 25-percent threshold 
payment adjustment policy, we refer readers to the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 50185 through 50187).) In the FY 2016 IPPS/LTCH 
PPS proposed rule (80 FR 24533 through 24534), we proposed to apply all 
of the payment adjustments to site neutral payment rates in the same 
manner as they are currently applied (and will continue to be applied 
for the foreseeable future) to LTCH PPS standard Federal payment 
rates--including, as applicable, the moratorium on implementing the 25-
percent threshold payment adjustment.
    We did not propose to apply the SSO payment adjustment to the site 
neutral payment rate at this time because, while the policy goal of 
ensuring patients in an LTCH receive a full course of treatment 
remains, under our current method of paying for SSOs as described under 
Sec.  412.529, we pay for SSOs based on the lowest of several payment 
options, one of which is the LTCH's estimated cost of the case. As 
described above, site neutral payment rate cases are paid the lower of 
the IPPS comparable per diem amount, or 100 percent of the estimated 
cost of the case. Because the estimated cost option is used in 
determining both SSO payments and site neutral payment rates and both 
methods make payment based on the lowest of their respective payment 
options, in most cases, applying our current SSO payment adjustment to 
site neutral payment rate cases would not affect the resulting LTCH PPS 
payment made for the discharge. We may consider proposing the 
application of an alternative SSO payment adjustment in the future if 
we find evidence that Medicare beneficiaries are not regularly 
receiving the full course of treatment when such treatment is paid for 
at the site neutral payment rate.
    Comment: MedPAC supported the CMS proposal to apply the interrupted 
stay policy and the 25-percent threshold policy to site neutral payment 
rate cases. However, other commenters disagreed with the proposal and 
indicated that one or both of these policies should be eliminated 
entirely because the concerns that led to these policies are addressed 
with the statutory revisions to the payment rates under the LTCH PPS. 
The commenters stated that if the policies are not eliminated entirely 
that, at a minimum, the provisions should not apply to site neutral 
payment rate cases because payments for site neutral payment rate cases 
are similar to the payments under the IPPS for these types of cases, 
and the lengths of stay for site neutral payment rate cases should be 
similar to the lengths of stay for similar cases paid under the IPPS. 
Some commenters suggested that CMS establish an IRF-like interrupted 
stay policy as an alternative to the LTCH interrupted stay policy. Some 
commenters noted that CMS indicated in prior rulemakings that the 
revised LTCH PPS would render the 25-percent threshold policy 
unnecessary. Other commenters suggested that CMS apply the 25-percent 
threshold policy to site neutral payment rate cases prior to applying 
the policy to LTCH PPS standard Federal payment rate cases as an 
alternative to excluding site neutral payment rate cases from the 25-
percent threshold policy altogether.
    Response: We appreciate MedPAC's support. In response to the 
commenters who disagreed with the proposals, we believe that it is 
premature to determine if modifications should be made to these 
polices, including their applicability to site neutral payment rate 
cases, without the benefit of experience gained under the revised LTCH 
PPS; especially given that the higher blended payment rate will apply 
to LTCH discharges that do not meet the criteria for exclusion from the 
site neutral payment rate until cost reporting periods beginning on or 
after October 1, 2017. In addition, we did not indicate in prior 
rulemakings that these policies were unnecessary. We stated that, at 
that time, the policies may no longer be necessary in light of the 
intended changes to the LTCH PPS. We believe that it would be prudent 
to maintain these policies as they currently exist, including their 
applicability to site neutral payment rate cases, while we gain more 
experience. However, we will keep this suggestion in mind when 
contemplating whether the current policy should be modified. In the 
event that we determine that policy modifications are warranted, we 
will address them through future rulemaking.
    Comment: One commenter requested clarification about our proposed 
application of the 25-percent threshold policy to site neutral payment 
rate cases.
    Response: The 25-percent threshold policy would apply to site 
neutral payment rate cases in the same manner as it would apply to LTCH 
PPS standard Federal payment cases; all LTCH discharges (site neutral 
payment rate cases or LTCH PPS standard Federal payment rate cases) 
that are beyond an LTCH's applicable threshold from a single referring 
hospital would be subjected to an adjustment in accordance with the 25-
percent threshold policy.
    Comment: Several commenters expressed support for our proposal not 
to apply the SSO policy to site neutral payment rate cases. Other 
commenters believed that the SSO policy should be modified in 
consideration of site neutral payment rate cases.
    Response: We appreciate the commenters' support. We will consider 
the commenters' suggestions to revise the SSO policy, and may consider 
additional policy proposals to address this issue in future rulemaking.

[[Page 49613]]

    After consideration of public comments we received, we are 
finalizing, without modification, our proposals to apply the 
interrupted stay policy and the 25-percent threshold policy to site 
neutral payment rate cases, and not to apply the SSO policy to site 
neutral payment rate cases at this time.
6. Policies Relating to the LTCH Discharge Payment Percentage
    Section 1886(m)(6)(C) of the Act, as added by section 1206 of 
Public Law 113-67, imposes several requirements related to an LTCH's 
discharge payment percentage. As defined by section 1886(m)(6)(C)(iv) 
of the Act, the term ``LTCH discharge payment percentage'' is a ratio, 
expressed as a percentage, of Medicare discharges not paid the site 
neutral payment rate to total number of Medicare discharges occurring 
during the cost reporting period. In other words, an LTCH's discharge 
payment percentage would be the ratio of an LTCH's Medicare discharges 
that meet the criteria for exclusion from the site neutral payment rate 
(as described under new Sec.  412.522(a)(2)) to an LTCH's total number 
of Medicare discharges paid under the LTCH PPS (that is, both Medicare 
discharges paid under the site neutral payment rate and those that meet 
the criteria for exclusion from the site neutral payment rate, as 
described under new Sec. Sec.  412.522(a)(1) and (2), respectively) 
during the cost reporting period. Therefore, consistent with the 
statutory requirement at section 1886(m)(6)(C)(iv) of the Act and under 
the broad authority under section 123(a)(1) of the BBRA, as amended by 
section 307(b) of the BIPA, in the FY 2016 IPPS/LTCH PPS proposed rule 
(80 FR 24534) under proposed new Sec.  412.522(d)(1), we proposed to 
define an LTCH's discharge payment percentage as a ratio, expressed as 
a percentage, of Medicare discharges excluded from the site neutral 
payment rate as described under proposed new Sec.  412.522(a)(2) to 
total Medicare discharges paid under the LTCH PPS (in accordance with 
42 CFR part 412, subpart O) during the cost reporting period.
    Comment: One commenter requested clarification about whether our 
proposed definition of the discharge payment percentage included 
Medicare Advantage beneficiaries, and noted that the statute expressly 
excludes these beneficiaries from the percentage.
    Response: We agree with the commenter that the exclusion of 
Medicare Advantage beneficiaries is consistent with the statute. We 
believe that our proposed use of the phrase ``Medicare discharges paid 
under the LTCH PPS (in accordance with 42 CFR part 412, subpart O)'' 
was a clear statement concerning the exclusion of Medicare Advantage 
beneficiaries from the discharge patient percentage (80 FR 24534). 
However in the interest of clarity, we are taking this opportunity to 
reiterate that the LTCH's discharge payment percentage under new Sec.  
412.522(d)(1) would not include Medicare Advantage patients in either 
the numerator or denominator of that ratio.
    Comment: One commenter requested we develop a procedure by which 
LTCHs who demonstrate ``highly compliant'' discharge payment 
percentages would receive payment for all discharges at the LTCH PPS 
standard Federal payment rate.
    Response: As explained more fully previously in this preamble, we 
do not have the authority to pay any rate other than the site neutral 
payment rate for discharges that do not meet the exclusion statutory 
criteria.
    After consideration of the public comments we received, we are 
finalizing our proposed definition of the discharge patient percentage 
under new Sec.  412.522(d)(1), including the technical correction of 
the typographical error in the phrase ``paid under this Subpart O'' 
that we are correcting to read as ``paid under this subpart'' for 
clarity.
    In addition, section 1886(m)(6)(C)(i) of the Act requires that we 
provide notice to each LTCH of the LTCH's discharge payment percentage 
(as defined in section 1886(m)(6)(C)(iv) of the Act) for LTCH cost 
reporting periods beginning during or after FY 2016. Therefore, in the 
FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24534 through 24535), we 
proposed to codify this statutory requirement at proposed new Sec.  
412.522(d)(2). Under this proposal, for cost reporting periods 
beginning on or after October 1, 2015, as required by the statute, we 
would inform each LTCH of their discharge payment percentage as defined 
under proposed new Sec.  412.522(d)(1). We stated that we plan to 
develop such a notification process through subregulatory guidance. We 
also note that, under section 1886(m)(6)(C)(ii) of the Act, for cost 
reporting periods beginning on or after October 1, 2020, the statute 
requires that any LTCH whose discharge payment percentage for the 
period is not at least 50 percent will be informed of such a fact and 
all of the LTCH's discharges in each successive cost reporting period 
will be paid the payment amount that would apply under subsection (d) 
for the discharge if the hospital were a subsection (d) hospital, 
subject to the process for reinstatement provided for by section 
1886(m)(6)(C)(iii) of the Act.
    Because this statutory requirement is not effective until cost 
reporting periods beginning on or after October 1, 2020, we did not 
propose to make any changes related to the limitation requirement or 
the process for reinstatement at this time. However, we invited public 
comments on the development and implementation of the process for 
reinstatement under section 1886(m)(6)(C)(iii) of the Act.
    Comment: Several commenters requested that CMS develop internal 
procedures and instructional mechanisms that explain how LTCHs will be 
notified of their discharge patient percentage through rulemaking.
    Response: We appreciate the commenters' input regarding the 
limitation requirements or the process for reinstatement as a result of 
the discharge patient percentage policy, including suggestions for 
``cure periods'' for LTCHs whose discharge patient percentages fall 
below 50 percent. We will consider these comments as we develop 
proposals in these areas for discharges occurring in cost reporting 
periods beginning on or after October 1, 2020. However, we note that 
the development of operational guidance consistent with the law and our 
regulations does not require rulemaking. We will continue to engage 
with stakeholders as we develop operational guidance for our 
contractors.
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposals to codify the statutory 
requirement under new Sec.  412.522(d)(2) that we provide notice to 
each LTCH of its discharge payment percentage for each cost reporting 
period beginning on or after October 1, 2015.
7. Additional LTCH PPS Policies Related to the Implementation of the 
Site Neutral Payment Rate Required by Section 1206(a) of Public Law 
113-67
    As discussed earlier in this section, section 1206(a) of Public Law 
113-67 amended section 1886(m) of the Act by adding paragraph (6), 
which establishes patient-level criteria for payments made under the 
LTCH PPS for LTCH discharges occurring during cost reporting periods 
beginning on or after October 1, 2015 (FY 2016). In the FY 2015 IPPS/
LTCH PPS proposed and final rules, we stated our intent to implement 
the requirements established by section 1206(a) of Public Law 113-67 
through notice and comment rulemaking during the FY 2016 IPPS/LTCH PPS 
rulemaking cycle. In the FY

[[Page 49614]]

2015 IPPS/LTCH PPS proposed rule (79 FR 28205 through 28206), we 
discussed several significant issues arising from the statutory changes 
to the LTCH PPS required by section 1206(a) of Public Law 113-67, which 
establishes two distinct payment groups for LTCH discharges under the 
revised system: Discharges meeting specified patient-level criteria 
that will be paid under the LTCH PPS standard Federal payment rate and 
all other patient discharges that will be paid under the site neutral 
payment rate. In that same proposed rule, we expressed our interest in 
receiving feedback from LTCH stakeholders on our plans to evaluate 
whether it would be appropriate to modify any of our historical 
policies or methodologies as we began to develop proposals to implement 
the statutory changes to the LTCH PPS. In particular, we solicited 
public feedback on the policies relating to the MS-LTC-DRG relative 
payment weights and high-cost outlier payments in preparation of 
developing proposals to implement the statutory changes to the LTCH PPS 
beginning in FY 2016. We explained that in setting the payment rates 
and factors under the LTCH PPS in accordance with requirements of 
section 1206(a) of Public Law 113-67, for certain LTCH PPS payment 
adjustments we planned to evaluate whether it would be appropriate to 
modify our historical methodology to account for the establishment of 
the two distinct payment rates for LTCH discharges. In particular, we 
stated our intent to examine whether, beginning in FY 2016, it would 
continue to be appropriate to include data for all LTCH PPS cases, 
including site neutral payment rate cases, in the methodology used to 
set the MS-LTC-DRGs relative payment weights. We also stated our intent 
to explore the possibility of changes to the current LTCH PPS high-cost 
outlier payment policy. Given the fact that, for a number of LTCH 
discharges, payment would be made based on the lower site neutral 
payment rate (that is, the lesser of an ``IPPS comparable'' per diem 
payment amount or 100 percent of the estimated cost of the case), we 
believed that it would be appropriate to evaluate whether a single 
high-cost outlier threshold could be applied to all LTCH PPS cases 
(both LTCH PPS standard Federal payment rate and site neutral payment 
rate cases), or whether it may be more appropriate to have separate 
high-cost outlier thresholds for each of the two payment rates under 
the statutory revisions to the LTCH PPS.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50197 through 
50198), we summarized the comments we received in response to our 
request for input from LTCH stakeholders. As we stated in that same 
final rule, we appreciated the commenters' thoughtful and detailed 
feedback, particularly those comments regarding the MS-LTC-DRG relative 
payment weights and the high-cost outlier policy under the new LTCH PPS 
dual rate payment structure established by section 1206(a) of Public 
Law 113-67. In developing the proposals presented in the FY 2016 IPPS/
LTCH PPS proposed rule, we considered the recommendations and 
information provided by those commenters. Below we discuss our proposed 
and finalized policies related to the MS-LTC-DRG payment relative 
weights and high-cost outlier policy in regard to our implementation 
policies under the LTCH PPS dual rate payment structure required by 
section 1206(a) of Public Law 113-67.
a. MS-LTC-DRG Relative Payment Weights
    Under the LTCH PPS, relative payment weights for each MS-LTC-DRG 
are a primary element used to account for the variations in cost per 
discharge and resource utilization between the diagnosis-related groups 
(Sec.  412.515). Each year, based on the latest available LTCH claims 
data, we calculate a relative payment weight for each MS-LTC-DRG that 
represents the resources used for an average inpatient LTCH case 
assigned to that MS-LTC-DRG to ensure that Medicare patients with 
conditions or illnesses classified under each MS-LTC-DRG have access to 
an appropriate level of services and to encourage efficiency (79 FR 
50170). CMS adjusts the classifications and weighting factors annually 
to reflect changes in factors affecting the relative use of hospital 
resources, such as treatment patterns, technology, and the number of 
discharges (Sec.  412.517).
    Under the new dual rate LTCH PPS payment structure, section 1206(a) 
of Public Law 113-67 establishes two distinct payment rates for LTCH 
discharges: discharges meeting specified patient-level criteria that 
will be excluded from the site neutral payment rate and all other 
patient discharges that will be paid under the site neutral payment 
rate. As discussed in greater detail in section VII.B.4.c. of the 
preamble of our proposed rule and this final rule, under new Sec.  
412.522(a)(2), we are establishing that LTCH discharges that meet the 
criteria for exclusion from site neutral payment rate will be paid 
using the LTCH PPS standard Federal payment rate described under Sec.  
412.523, as adjusted. In general, the LTCH PPS standard Federal payment 
rate is calculated by adjusting the standard Federal rate (determined 
under Sec.  412.523(c)(3)) by the applicable MS-LTC-DRG relative 
payment weight for that Medicare cases. Under new Sec.  412.522(c) (as 
discussed in greater detail in section VII.B.4.a. of the preamble of 
this final rule), consistent with section 1886(m)(6)((B)(ii) of the 
Act, we are establishing that the site neutral payment rate is the 
lower of the IPPS comparable per diem amount (including any applicable 
outlier payments), or 100 percent of the estimated cost of the case. 
Under this policy, the IPPS comparable per diem amount is determined 
using the same method to determine adjusted payments under the SSO 
policy at Sec.  412.529(d)(4), and the estimated cost of the case is 
determined using the same method to determine estimated costs under the 
SSO policy at Sec.  412.529(d)(2). We also note that the methodology we 
are adopting to determine payments for site neutral payment rate cases 
does not use the LTCH PPS standard Federal payment rate or the 
applicable MS-LTC-DRG relative payment weights.
    As discussed above, in preparation for the proposed rule, we 
considered LTCH stakeholder input and evaluated whether it would be 
appropriate to modify our historical MS-LTC-DRG relative payment weight 
methodology to account for the establishment of the two distinct 
payment rates for LTCH discharges under the statutory changes to the 
LTCH PPS. Specifically, we examined whether our historical methodology, 
which uses data from all LTCH PPS discharges, should be continued when 
we calculate the MS-LTC-DRG relative payment weights under the new LTCH 
PPS dual rate payment structure, or whether it would be more 
appropriate to limit the data used to calculate relative payment 
weights to that obtained from discharges paid based on the LTCH PPS 
standard Federal payment rate (that is, discharges that would have met 
the criteria to be excluded from the site neutral payment rate had 
those criteria been in effect at the time of the discharge). Our 
existing methodology for developing the MS-LTC-DRG relative payment 
weights includes established policies related to the data used to 
calculate the relative payment weights, the hospital-specific relative 
value methodology, the treatment of severity levels in the MS-LTC-DRGs, 
the low-volume and no-volume MS-LTC-DRGs, adjustments for 
nonmonotonicity, and the calculation of the MS-LTC-DRG relative payment 
weights with a budget neutrality factor

[[Page 49615]]

(79 FR 50171). Our most recent discussion of the existing methodology 
for calculating the MS-LTC-DRG relative payment weights can be found in 
the FY 2015 IPPS/LTCH final rule (79 FR 50168 through 50176). For FY 
2016, our finalized methodology for calculating the FY 2016 MS-LTC-DRG 
relative payment weights (including the policy we are finalizing below 
to use only data from cases that would have been LTCH PPS standard 
Federal payment rate cases had the new LTCH PPS payment structure been 
in effect at the time of the discharge) is discussed in section 
VII.C.3. of the preamble of this final rule.
    In response to our solicitation for stakeholder input during the FY 
2015 rulemaking cycle, we received numerous comments that addressed the 
calculation of the MS-LTC-DRG relative payment weights under the new 
statutory LTCH PPS structure. In its comment, MedPAC urged CMS to 
establish `` . . . new relative payment weights for each MS-LTC-DRG 
based solely on the most recent available standardized data associated 
with discharges meeting the specified patient-level criteria'' because 
those discharges under the new law would represent cases treating the 
most severely ill, incurring higher resource costs that warrant higher 
LTCH payments. MedPAC also stated that the change in methodology should 
not result in increased aggregate payments for the cases paid under the 
LTCH PPS standard Federal payment rate under the new statutory LTCH PPS 
structure. Most of the other commenters agreed with MedPAC's 
recommendation that the MS-LTC-DRG relative payment weights under the 
new statutory structure should be calculated using only the data from 
cases that meet the statutory patient-level criteria for exclusion from 
the site neutral payment rate (or cases that would have qualified for 
exclusion had the new LTCH PPS payment structure been in effect at the 
time of discharge) A few commenters conducted their own analyses and 
found that both relative payment weight approaches (that is, using data 
from all LTCH PPS cases as compared to using only data from standard 
Federal payment rate cases) produce MS-LTC-DRG relative payment weights 
that are similar. In addition, some of the commenters urged CMS to 
focus on keeping payments for LTCH PPS standard Federal payment rate 
cases at the same level that would have been in the absence of the 
statutory changes, or otherwise consider employing a methodology that 
promotes stability and predictability in the MS-LTC-DRG relative 
payment weights. Therefore, the overwhelming majority of the 
preliminary stakeholder feedback we received did not support using data 
from all LTCH PPS cases to determine the MS-LTC-DRG relative payment 
weights for the LTCH PPS standard Federal payment rate cases (80 FR 
24536).
    In the FY 2016 IPPS/LTCH PPS proposed rule, we expressed our 
appreciation for the commenters' detailed feedback and took into 
consideration their concerns and recommendations in our evaluation the 
issue of the MS-LTC-DRG relative payment weights under the new LTCH PPS 
structure required by section 1206(a) of Public Law 113-67 in 
preparation for that proposed rule. As part of our evaluation, as we 
discussed in the proposed rule (80 FR 24536), we examined the FY 2013 
LTCH claims data used to determine the FY 2015 MS-LTC-DRG relative 
weights and found that approximately 54 percent of LTCH cases would 
meet the criteria for exclusion from the site neutral payment rate 
(that is, those cases would be paid the LTCH PPS standard Federal 
payment rate had the new criteria been in effect at the time of the 
discharge) and approximately 46 percent of LTCH cases would be paid the 
site neutral payment rate (had the new criteria been in effect at the 
time of the discharge). We then compared the MS-LTC-DRG relative 
payment weights computed using data from all LTCH PPS cases to the MS-
LTC-DRG relative payment weights computed using only data from the LTCH 
PPS standard Federal payment rate cases (had those criteria been in 
effect at the time of the discharge). Specifically, using the FY 2013 
LTCH claims data (the same LTCH claims data used in the FY 2015 IPPS/
LTCH PPS final rule), we calculated FY 2015 MS-LTC-DRG relative payment 
weights using only data from the 54 percent of LTCH PPS cases that 
would be paid the LTCH PPS standard Federal payment rate, and compared 
them to the FY 2015 MS-LTC-DRG relative payment weights established in 
Table 11 of the FY 2015 IPPS/LTCH PPS final rule, which were calculated 
using data from all LTCH cases (that is, both case that would have been 
LTCH PPS standard Federal payment rate cases and would have been site 
neutral payment rate cases had those criteria been in place at the time 
of the discharge). Similar to results found by industry stakeholders, 
we found that both approaches produced comparable MS-LTC-DRG payments 
for LTCH PPS standard Federal payment rate cases. For example, our 
analysis of the average MS-LTC-DRG relative payment weight (that is, 
the case-mix) of LTCH PPS cases that would be paid the LTCH PPS 
standard Federal payment rate showed that the average case-mix using 
relative payment weights determined from using only data from LTCH PPS 
standard Federal payment rate cases differed by only approximately 0.01 
percentage point from the average case-mix of those same cases using 
relative weights determined from data from all LTCH PPS cases.
    However, we also discussed our belief that the costs and resource 
use for cases paid at the site neutral payment rate in the future may 
be lower on average than the costs and resource use for LTCH cases in 
our historical data that would have been paid at the site neutral 
payment rate if the statutory changes were in place when the discharges 
occurred. We believe that this is likely, even if the proportion of 
site neutral payment rate cases in future data remains similar to the 
historical data (that is, 46 percent). (We discuss our assumptions 
about cases paid at the site neutral payment rate in the future in more 
detail in section VII.B.7.b. of the preamble of this final rule, where 
we present our proposed and final policies regarding outlier payments 
for site neutral payment rate cases.) Therefore, even though the 
analysis described shows that including or excluding what would have 
been site neutral payment rate cases if the new statutory requirements 
were applied to the historical discharges would not have much impact on 
the relative payment weight calculation for FY 2016, over time we 
believe that the relative payment weights could become distorted if 
future site neutral payment rate cases involve less intensive resource 
use and lower costs, which we believe is a plausible response to the 
lower site neutral payment rates under the statutory LTCH PPS changes. 
This also could lead to less stability in the MS-LTC-DRG relative 
payment weights because these cases become incorporated into data used 
to calculate the relative payment weights.
    Taking all of this information into account and given the feedback 
we received on this issue in the FY 2015 rulemaking cycle, we believe 
that computing the MS-LTC-DRG relative payment weights using only data 
from LTCH PPS cases that will be (or, in the future, are) paid the LTCH 
PPS standard Federal payment rate (that is, cases that meet the 
criteria for exclusion from the site neutral payment rate) will result 
in the most appropriate payments under

[[Page 49616]]

the new statutory structure. Therefore, in the FY 2016 IPPS/LTCH PPS 
proposed rule (80 FR 24537), we proposed that, beginning with FY 2016, 
the annual recalibration of the MS-LTC-DRG relative payment weighting 
factors would be determined using only data from LTCH discharges that 
meet the criteria for exclusion from the site neutral payment rate 
(that is, LTCH PPS standard Federal payment rate cases). Accordingly, 
we proposed to codify this proposal by adding paragraph (c) to Sec.  
412.517 to specify that, beginning in FY 2016, the annual recalibration 
of the MS-LTC-DRG relative weighting factors are determined using data 
from LTCH discharges described under new Sec.  412.522(a)(2), or that 
would have been described by that section had the new dual rate LTCH 
PPS payment structure been in effect at the time of discharge.
    In addition, we proposed to continue to apply the existing budget 
neutrality requirement for the annual changes to the MS-LTC-DRG 
classifications and relative payment weights at Sec.  412.517(b), which 
specifies that any such changes must be made in a budget neutral manner 
such that estimated aggregate LTCH PPS payments are not affected. We 
explained that we believe that a budget neutrality requirement is 
appropriate for the MS-LTC-DRG relative payment weights that would be 
used to determine LTCH PPS payments for LTCH PPS standard Federal 
payment rate cases for the same reasons discussed when the policy was 
originally adopted in the FY 2008 LTCH PPS final rule (72 FR 26880 
through 26884). Therefore, we did not propose to make any changes to 
the budget neutrality requirement at Sec.  412.517(b).
    Comment: Several commenters, including the MedPAC, supported CMS' 
proposal, in general, to compute the MS-LTC-DRG relative payment 
weights using only data from LTCH PPS cases that meet the criteria for 
exclusion from the site neutral payment rate (that is, LTCH PPS 
standard Federal payment rate cases). The commenters stated that this 
policy would result in appropriate LTCH PPS standard Federal payment 
rate payments under the new dual rate LTCH PPS because the discharges 
meeting the LTCH PPS standard Federal payment rate criteria are 
``considered under the law to warrant the LTCH higher payments.'' Some 
of these commenters supported adopting this approach beginning in FY 
2016, to correspond with the commencement of the new dual rate LTCH PPS 
payment structure. However, other commenters believed that, for FY 
2016, the calculation of MS-LTC-DRG weights should be based on all LTCH 
cases in the available data, and then in subsequent years, the MS-LTC-
DRG weights should be based on only LTCH cases meeting the new LTCH PPS 
standard Federal payment rate criteria. These commenters asserted that 
CMS' proposal was based upon the incorrect assumption that all LTCH 
discharges are immediately subject to the new dual rate LTCH PPS 
payment system after October 1, 2015, rather than LTCH discharges 
becoming subject to the new dual rate LTCH PPS payment structure based 
on the LTCH's cost reporting periods beginning on or after October 1, 
2015. The commenters believed that because some LTCH discharges will be 
subject to the new dual rate LTCH PPS payment structure after October 
1, 2015, CMS should set payment weights for those discharges using all 
LTCH claims in the available data because there should be no difference 
in the MS-LTC-DRG weighting methodology for the LTCH discharges that 
will not be subject to the new dual rate LTCH PPS payment structure 
until after October 1, 2015 (that is, LTCH discharges in cost reporting 
periods beginning before October 1, 2015). Some of these commenters 
requested that CMS establish two sets of MS-LTC-DRG relative weights 
for FY 2016--one set of relative weights computed using only data from 
LTCH PPS cases that would meet the criteria for exclusion from the site 
neutral payment rate as CMS proposed, which would apply to discharges 
in LTCH cost reporting periods that begin on or after October 1, 2015, 
and a second set of weights computed using all LTCH cases, regardless 
of whether they would meet the new patient criteria, which would apply 
to discharges in LTCH cost reporting periods that begin before October 
1, 2015. Some commenters acknowledged the result of CMS' analyses 
included in the proposed rule that indicate that the MS-LTC-DRG 
relative weights overall are similar when using all LTCH cases or only 
those that meet the new criteria. However, these commenters stated that 
there could be notable variation for specific MS- LTC-DRGs. In 
addition, several commenters recommended that CMS explore options for 
improving the year-to-year stability of the MS-LTC-DRG weights and 
reducing any year-to-year variation that could result from smaller 
sample sizes, as they recommended previously when providing feedback 
during the FY 2015 rulemaking cycle.
    Some commenters agreed with CMS' proposal to continue to make the 
annual changes to the MS-LTC-DRG classifications and relative payment 
weights in a budget neutral manner such that estimated aggregate LTCH 
PPS payments are not affected. One commenter believed that the budget 
neutrality requirement should not be included until the new payment 
system is in place, consistent the original implementation of the 
budget neutrality requirement, which was introduced a few years after 
the initial implementation of the LTCH PPS.
    Response: We appreciate the commenters' support. However, we 
believe that the commenters are mistaken that, under this proposal, we 
did not consider the statutory phase-in and that we assumed that all 
LTCH discharges are immediately subject to the new dual rate payment 
structure after October 1, 2015. As explained in the proposed rule and 
reiterated above, we believe that this policy would result in 
appropriate LTCH PPS standard Federal payment rate payments under the 
new dual rate LTCH PPS, which becomes effective beginning on October 1, 
2015. We also believe that this approach will promote stability and 
predictability in the MS-LTC-DRG relative weights under the revised 
LTCH PPS, which was a statement made by many commenters in the feedback 
they provided during the FY 2015 rulemaking cycle.
    Furthermore, using only data from LTCH PPS cases that meet the 
criteria for exclusion from the site neutral payment rate (that is, 
LTCH PPS standard Federal payment rate cases) to compute the MS-LTC-DRG 
relative payment weights for FY 2016 is consistent with the HCO policy 
calculations we are finalizing in this final rule after consideration 
of public comments, which are discussed in section VII.B.7.b. of the 
preamble of this final rule. While we appreciate the commenters' 
recognition that using all of the cases in the historical data or only 
using cases that would have met the criterial for exclusion for the 
site neutral payment rate (had those criteria been in effect at the 
time of the discharge) would not have substantial impact on the 
relative weight calculation for FY 2016, we are aware that variation 
for specific MS-LTC-DRGs would occur as noted by commenters. However, 
such a variation can occur with the annual update of the relative 
weights based on the latest available LTCH PPS data under existing 
Sec.  412.517, and, in general, appropriately adjusts the relative 
weights to reflect the resource use of LTCHs based on the best 
available data. For these reasons, we are not adopting the commenters' 
suggestions to calculate the FY 2016

[[Page 49617]]

MS-LTC-DRG relative weights based on all of the cases in the historical 
data or to calculate two sets of relative weights for FY 2016. As 
suggested by commenters, we intend to monitor the year-to-year changes 
in the MS-LTC-DRG relative weights, and to the extent issues such as 
stability or inappropriate variation are encountered, we would explore 
possible options to address those issues once we have more experience 
under the changes to the LTCH PPS.
    We appreciate the comments we received in support of our proposal 
to continue to make the annual changes to the MS LTC DRG 
classifications and relative payment weights in a budget neutral manner 
such that estimated aggregate LTCH PPS payments are not affected. In 
addition to resulting in appropriate payments, we believe that this 
adjustment will continue to help to provide stability in LTCH PPS 
payments that are computed using the MS-LTC-DRG weights because the 
purpose of the budget neutrality adjustment is to ensure that estimated 
aggregate LTCH PPS payments do not increase or decrease as a result of 
the annual update of the MS-LTC-DRG classifications and relative 
weights. We do not believe that this change in Medicare payments to 
LTCHs is parallel to the change in Medicare payments to LTCHs under the 
initial implementation of the LTCH PPS in a way that would make it 
necessary to delay the continued application of the MS-LTC-DRG budget 
neutrality requirement. The period under which there was no MS-LTC-DRG 
budget neutrality requirement allowed LTCHs to adjust to a complete 
change in the structure of Medicare reimbursement; that is, from 
reasonable cost-based payments to a DRG-based prospective payment 
system, in which one of the primary elements for the basis of payments 
the coding of the diagnosis and procedure codes that are used to 
determine DRG assignment. As we explained when the policy was 
originally adopted, there had been fluctuations in the MS-LTC-DRG 
relative weights during the first 4 years of the LTCH PPS that were, in 
part, due to actual improvements in coding so that cases are 
appropriately assigned to MS-LTC-DRGs. We believed it was appropriate 
to establish the MS-LTC-DRG budget neutrality adjustment in the 5th 
year of the LTCH PPS when our annual case-mix index analysis indicated 
that changes in LTCH coding practices, which we believe were a primary 
contributor to in fluctuations in the MS-LTC-DRG relative weights in 
the past, had appeared to be stabilizing as LTCHs became more familiar 
with a DRG-based system (72 FR 26880). While the new dual rate LTCH PPS 
payment structure is arguably the most extensive change since the 
implementation of the LTCH PPS, it is not a complete change in the 
structure of Medicare payments to LTCHs, as was the case when LTCHs 
moved from cost-based payments to prospective payments. Therefore, we 
disagree with the commenter that it would be appropriate to delay the 
application of the MS-LTC-DRG budget neutrality requirement until LTCHs 
gain experience under the revised LTCH PPS.
    After consideration of public commenters we received, for the 
reasons discussed above, we are finalizing, without modification, our 
proposal to compute the MS-LTC-DRG relative payment weights using only 
data from LTCH PPS cases that met the criteria for exclusion from the 
site neutral payment rate (that is, LTCH PPS standard Federal payment 
rate cases), or that would have met the criteria had the new dual rate 
LTCH PPS payment structure been in effect at the time of discharge, and 
to continue to apply the existing budget neutrality requirement for the 
annual changes to the MS-LTC-DRG classifications and relative payment 
weights. Furthermore, we are clarifying the language we proposed to 
codify this policy under new paragraph (c) of Sec.  412.517, to specify 
that beginning in FY 2016, the annual recalibration of the MS-LTC-DRG 
relative weights is determined using LTCH PPS discharges described in 
Sec.  412.522(a)(2) (or that would have been described in such section 
had the application of site neutral payment rate been in effect at the 
time of the discharge).
b. High-Cost Outliers
    Under the LTCH PPS, the existing regulations at Sec.  412.525(a) 
provide for an additional adjustment to LTCH PPS payments to account 
for outlier cases that have extraordinarily high costs relative to the 
costs of most discharges (referred to as high-cost outliers (HCOs).) 
Providing such adjustments for HCOs strongly improves the accuracy of 
the LTCH PPS in determining resource costs at the patient and hospital 
level. In addition, HCO payments reduce the financial losses that would 
otherwise be incurred by hospitals when treating patients who require 
more costly care and, therefore, reduce the incentives to underserve 
these patients. Currently, we set the HCO threshold before the 
beginning of the payment year so that total estimated HCO payments are 
projected to equal 8 percent of estimated total payments under the LTCH 
PPS. Under our current HCO policy, an LTCH would receive an additional 
payment if the estimated cost of a case exceeds the adjusted LTCH PPS 
payment plus a fixed-loss amount. In such cases, the additional HCO 
payment amount is equal to 80 percent of the difference between the 
estimated cost of the case and the HCO threshold, which is the sum of 
the adjusted Federal MS-LTC-DRG prospective payment amount for the case 
and the fixed-loss amount. The fixed-loss amount is the amount used to 
limit the loss that an LTCH would incur under the HCO policy for a case 
with unusually high costs. This results in Medicare and the LTCH 
sharing financial risk in the treatment of extraordinarily costly 
cases. Under the HCO policy, the fixed-loss amount is the maximum loss 
that an LTCH can incur for a case with unusually high costs before 
receiving an additional payment amount. The additional payment amount 
under the LTCH PPS HCO policy is determined using a marginal cost 
factor, which is a fixed percentage of costs above the HCO threshold. 
The marginal cost factor under the LTCH PPS HCO policy is 80 percent.
    Under the current HCO policy, we annually determine a fixed-loss 
amount, that is, the maximum loss that an LTCH can incur under the LTCH 
PPS for a case with unusually high costs before an adjustment is made 
to the payment for the case. We do so by using the best available data 
to estimate aggregate LTCH PPS payments with and without a HCO policy, 
and, based on those estimates, set the fixed-loss amount at an amount 
that result in estimated total HCO payments being equal to 8 percent of 
estimated total LTCH PPS payments. Additional information on the LTCH 
PPS HCO methodology can be found in the FY 2003 LTCH PPS final rule (67 
FR 56022 through 56027) and the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50398 through 50400).
    As discussed in the previous section, under the new statutory LTCH 
PPS structure, section 1206(a) of Public Law 113-67 establishes two 
distinct payment rates for LTCH discharges beginning in FY 2016. To 
implement this statutory change, in the FY 2016 IPPS/LTCH PPS proposed 
rule, under proposed new Sec.  412.522(a)(2), we proposed to pay for 
LTCH discharges that meet the criteria for exclusion from site neutral 
payment rate based on the LTCH PPS standard Federal payment rate, which 
includes HCO payments. Under proposed new Sec.  412.522(c), consistent 
with the statute, we proposed that the site neutral payment rate is the 
lower of the IPPS comparable per diem amount as determined under 
existing

[[Page 49618]]

Sec.  412.529(d)(4) (including any applicable adjustments, such as 
outlier payments), or 100 percent of the estimated cost of the case as 
determined under existing Sec.  412.529(d)(2). Below we discuss our 
proposed and finalized policies for determining HCO payments under the 
new statutory LTCH PPS payment structure.
    In response to our solicitation for stakeholder input included in 
the FY 2015 IPPS/LTCH PPS proposed rule, we received numerous comments 
that addressed the HCO policy under the new statutory LTCH PPS 
structure. In its comment, MedPAC recommended that both LTCH PPS 
standard Federal payment rate cases and site neutral payment rate cases 
receive HCO payments, and that estimated total HCO payments under the 
LTCH PPS continue to be projected to be equal to 8 percent of estimated 
total LTCH PPS payments for all cases (that is, both the LTCH PPS 
standard Federal payment rate cases and the site neutral payment rate 
cases). In contrast, most of the other commenters recommended that 
separate HCO fixed-loss amounts and separate HCO payment ``targets'' 
(that is, the projected percentage that estimated HCO payments are of 
estimated total payments) be determined for LTCH PPS standard Federal 
payment rate cases and site neutral payment rate cases. Specifically, 
these commenters recommended that we calculate a fixed-loss amount 
under the current HCO policy for LTCH PPS standard Federal payment rate 
cases using only data (and estimated payments) from what would have 
been or are LTCH PPS standard Federal payment rate cases, without 
including data (and estimated payments) from cases that would have been 
or are paid the site neutral payment rate. In addition, some of the 
commenters recommended initially applying the existing HCO policy 
separately to both LTCH PPS standard Federal payment rate cases and 
site neutral payment rate cases; that is, determining separate HCO 
fixed-loss amounts so that estimated HCO payments would be equal to 8 
percent of estimated total payments for each of the two LTCH PPS 
payment types (the LTCH PPS standard Federal payment rate cases and 
site neutral payment rate cases), respectively, and then adjusting the 
HCO targets as more data under the statutory revisions to the LTCH PPS 
become available. In other words, commenters suggested that it may be 
more appropriate to have different HCO targets for the two LTCH PPS 
payment types rather than two HCO targets of 8 percent. When making 
recommendations regarding the HCO policy under the statutory LTCH PPS 
changes, several commenters urged CMS to focus on maintaining LTCH PPS 
payments for LTCH PPS standard Federal payment rate cases at the same 
payment level as they are currently under the LTCH PPS, including the 
level of HCO payments, and to mitigate any instability in the HCO 
fixed-loss amount for LTCH PPS standard Federal payment rate cases.
    Several commenters conducted independent analyses that looked at 
separate HCO fixed-loss amounts for LTCH PPS standard Federal payment 
rate cases and site neutral payment rate cases. Upon review of their 
analyses, these commenters specifically recommended that separate HCO 
fixed-loss amounts be used for the two LTCH PPS payment types. A few of 
the commenters' analyses included assumptions about LTCH behavioral 
response to statutory changes to the LTCH PPS (such as changes in 
patient volume and costs). A few commenters indicated that using 
historical data would not reflect the anticipated behavioral response 
as a result of the new statutory payment structure and, therefore, may 
lead to an overestimation of costs and HCO payments (particularly with 
regard to payments for site neutral payment rate cases), resulting in a 
fixed-loss amount that is set too high relative to the HCO target. If 
this were to occur, these commenters expressed concern that LTCHs would 
be ``underpaid'' because HCO payments are budget neutral and actual HCO 
payments would fall below the HCO payments target.
    In the FY 2016 IPPS/LTCH PPS proposed rule, we stated our 
appreciation for the commenters' detailed feedback and indicated that 
we had taken their concerns and recommendations into consideration 
while framing our proposed HCO policy under the new statutory LTCH PPS 
structure. As we always have for the LTCH PPS, we designed our proposed 
HCO policy under the new statutory structure to achieve a balance of 
the following goals: To reduce financial risk, reduce incentives to 
underserve costly beneficiaries, and improve the overall fairness of 
the PPS (67 FR 56023). With these goals in mind, we evaluated whether 
it would be appropriate to modify our current HCO policy to account for 
the establishment of the new dual rate LTCH PPS payment structure. This 
included examining whether our current HCO target, under which we set a 
single fixed-loss amount so that estimated total HCO payments are 
projected to equal 8 percent of estimated total LTCH PPS payments, 
should continue to be used upon implementation of the statutory LTCH 
PPS payment changes, or whether it would be more appropriate to have 
two separate HCO targets (one for LTCH PPS standard Federal payment 
rate cases and one for site neutral payment rate cases).
    In examining this issue, we considered how LTCH discharges based on 
historical claims data would have been classified under the new dual 
rate LTCH PPS payment structure and the CMS' Office of the Actuary 
(OACT) projections regarding how LTCHs would likely respond to our 
proposed implementation of policies resulting from the statutory 
payment changes. For FY 2016, our actuaries currently project that the 
proportion of cases that would qualify as LTCH PPS standard Federal 
payment rate cases verses site neutral payment rate cases under the new 
statutory provisions would remain consistent with what is reflected in 
the historical LTCH PPS claims data. (As previously noted, based on FY 
2013 LTCH claims data, we found that approximately 54 percent of LTCH 
cases would have been paid the LTCH PPS standard Federal payment rate 
and approximately 46 percent of LTCH cases would have been paid the 
site neutral payment rate if those rates had been in effect at that 
time.) While our actuaries do not project an immediate change in these 
proportions, they do project cost and resource changes to take into 
account the lower payment rates. Our actuaries also project that the 
costs and resource use for cases paid at the site neutral payment rate 
would likely be lower, on average, than the costs and resource use for 
cases paid at the LTCH PPS standard Federal payment rate and would 
likely mirror the costs and resource use for IPPS cases assigned to the 
same MS-DRG, regardless of whether the proportion of site neutral 
payment rate cases in the future remains similar to what is found based 
on the historical data. This actuarial assumption is based on our 
expectation that site neutral payment rate cases would generally be 
paid based on an IPPS comparable per diem amount under the statutory 
LTCH PPS payment changes, which, in the majority of cases, is much 
lower than the payment that would have been paid if these statutory 
changes were not enacted. These assumptions are consistent with 
statements from several commenters who noted that the type of site 
neutral payment rate cases may change in cost and severity over time in 
response to the new statutory payment structure because the payment for 
those cases

[[Page 49619]]

would generally be lower than the current payment made under the LTCH 
PPS for these types of cases (80 FR 24538).
    In light of these projections and expectations, we stated in the 
proposed rule that we believe that the use of a single fixed-loss 
amount and HCO target for all LTCH PPS cases would be problematic. 
Currently, the FY 2015 LTCH PPS fixed-loss amount is $14,972, which was 
determined using FY 2013 LTCH claims data (79 FR 50400). The FY 2015 
IPPS fixed-loss amount is $25,799 (79 FR 50374). A single fixed-loss 
amount and target under the LTCH PPS would allow LTCH cases paid at the 
site neutral payment rate to qualify for HCO payments much more easily 
than comparable IPPS cases assigned to the same MS-DRG. This would 
occur because the HCO threshold (which is generally the sum of the 
adjusted Federal PPS payment for the case and the fixed-loss amount) 
under the IPPS would be higher than the HCO threshold under the LTCH 
PPS for a case assigned to the same MS-DRG (which would be expected to 
have a comparable adjusted Federal PPS payment, costs and resource use 
to a case paid as a LTCH PPS site neutral payment rate case). We also 
stated in the proposed rule that while we recognize that differing 
statutory requirements between the two payment systems result in 
comparable LTCH PPS site neutral payment rate cases and IPPS cases not 
being paid exactly the same amount, we did not believe that it would be 
appropriate for comparable LTCH PPS site neutral payment rate cases to 
receive dramatically different HCO payments from those cases that would 
be paid under the IPPS. Based on the FY 2015 figures, an IPPS hospital 
would have to absorb approximately $11,000 more in additional estimated 
costs than the LTCH treating a comparable case based on the difference 
between the IPPS fixed-loss amount of $25,799 and the LTCH PPS fixed-
loss amount of $14,792 before it would begin to receive HCO payments. 
We believe that the most appropriate fixed-loss amount for site neutral 
payment rate cases under the LTCH PPS for a given fiscal year beginning 
with FY 2016 would be the IPPS fixed-loss amount for that fiscal year. 
Therefore, in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24538 
through 24539), for FY 2016, we proposed a fixed-loss amount for site 
neutral payment rate cases of $24,485, which was the same proposed FY 
2016 IPPS fixed-loss amount discussed in section II.A.4.g.(1) of the 
Addendum to the proposed rule and this final rule. We believe that this 
policy will reduce differences between HCO payments for similar cases 
under the IPPS and site neutral payment rate cases under the LTCH PPS 
and promote fairness between the two systems. We also proposed to make 
a payment adjustment for HCOs paid under the site neutral payment rate 
at a rate equal to 80 percent of the difference between the estimated 
cost of the case and the proposed IPPS HCO threshold, which is 
consistent with the current LTCH PPS HCO policy. The proposed IPPS HCO 
threshold for site neutral payment rate cases would be the sum of the 
LTCH PPS payment for such cases and the proposed IPPS fixed-loss amount 
of $24,485. As stated above, we believe that this policy will reduce 
differences between HCO payments for similar cases under the IPPS and 
site neutral payment rate cases under the LTCH PPS and promote fairness 
between the two systems. We also proposed to codify these proposals by 
making revisions to the existing HCO policy at Sec.  412.525(a). In 
light of these proposals, we noted that any site neutral payment rate 
case that is paid 100 percent of the estimated cost of the case because 
that amount is lower than the IPPS comparable per diem amount will 
never be eligible to receive a HCO payment because, by definition, the 
estimated costs of such cases will never exceed the IPPS comparable per 
diem amount by any threshold.
    Comment: Commenters supported the proposed HCO policy under the new 
statutory LTCH PPS structure, under which there would be separate HCO 
fixed-loss amounts and separate HCO payment targets for LTCH PPS 
standard Federal payment rate cases and site neutral payment rate 
cases. Commenters also expressed support for the proposals concerning 
the methodology for determining the HCO payment amount for site neutral 
payment rate cases, including the use of the IPPS FLT for FY 2016. 
While commenters generally agreed with our assumptions that the costs 
and resource use for site neutral payment rate cases would likely 
mirror the costs and resource use for IPPS cases assigned to the same 
MS-DRG, some commenters also noted their belief that the type of site 
neutral payment rate cases may change in cost and severity over time in 
response to the new dual rate LTCH PPS payment structure. These 
commenters requested that CMS revisit the use of the IPPS fixed-loss 
amount once we have actual experience under the revised LTCH PPS, and 
possibly develop a HCO fixed-loss amount for site neutral payment rate 
cases that is independent of the IPPS's amount in the future. 
(Commenters also provided comments regarding the proposed budget 
neutrality adjustment for HCO payments to site neutral payment rate 
cases, which are discussed later in this section.)
    Response: We appreciate the commenters' support of these proposals. 
As we indicated in the proposed rule, we believe having a single HCO 
policy for both standard Federal payment rate cases and site neutral 
payment rate cases under the revised LTCH PPS would be problematic in 
light of our projections and expectations of LTCHs' behavioral response 
to statutory changes to the LTCH PPS. We also explained that, given the 
expectation that cases paid at the site neutral payment rate would 
likely be similar to IPPS cases assigned to the same MS-DRG, the most 
appropriate fixed-loss amount for site neutral payment rate cases would 
be the IPPS fixed-loss amount for that fiscal year. To the extent 
experience under the revised LTCH PPS indicates site neutral payment 
rate cases differ sufficiently from these expectations, we agree it 
would be appropriate to revisit in future rulemaking the most 
appropriate fixed-loss amount used to determine HCO payments for site 
neutral payment rate cases.
    After consideration of public comments we received, we are 
finalizing without modification our proposals to have separate HCO 
policies under the new dual rate LTCH PPS payment structure and our 
proposed methodology for calculating site neutral payment rate case the 
HCO payments, including the use of the IPPS FLT. We also are finalizing 
proposed revisions to the existing HCO policy at Sec.  412.525(a) to 
codify these policies, as discussed below in this section.
    Therefore, in this final rule, we are establishing a fixed-loss 
amount for site neutral payment rate cases for FY 2016 of $22,544, 
which was the same FY 2016 IPPS fixed-loss amount discussed in section 
II.A.4.g.(1) of the Addendum to this final rule. As stated above, we 
believe that this policy will reduce differences between HCO payments 
for similar cases under the IPPS and site neutral payment rate cases 
under the LTCH PPS and promote fairness between the two systems.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24539), after 
having established the IPPS fixed-loss amount as an appropriate 
threshold to propose for HCOs paid under the site neutral payment rate, 
we next examined how to establish an appropriate fixed-loss amount and 
HCO target for LTCH PPS standard Federal payment rate

[[Page 49620]]

cases. Therefore, we agreed with the commenters who recommended in 
response to our solicitation for input during the FY 2015 rulemaking 
cycle that we establish a fixed-loss amount and target for LTCH PPS 
standard Federal payment rate cases using the current LTCH PPS HCO 
policy, but limiting the data used under that policy to was and/or what 
would have been LTCH PPS standard Federal payment rate cases if the new 
dual rate LTCH PPS payment structure was/had been in effect at the time 
of those discharges. We also agreed with the commenters from the FY 
2015 rulemaking cycle that believed this policy would result in 
increased stability over time with respect to HCO payments for the LTCH 
PPS standard Federal payment rate cases. We also believed that this 
approach would meet the goals cited for our revised and current HCO 
policy; that is, reducing financial risk, reducing incentives to 
underserve costly beneficiaries, and improving the overall fairness of 
the LTCH PPS (67 FR 56023). Therefore, in the FY 2016 IPPS/LTCH PPS 
proposed rule, we did not propose to make any modifications to the HCO 
methodology as it applies to LTCH PPS standard Federal payment rate 
cases, other than determining a fixed-loss amount using only data from 
LTCH PPS standard Federal payment rate cases. Specifically, under our 
proposal, LTCH PPS standard Federal payment rate cases as described 
under proposed new Sec.  412.522(a)(2) would receive an additional 
payment for an HCO case that is equal to 80 percent of the difference 
between the estimated cost of the case and the HCO threshold, which 
would be the sum of the LTCH PPS payment for the LTCH PPS standard 
Federal payment rate case and the fixed-loss amount for such cases. The 
fixed-loss amount for LTCH PPS standard Federal payment rate cases 
would continue to be determined so that estimated HCO payments would be 
projected to be equal to 8 percent of estimated total LTCH PPS payments 
for LTCH PPS standard Federal payment rate cases.
    In the FY 2016 IPPS/LTCH PPS proposed rule, to codify our proposed 
changes to the HCO policy to account for the new dual rate LTCH PPS 
payment structure, we proposed to revise paragraphs (a)(1), (a)(2), and 
(a)(3), and add a new paragraph (a)(4) to existing Sec.  412.525. In 
existing Sec.  412.525 (a)(1), (a)(2), and (a)(3), we proposed to make 
technical changes to the existing language to make it clear that the 
provisions in those paragraphs apply to LTCH discharges under both LTCH 
PPS payment rates (that is, site neutral payment rate cases as 
described at new Sec.  412.522(a)(1) and the standard Federal payment 
rate cases as described at new Sec.  412.522(a)(2)). Under the proposed 
new paragraph (a)(4) to Sec.  412.525, we also proposed to specify what 
the terms ``applicable LTCH PPS prospective payment'' and ``applicable 
fixed-loss amount'' mean for purposes of this paragraph. Specifically, 
we proposed that, for purposes of Sec.  412.525(a), ``applicable LTCH 
PPS prospective payment'' means either the site neutral payment rate 
under new Sec.  412.522(c) for LTCH discharges described under new 
Sec.  412.522(a)(1) or the standard Federal prospective payment rates 
under Sec.  412.523 for LTCH discharges described under new Sec.  
412.522(a)(2). Similarly, we proposed that, for purposes of Sec.  
412.525(a), ``applicable fixed-loss amount'' means either, for LTCH 
described under new Sec.  412.522(a)(1), the fixed-loss amount 
established for such cases, or, for LTCH discharges described under new 
Sec.  412.522(a)(2), the fixed-loss amount established for such cases. 
In addition, we proposed to add language to paragraph (a) of Sec.  
412.525 to clarify that the fixed-loss is the maximum loss that a LTCH 
can incur under the LTCH PPS for a case with unusually high costs 
``before receiving an additional payment,'' and is not the maximum loss 
an LTCH can incur. We proposed to make this clarification to highlight 
that the additional payment under the revised HCO policy is 80 percent 
(not 100 percent) of the estimated costs above the outlier threshold 
(that is, the sum of the applicable LTCH PPS prospective payment and 
the applicable fixed-loss amount).
    Comment: Commenters supported the proposals to apply the existing 
HCO policy to LTCH PPS standard Federal payment rate cases, including 
the 8 percent HCO payment percentage target. However, some commenters 
requested that, when calculating the fixed-loss amount for cases that 
will be paid using the LTCH PPS standard Federal payment rate in FY 
2016, CMS include all of the cases in the historical data that would 
have been paid using the LTCH PPS standard Federal payment rate had the 
revised FY 2016 LTCH PPS been in effect at the time of the discharge, 
not just the historical data for cases meeting the criteria for 
exclusion from the site neutral payment rate. These commenters believed 
that CMS' use of only the historical cases meeting the criteria for 
exclusion from the site neutral payment rate in the calculation of the 
fixed-loss amount for FY 2016 is inaccurate. They also stated that the 
proposed approach results in estimated aggregate FY 2016 high-cost 
outlier payments for cases paid using the LTCH PPS standard Federal 
payment rate that are less than 8 percent of estimated aggregate FY 
2016 payments for such cases (that is, paid using the LTCH PPS standard 
Federal payment rate during FY 2016). These commenters also requested 
that CMS modify the proposed conforming changes to the existing HCO 
policy at Sec.  412.525(a) to reflect their requested changes to the 
fixed-loss amount.
    Response: We appreciate the commenters' support of our proposals to 
determine HCO for LTCH PPS standard Federal payment rate cases using 
our existing HCO policies, including the 8 percent HCO payment 
percentage target. We proposed that the fixed-loss amount for LTCH PPS 
standard Federal payment rate cases would continue to be determined so 
that estimated HCO payments would be projected to be ``equal to 8 
percent of estimated total LTCH PPS payments for LTCH PPS standard 
Federal payment rate cases'' (80 FR 24539). In the proposed rule, we 
clearly indicated that the phrase ``LTCH PPS standard Federal payment 
rate case''' refers to a LTCH PPS case that meets the criteria for 
exclusion from the site neutral payment rate under section 
1886(m)(6)(A)(ii) of the Act (80 FR 24527). The commenters' concern 
regarding the calculation of the fixed-loss amount for FY 2016 comes 
from the distinction between ``cases paid using the LTCH PPS standard 
Federal payment rate in FY 2016'' and ``LTCH PPS standard Federal 
payment rate cases in FY 2016.'' Under the statutory phase-in of the 
LTCH PPS for FY 2016, cases in an LTCH with a cost reporting period 
starting before October 1, 2015, that do not meet the criteria for 
exclusion from the site neutral payment rate will nevertheless be 
``paid using the LTCH PPS standard Federal payment rate'' until the 
start of that LTCH's first cost reporting period beginning in FY 2016. 
These cases are the historical cases that the commenters requested be 
included in the calculation of the FY 2016 fixed-loss amount for ``LTCH 
PPS standard Federal payment rate cases'' even though those cases would 
not meet the criteria to be excluded from the site neutral payment rate 
had the revised LTCH PPS been in effect at the time of the discharge.
    For the calculation of the fixed-loss amount in the second year of 
the revised LTCH PPS (that is, FY 2017), there is no difference between 
the historical cases that would have been paid using the LTCH PPS 
standard Federal payment

[[Page 49621]]

rate and the historical cases that would meet the criteria for 
exclusion from the site neutral payment rate (that is, LTCH PPS 
standard Federal payment rate cases) had the revised FY 2017 LTCH PPS 
been in effect at the time of the discharge. The distinction between 
them under the revised FY 2016 LTCH PPS (explained above) no longer 
exists--they are the same cases. It is only in the first year of the 
revised LTCH PPS (FY 2016) that there is a difference. As explained 
above, this difference is due to the statutory phase-in of the revised 
LTCH PPS in FY 2016: cases in an LTCH with a cost reporting period 
starting before October 1, 2015, that do not meet the criteria for 
exclusion from the site neutral payment rate will continue to be paid 
at the higher LTCH PPS standard Federal payment rate until the start of 
that hospital's first cost reporting period in FY 2016.
    We considered the approach requested by commenters of using the 
historical cases that would have been paid using the LTCH PPS standard 
Federal payment rate had the revised FY 2016 PPS been in effect at the 
time of the discharge to calculate the fixed-loss amount for FY 2016. 
However, we believe that approach would lead to less stability in the 
fixed-loss amount between FY 2016 and FY 2017 because cases not meeting 
the criteria for exclusion from the site neutral payment rate (had 
those criteria been in effect) would be included in the calculation of 
the fixed-loss amount for FY 2016 and then not included in the 
calculation for FY 2017. As we stated in the proposed rule, we believe 
our proposal would result in increased stability over time with respect 
to HCO payments for the LTCH PPS standard Federal payment rate cases 
(80 FR 24539). In addition, as noted earlier, there is uncertainty 
surrounding the site neutral payment rate case population under the new 
dual rate LTCH PPS payment structure. For the portion of the site 
neutral payment rate case population that will continue to be paid at 
the LTCH PPS standard Federal payment rate for a portion of FY 2016 
(that is, those FY 2016 cases that would not meet the criteria for 
exclusion and would be paid the site neutral payment rate were those 
cases in LTCH cost reporting periods subject to those criteria at the 
time of the discharge), there is even greater uncertainty as to what 
the costs of those cases will be during that time. Therefore, we 
disagree that our proposed methodology is inaccurate. However, we 
acknowledge that these two approaches result in different estimated 
aggregate FY 2016 payments for cases paid using the LTCH PPS standard 
Federal payment rate, but that is due to the transitory effect of the 
statutory phase-in of the revised LTCH PPS. In FY 2017, the two 
approaches would result in the same estimated aggregate FY 2017 LTCH 
PPS expenditures.
    After consideration of the public comments we received, for the 
reasons discussed, we are finalizing our policy as proposed without 
modification. In this final rule, we are calculating the fixed-loss 
amount for FY 2016 so that estimated aggregate FY 2016 HCO payments for 
cases that meet the criteria for exclusion from the site neutral 
payment rate are estimated to be equal to 8 percent of estimated 
aggregate FY 2016 payments for cases that meet the criteria for 
exclusion from the site neutral payment rate, rather than calculating 
the fixed-loss amount so that estimated aggregate FY 2016 HCO payments 
for cases paid using the LTCH PPS standard Federal payment rate are 
estimated to be equal to 8 percent of estimated aggregate FY 2016 
payments for cases paid using the LTCH PPS standard Federal payment 
rate. We also are finalizing our proposals, without modification, to 
codify the changes to the HCO policy to account for the new dual rate 
LTCH PPS payment structure in existing Sec.  412.525.
    The current LTCH PPS HCO policy has a budget neutrality requirement 
in which the LTCH PPS standard Federal payment rate is reduced by an 
adjustment factor to account or the estimated proportion of HCO 
payments to total estimated LTCH PPS payments, that is, 8 percent. (We 
refer readers to Sec.  412.523(d)(1) of the regulations.) This budget 
neutrality requirement is intended to ensure that the HCO policy would 
not result in any change in estimated aggregate LTCH PPS payments. 
Under our proposal to continue to apply the current HCO methodology as 
it relates to LTCH PPS standard Federal payment rate cases (other than 
determining a fixed-loss amount using only data from LTCH PPS standard 
Federal payment rate cases (had the new statutory patient criteria been 
in effect at the time of the discharge), we also would continue to 
apply the current budget neutrality requirement (described above). In 
accordance with the current LTCH PPS HCO policy budget neutrality 
requirement, we believe that the HCO policy for site neutral payment 
rate cases should also be budget neutral, meaning that the proposed 
site neutral payment rate HCO payments should not result in any change 
in estimated aggregate LTCH PPS payments. In order to achieve this, 
under new Sec.  412.522(c)(2)(i), we proposed to apply a budget 
neutrality factor to the payment for all site neutral payment rate 
cases described under proposed new Sec.  412.522(a)(1), which would 
also be established on an estimated basis. This approach was consistent 
with the HCO policy proposed LTCH PPS standard Federal payment rate 
cases HCO policy, which is budget neutral within the universe of LTCH 
PPS standard Federal payment rate cases (had the new statutory patient 
criteria been in effect at the time of the discharge). We invited 
public comments on this approach and the alternative approach of 
applying a single budget neutrality factor to all LTCH PPS cases, 
irrespective of the site neutral payment rate.
    In order to estimate the magnitude a proposed budget neutrality 
adjustment under our proposed HCO payment budget neutrality requirement 
for site neutral payment rate cases, we again relied on the assumption 
by our actuaries that site neutral payment rate cases would have 
lengths of stay and costs comparable to IPPS cases assigned to the same 
MS-DRG. Under the IPPS, the fixed-loss amount is estimated based on a 
5.1 percent target (79 FR 50378). In accordance with section 
1886(d)(5)(A)(iv) of the Act, estimated operating IPPS HCO payments for 
any year are projected to be at least 5 percent, but no more than 6 
percent of estimated total operating DRG payments, which does not 
include IME and DSH payments plus HCO payments. When setting the HCO 
threshold, we historically compute a 5.1 percent target by dividing the 
total operating IPPS HCO payments by the total operating IPPS DRG 
payments plus operating IPPS HCO payments (79 FR 50374). We believe 
that it is reasonable to set the site neutral payment rate case HCO 
target at the IPPS HCO target because these cases are expected to have 
lengths of stay and costs comparable to IPPS cases assigned to the same 
MS-DRG. Furthermore, using the IPPS fixed-loss threshold for the site 
neutral payment rate cases would be expected to result in HCO payments 
for site neutral payment rate cases that are similar in proportion as 
is seen in IPPS cases assigned to the same MS-DRG; that is, 5.1 
percent. We recognize that, given the uncertainty surrounding the site 
neutral payment rate case population under the revised LTCH PPS and 
differences between the relative utilization of the MS-DRGs and MS-LTC-
DRGs between the two systems, this prediction may not

[[Page 49622]]

take effect. However, we must begin somewhere, and we believed that 
this proposed policy seems to be the best budget neutrality option at 
this time based on the information available to ensure LTCH PPS 
spending does not inappropriately increase under our proposal for site 
neutral payment rate HCO cases. As with all of our finalized policies, 
we will continue to monitor HCOs payments under the LTCH PPS and, as 
necessary, propose modifications to the proposed method as needed based 
on what is observed during the implementation process.
    Therefore, in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24540 
through 24541), under proposed new Sec.  412.522(c)(2)(i), we proposed 
to adjust payments to site neutral payment rate cases (that is, LTCH 
PPS discharges described under proposed new Sec.  412.522(a)(1)) by a 
budget neutrality factor so that the estimated HCO payments payable to 
site neutral payment rate cases do not result any increase in aggregate 
LTCH PPS payments. As discussed in greater detail in section V.D.4. of 
the Addendum to the proposed rule and this final rule, in estimating 
total LTCH PPS payments in Federal FY 2016, we proposed to apply an 
adjustment to account for the varying effective dates of the statutory 
LTCH PPS payment changes required by section 1886(m)(6) of the Act, as 
amended by section 1206 of Public Law 113-67, which are effective for 
discharges occurring in cost reporting periods beginning on or after 
October 1, 2015.
    Comment: Commenters objected to the proposed site neutral payment 
rate HCO budget neutrality adjustment, claiming that it would result in 
savings instead of being budget neutral. The commenters' primary 
objection was based on their belief that, because the IPPS base rates 
used in the IPPS comparable per diem amount calculation of the site 
neutral payment rate include a budget neutrality adjustment for IPPS 
HCO payments (for example, a 5.1 percent adjustment on the operating 
IPPS standardized amount), an ``additional'' budget neutrality factor 
is not necessary and is, in fact, duplicative. Based on their belief 
that the proposed site neutral payment rate HCO budget neutrality 
adjustment is duplicative, some commenters recommended that if CMS 
continues with the application of that budget neutrality adjustment, 
the calculation of the IPPS comparable per diem amount should be 
revised to use the IPPS operating standardized amount prior to the 
application of the IPPS HCO budget neutrality adjustment. The 
commenters also disagreed with CMS' proposed approach for determining 
the proposed site neutral payment rate HCO budget neutrality factor, 
and also noted some technical changes to the calculation should CMS 
finalize this proposal.
    Response: We disagree with the commenters that a budget neutrality 
adjustment for site neutral payment rate HCO payments is unnecessary or 
duplicative. While the commenters are correct that the IPPS base rates 
that are used in site neutral payment rate calculation include a budget 
neutrality adjustment for IPPS HCO payments, that adjustment is merely 
a part of the calculation of one of the inputs (that is, the IPPS base 
rates) that are used in the LTCH PPS computation of site neutral 
payment rate. The HCO budget neutrality factor that is applied in 
determining the IPPS base rates is intended to fund estimated HCO 
payment made under the IPPS, and is therefore determined based on 
estimated payments made under the IPPS. As such, the HCO budget 
neutrality factor that is applied to the IPPS base rates does not 
account for the additional HCO payments that would be made to site 
neutral payment rate cases under the LTCH PPS. Without a budget 
neutrality adjustment when determining payment for a case under the 
LTCH PPS, any HCO payment payable to site neutral payment rate cases 
would increase aggregate LTCH PPS payments above the level of 
expenditure if there were no HCO payments for site neutral payment rate 
cases. Therefore, our proposed approach appropriately results in LTCH 
PPS payments to site neutral payment rate cases that are budget neutral 
relative to a policy with no HCO payments to site neutral payment rate 
cases. For these reasons, we are not adopting the commenters' 
recommendation to change the calculation of the IPPS comparable per 
diem amount to adjust the IPPS operating standardized amount used in 
that calculation to account for the application of the IPPS HCO budget 
neutrality adjustment.
    After consideration of the public comments we received, for the 
reasons discussed above, we are adopting our proposal to adjust 
payments to site neutral payment rate cases by a budget neutrality 
factor so that the estimated HCO payments payable to site neutral 
payment rate cases do not result any increase in aggregate LTCH PPS 
payments (relative to LTCH PPS payments without HCO payments to site 
neutral payment rate cases), without modification. In doing so, we note 
that we present and respond to the comments on CMS' proposed approach 
for determining the proposed site neutral payment rate budget 
neutrality factor, including the technical changes recommended by some 
commenters, in section V.D.4. of the Addendum to this final rule.
    In addition to the proposed changes to the existing HCO policy 
under Sec.  412.525(a) and the budget neutrality adjustment to account 
for site neutral payment rate HCO payments under proposed Sec.  
412.522(c)(2)(i), we proposed to make conforming changes to existing 
Sec.  412.523 under paragraph (d)(1) to specify that the HCO target of 
8 percent in that provision only applies to HCO payments under Sec.  
412.525(a) as they relate to LTCH PPS standard Federal payment rate 
cases; that is, HCO payments made for discharges described under 
proposed new Sec.  412.522(a)(2) and not all HCO payments described 
under proposed new Sec.  412.525(a).
    We did not receive any public comments on the proposed conforming 
changes to existing Sec.  412.523(d)(1). Therefore, we are adopting 
these changes as final without modification.
    In summary, in this final rule, we are finalizing the policy to 
have separate HCO fixed-loss amounts and HCO targets (and corresponding 
budget neutrality adjustments) for site neutral payment rate cases and 
LTCH PPS standard Federal payment rate cases, respectively, under the 
new dual rate LTCH PPS payment structure. For the reasons discussed 
above, we believe that separate and independent HCO fixed-loss amounts 
for each of the two types of LTCH PPS cases will result in the most 
appropriate payments under the LTCH PPS and achieve the stated goals of 
our HCO policy. In accordance with our revised HCO policy for LTCH PPS 
standard Federal payment rate cases and site neutral payment rate 
cases, we are establishing that, beginning with FY 2016, our current 
HCO policy will apply to LTCH PPS standard Federal payment rate cases, 
such that LTCH PPS standard Federal payment rate cases will receive an 
additional payment for an HCO case that is equal to 80 percent of the 
difference between the estimated cost of the case and the LTCH PPS 
standard Federal payment HCO threshold (which is the sum of the LTCH 
PPS standard Federal payment rate for the case and the fixed-loss 
amount for such cases). The fixed-loss amount for LTCH PPS standard 
Federal payment rate cases will be determined so that estimated HCO 
payments will be projected to equal 8 percent of estimated total LTCH 
PPS payments for LTCH PPS standard Federal payment rate cases. To 
maintain budget neutrality, the LTCH PPS standard Federal payment rate 
will

[[Page 49623]]

continue to be adjusted by 8 percent to account for the estimated HCO 
payments to LTCH PPS standard Federal payment rate cases. Similarly, we 
are establishing that site neutral payment rate cases will receive an 
additional payment for an HCO case that is equal to 80 percent of the 
difference between the estimated cost of the case and the site neutral 
payment rate HCO threshold, which is the sum of site neutral payment 
rate for the case and the fixed-loss amount for such cases. For site 
neutral payment rate cases, we are finalizing the proposal to use the 
fixed-loss amount determined annually under the IPPS HCO policy, and we 
estimate that this will result in an estimated proportion of HCO 
payments to total LTCH PPS payments for site neutral payment rate cases 
of 5.1 percent. We are establishing that HCO payments to site neutral 
payment rate cases will be budget neutral, consistent with the current 
LTCH PPS HCO policy. To maintain budget neutrality, we are finalizing 
the proposal to apply a budget neutrality factor to the LTCH PPS 
payments for site neutral payment rate cases. (The details of the 
determination of the site neutral payment rate HCO budget neutrality 
factor are discussed in section V.D.4. of the Addendum to this final 
rule.) To codify the policies discussed in this section, we are making 
changes to the existing HCO policy under Sec.  412.525(a) and 
conforming changes to existing Sec.  412.523(d)(1), as well as a budget 
neutrality requirement for HCO payments to site neutral payment rate 
cases under new Sec.  412.522(c)(2)(i).
c. Limitation on Charges to Beneficiaries
    In accordance with existing regulations and for the consistency 
with other established hospital prospective payment systems polices, in 
the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24541), we proposed to 
revise Sec.  412.507 to establish allowable charges to Medicare 
beneficiaries whose discharge from the LTCH is paid under the site 
neutral payment rate (as described in section VII.B.4. of the preamble 
of the proposed rule and this final rule). Section 1206(a)(1) of Public 
Law 113-67 requires that, beginning with cost reporting periods 
occurring on or after October 1, 2015, all LTCH discharges be paid at 
the applicable site neutral payment rate unless certain criteria are 
met. In general, the site neutral rate payment is based on the lesser 
of 100 percent of the estimated cost of the case or the IPPS comparable 
per diem amount (as discussed more detail in section VII.B.4.a. of the 
preamble of this final rule). We believe that, in general, the LTCH PPS 
payment an LTCH receives at the site neutral payment rate represents a 
full payment for purposes of determining allowable beneficiary charges 
for covered services. As such, using the broad authority conferred upon 
the Secretary under section 123(a)(1) of the BBRA, as amended by 
section 307(b) of the BIPA, in the proposed rule, we proposed to revise 
Sec.  412.507 to limit allowable charges to beneficiaries. 
Specifically, we proposed that, if Medicare has paid the full site 
neutral payment rate for a discharge, an LTCH may only charge the 
beneficiary applicable deductibles and copay amounts until the high-
cost outlier threshold is met. In addition, we proposed to revise the 
terminology used under Sec.  412.507 to differentiate between cases 
paid under the site neutral payment rate and those paid under the LTCH 
PPS standard Federal payment rate. We noted that, under this proposed 
revision, for a case paid under the site neutral payment rate, that 
payment applies to the LTCH's costs for services furnished until the 
high-cost outlier threshold is met, and LTCHs may charge the 
beneficiary for noncovered services in the same manner as if the case 
were paid under the LTCH PPS standard Federal payment rate, as 
specified under existing Sec.  412.507. We did not propose to make any 
additional changes to our current provisions limiting charges to 
beneficiaries for discharges paid as SSO cases because, as explained in 
section VII.B.5. of the preamble of the proposed rule and this final 
rule, we did not propose to adopt any SSO payment adjustment policies 
for discharges paid under the site neutral payment rate at this time. 
We stated that we believe that these proposals concerning the 
limitation on charges to beneficiaries are in accordance with existing 
regulations and consistent with other established hospital payment 
systems policies.
    We did not receive any public comments concerning our proposed 
changes to the regulations limiting charges to beneficiaries. 
Therefore, we are finalizing, without modification, our proposals to 
limit charges to beneficiaries.

C. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-LTC-
DRG) Classifications and Relative Weights for FY 2016

1. Background
    Section 123 of the BBRA required that the Secretary implement a PPS 
for LTCHs to replace the cost-based payment system under TEFRA. Section 
307(b)(1) of the BIPA modified the requirements of section 123 of the 
BBRA by requiring that the Secretary examine the feasibility and the 
impact of basing payment under the LTCH PPS on the use of existing (or 
refined) hospital DRGs that have been modified to account for different 
resource use of LTCH patients.
    When the LTCH PPS was implemented for cost reporting periods 
beginning on or after October 1, 2002, we adopted the same DRG patient 
classification system utilized at that time under the IPPS. As a 
component of the LTCH PPS, we refer to this patient classification 
system as the ``long-term care diagnosis-related groups (LTC-DRGs).'' 
Although the patient classification system used under both the LTCH PPS 
and the IPPS are the same, the relative weights are different. The 
established relative weight methodology and data used under the LTCH 
PPS result in relative weights under the LTCH PPS that reflect the 
differences in patient resource use of LTCH patients, consistent with 
section 123(a)(1) of the BBRA (Pub. L. 106-113).
    As part of our efforts to better recognize severity of illness 
among patients, in the FY 2008 IPPS final rule with comment period (72 
FR 47130), the MS-DRGs and the Medicare severity long-term care 
diagnosis-related groups (MS-LTC-DRGs) were adopted under the IPPS and 
the LTCH PPS, respectively, effective beginning October 1, 2007 (FY 
2008). For a full description of the development, implementation, and 
rationale for the use of the MS-DRGs and MS-LTC-DRGs, we refer readers 
to the FY 2008 IPPS final rule with comment period (72 FR 47141 through 
47175 and 47277 through 47299). (We note that, in that same final rule, 
we revised the regulations at Sec.  412.503 to specify that for LTCH 
discharges occurring on or after October 1, 2007, when applying the 
provisions of 42 CFR part 412, subpart O applicable to LTCHs for policy 
descriptions and payment calculations, all references to LTC-DRGs would 
be considered a reference to MS-LTC-DRGs. For the remainder of this 
section, we present the discussion in terms of the current MS-LTC-DRG 
patient classification system unless specifically referring to the 
previous LTC-DRG patient classification system that was in effect 
before October 1, 2007.)
    The MS-DRGs adopted in FY 2008 represent an increase in the number 
of DRGs by 207 (that is, from 538 to 745) (72 FR 47171). The MS-DRG 
classifications are updated annually. There are currently 753 MS-DRG 
groupings. For FY 2016, there are 758 MS-DRG groupings that we are

[[Page 49624]]

finalizing in conjunction with all of the changes discussed in section 
II.G. of the preamble of this final rule. Consistent with section 123 
of the BBRA, as amended by section 307(b)(1) of the BIPA, and Sec.  
412.515 of the regulations, we use information derived from LTCH PPS 
patient records to classify LTCH discharges into distinct MS-LTC-DRGs 
based on clinical characteristics and estimated resource needs. We then 
assign an appropriate weight to the MS-LTC-DRGs to account for the 
difference in resource use by patients exhibiting the case complexity 
and multiple medical problems characteristic of LTCHs. Below we provide 
a general summary of our existing methodology for determining the FY 
2016 MS-LTC-DRG relative weights under the LTCH PPS.
    In this final rule, in general, for FY 2016, we are using our 
existing methodology to determine the MS-LTC-DRG relative weights (as 
discussed in greater detail in section VII.C.3. of the preamble of this 
final rule). However, under the new dual rate LTCH PPS payment 
structure, we are establishing that, beginning with FY 2016, the annual 
recalibration of the MS-LTC-DRG relative weights will be determined (1) 
using only data from available LTCH PPS claims that would have 
qualified for payment under the new LTCH PPS standard Federal payment 
rate if that rate were in effect when claims data from time periods 
before the new dual rate LTCH PPS payment structure applies were used 
to calculate the relative weights, and (2) using only data from 
available LTCH PPS claims that qualify for payment under the new LTCH 
PPS standard Federal payment rate when claims data from time periods 
after the dual rate LTCH PPS payment structure applies are used to 
calculate the relative weights. For the remainder of this discussion, 
we use the phrase ``applicable LTCH cases'' or ``applicable LTCH data'' 
when referring to the resulting claims data set used to calculate the 
relative weights (as described in greater detail in section VII.C.3.c. 
of the preamble of this final rule). In addition, we are continuing to 
exclude the data from all-inclusive rate providers and LTCHs paid in 
accordance with demonstration projects, as well as any Medicare 
Advantage claims from the MS-LTC-DRG relative weight calculations for 
the reasons discussed in section VII.C.3.c. of the preamble of this 
final rule.
    Under our finalized policies, the MS-LTC-DRG relative weights will 
not be used to determine the LTCH PPS payment for cases paid at the 
site neutral payment rate and data from cases paid at the site neutral 
payment rate or that would have been paid at the site neutral payment 
if the dual rate LTCH PPS payment structure had been in effect will not 
be used to develop the relative weights. (For details on our finalized 
policies regarding the application of the site neutral payment rate, we 
refer readers to section VII.B. of the preamble of this final rule. For 
additional information on our finalized policy to use data from 
applicable LTCH cases to determine the MS-LTC-DRG relative weights 
under the new dual rate LTCH PPS payment structure, we refer readers to 
section VII.B.7.a. of the preamble of this final rule.)
    Furthermore, for FY 2016, in using data from applicable LTCH cases 
to establish MS-LTC-DRG relative weights, we will continue to establish 
low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs with less than 25 cases) 
using our quintile methodology in determining the MS-LTC-DRG relative 
weights because LTCHs do not typically treat the full range of 
diagnoses as do acute care hospitals. Therefore, for purposes of 
determining the relative weights for the large number of low-volume MS-
LTC-DRGs, we group all of the low-volume MS-LTC-DRGs into five 
quintiles based on average charges per discharge. Then, under our 
existing methodology, we account for adjustments made to LTCH PPS 
standard Federal payment rate payments for short-stay outlier (SSO) 
cases (that is, cases where the covered length of stay at the LTCH is 
less than or equal to five-sixths of the geometric average length of 
stay for the MS-LTC-DRG), and we make adjustments to account for 
nonmonotonically increasing weights, when necessary. The methodology is 
premised on more severe cases under the MS-LTC-DRG system requiring 
greater expenditure of medical care resources and higher average 
charges such that, in the severity levels within a base MS-LTC-DRG, the 
relative weights should increase monotonically with severity from the 
lowest to highest severity level. (We discuss each of these components 
of our MS-LTC-DRG relative weight methodology in greater detail in 
section VII.C.3.g. of the preamble of this final rule.)
2. Patient Classifications into MS-LTC-DRGs
a. Background
    The MS-DRGs (used under the IPPS) and the MS-LTC-DRGs (used under 
the LTCH PPS) are based on the CMS DRG structure. As noted above in 
this section, we refer to the DRGs under the LTCH PPS as MS-LTC-DRGs 
although they are structurally identical to the MS-DRGs used under the 
IPPS.
    The MS-DRGs are organized into 25 major diagnostic categories 
(MDCs), most of which are based on a particular organ system of the 
body; the remainder involve multiple organ systems (such as MDC 22, 
Burns). Within most MDCs, cases are then divided into surgical DRGs and 
medical DRGs. Surgical DRGs are assigned based on a surgical hierarchy 
that orders operating room (O.R.) procedures or groups of O.R. 
procedures by resource intensity. The GROUPER software program does not 
recognize all ICD-9-CM procedure codes as procedures affecting DRG 
assignment. That is, procedures that are not surgical (for example, 
EKGs), or minor surgical procedures (for example, a biopsy of skin and 
subcutaneous tissue (procedure code 86.11)) do not affect the MS-LTC-
DRG assignment based on their presence on the claim.
    Generally, under the LTCH PPS, a Medicare payment is made at a 
predetermined specific rate for each discharge and that payment varies 
by the MS-LTC-DRG to which a beneficiary's stay is assigned. Cases are 
classified into MS-LTC-DRGs for payment based on the following six data 
elements:
     Principal diagnosis;
     Additional or secondary diagnoses;
     Surgical procedures;
     Age;
     Sex; and
     Discharge status of the patient.
    Currently, for claims submitted on the 5010 format, up to 25 
diagnosis codes and 25 procedure codes are considered for an MS-DRG 
assignment. This includes one principal diagnosis and up to 24 
secondary diagnoses for severity of illness determinations. (For 
additional information on the processing of up to 25 diagnosis codes 
and 25 procedure codes on hospital inpatient claims, we refer readers 
to section II.G.11.c. of the preamble of the FY 2011 IPPS/LTCH PPS 
final rule (75 FR 50127).)
    Under HIPAA transactions and code sets regulations at 45 CFR parts 
160 and 162, covered entities must comply with the adopted transaction 
standards and operating rules specified in Subparts I through S of Part 
162. Among other requirements, by January 1, 2012, covered entities 
were required to use the ASC X12 Standards for Electronic Data 
Interchange Technical Report Type 3--Health Care Claim: Institutional 
(837), May 2006, ASC X12N/005010X223, and Type 1 Errata to Health Care 
Claim: Institutional (837) ASC X12 Standards for Electronic Data 
Interchange Technical Report Type 3, October 2007,

[[Page 49625]]

ASC X12N/005010X233A1 for the health care claims or equivalent 
encounter information transaction (45 CFR 162.1102).
    HIPAA requires covered entities to use the applicable medical data 
code set requirements when conducting HIPAA transactions (45 CFR 
162.1000). Currently, upon the discharge of the patient, the LTCH must 
assign appropriate diagnosis and procedure codes from the most current 
version of the Internal Classification of Diseases, Ninth Revision, 
Clinical Modification (ICD-9-CM). For additional information on the 
ICD-9-CM coding system, we refer readers to the FY 2008 IPPS final rule 
with comment period (72 FR 47241 through 47243 and 47277 through 
47281). We also refer readers to the detailed discussion on correct 
coding practices in the August 30, 2002 LTCH PPS final rule (67 FR 
55981 through 55983).
    Currently, providers use the code sets under the ICD-9-CM coding 
system to report diagnoses and procedures for Medicare hospital 
inpatient services under the MS-DRG system. We have been discussing the 
conversion to the ICD-10 coding system for many years. Hospitals, 
including LTCHs, are required to use the ICD-10 coding system effective 
October 1, 2015. Consequently, providers will begin using the code sets 
under the ICD-10 coding system to report diagnoses (ICD-10-CM codes) 
and procedures (ICD-10-PCS codes) for Medicare hospital inpatient 
services under the MS-DRG system (and by extension the MS-LTC-DRG 
system) beginning October 1, 2015. For additional information on the 
implementation of the ICD-10 coding system, we refer readers to section 
II.G.1. of the preamble of this final rule. Additional coding 
instructions and examples are published in the AHA's Coding Clinic for 
ICD-10-CM/PCS.
    To create the MS-DRGs (and by extension, the MS-LTC-DRGs), base 
DRGs were subdivided according to the presence of specific secondary 
diagnoses designated as complications or comorbidities (CCs) into one, 
two, or three levels of severity, depending on the impact of the CCs on 
resources used for those cases. Specifically, there are sets of MS-DRGs 
that are split into 2 or 3 subgroups based on the presence or absence 
of a CC or a major complication or comorbidity (MCC). We refer readers 
to section II.D. of the FY 2008 IPPS final rule with comment period for 
a detailed discussion about the creation of MS-DRGs based on severity 
of illness levels (72 FR 47141 through 47175).
    MACs enter the clinical and demographic information submitted by 
LTCHs into their claims processing systems and subject this information 
to a series of automated screening processes called the Medicare Code 
Editor (MCE). These screens are designed to identify cases that require 
further review before assignment into a MS-LTC-DRG can be made. During 
this process, certain cases are selected for further development (74 FR 
43949).
    After screening through the MCE, each claim is classified into the 
appropriate MS-LTC-DRG by the Medicare LTCH GROUPER software on the 
basis of diagnosis and procedure codes and other demographic 
information (age, sex, and discharge status). The GROUPER software used 
under the LTCH PPS is the same GROUPER software program used under the 
IPPS. Following the MS-LTC-DRG assignment, the Medicare contractor 
determines the prospective payment amount by using the Medicare PRICER 
program, which accounts for hospital-specific adjustments. Under the 
LTCH PPS, we provide an opportunity for LTCHs to review the MS-LTC-DRG 
assignments made by the Medicare contractor and to submit additional 
information within a specified timeframe as provided in Sec.  
412.513(c).
    The GROUPER software is used both to classify past cases to measure 
relative hospital resource consumption to establish the MS-LTC-DRG 
relative weights and to classify current cases for purposes of 
determining payment. The records for all Medicare hospital inpatient 
discharges are maintained in the MedPAR file. The data in this file are 
used to evaluate possible MS-DRG and MS-LTC-DRG classification changes 
and to recalibrate the MS-DRG and MS-LTC-DRG relative weights during 
our annual update under both the IPPS (Sec.  412.60(e)) and the LTCH 
PPS (Sec.  412.517), respectively.
b. Changes to the MS-LTC-DRGs for FY 2016
    As specified by our regulations at Sec.  412.517(a), which require 
that the MS-LTC-DRG classifications and relative weights be updated 
annually, and consistent with our historical practice of using the same 
patient classification system under the LTCH PPS as is used under the 
IPPS, we are updating the MS-LTC-DRG classifications effective October 
1, 2015, through September 30, 2016 (FY 2016) consistent with the 
changes to specific MS-DRG classifications presented in section II.G. 
of the preamble of this final rule. Therefore, the MS-LTC-DRGs for FY 
2016 presented in this final rule are the same as the MS-DRGs that are 
being used under the IPPS for FY 2016. Specifically, as discussed in 
section II.G.1.b. of this preamble of this final rule, we are using the 
ICD-10 MS-DRGs Version 33 as the replacement logic for the ICD-9-CM 
based MS-DRGs Version 32 as part of the MS-DRG updates (and by 
extension the MS-LTC-DRG) updates for FY 2016. The GROUPER Version 33 
is based on ICD-10-CM/PCS diagnoses and procedure codes, consistent 
with the requirement to use ICD-10 beginning October 1, 2015, as noted 
above and discussed in greater detail in section II.G.1. of the 
preamble of this final rule.
    In the proposed rule, we invited public comments on how well the 
ICD-10 MS-DRGs Version 33 (and by extension the ICD-10 MS-LTC-DRGs 
Version 33) replicates the logic of the ICD-9 MS-DRGs Version 32 (and 
by extension ICD-9 MS-LTC-DRGs Version 32). These comments and our 
responses are discussed in section II.G.1.a. of the preamble of this 
final rule. (We note that, when referencing MS-LTC-DRGs Version 33 in 
the remainder of this section, we are referring to the ICD-10-based MS-
LTC-DRGs Version 33 unless otherwise stated. Similarly, when 
referencing MS-LTC-DRGs Version 32 for the remainder of this section, 
we are referring to the ICD-9-based MS-LTC-DRGs Version 32 unless 
otherwise stated.) In addition, because the MS-LTC-DRGs for FY 2016 are 
the same as the MS-DRGs for FY 2016, the other changes that affect MS-
DRG (and by extension MS-LTC-DRG) assignments under GROUPER Version 33, 
as discussed in section II.G. of the preamble of this final rule, 
including the changes to the MCE software and the ICD-10 coding system, 
will also be applicable under the LTCH PPS for FY 2016.
3. Development of the FY 2016 MS-LTC-DRG Relative Weights
a. General Overview of the Development of the MS-LTC-DRG Relative 
Weights
    One of the primary goals for the implementation of the LTCH PPS is 
to pay each LTCH an appropriate amount for the efficient delivery of 
medical care to Medicare patients. The system must be able to account 
adequately for each LTCH's case-mix in order to ensure both fair 
distribution of Medicare payments and access to adequate care for those 
Medicare patients whose care is more costly (67 FR 55984). To 
accomplish these goals, we have annually adjusted the LTCH PPS standard 
Federal prospective payment system rate by the applicable relative 
weight in determining payment to LTCHs for each case. In order to make 
these annual

[[Page 49626]]

adjustments under the new dual rate LTCH PPS payment structure, as 
previously discussed in section VII.B.7.a. of the preamble of this 
final rule, we are finalizing the policy, beginning with FY 2016, to 
recalibrate the MS-LTC-DRG relative weighting factors annually using 
data from applicable LTCH cases. Under this policy, the resulting MS-
LTC-DRG relative weights will continue to be used to adjust the LTCH 
PPS standard Federal rate when calculating the payment for LTCH PPS 
standard Federal payment rate cases. However, the MS-LTC-DRG relative 
weights will not be used to determine the LTCH PPS payment for cases 
paid under the site neutral payment rate. (For details on our finalized 
policies regarding application of the site neutral payment rate, we 
refer readers to section VII.B. of the preamble of this final rule.)
    The established methodology to develop the MS-LTC-DRG relative 
weights is consistent with the methodology established when the LTCH 
PPS was implemented in the August 30, 2002 LTCH PPS final rule (67 FR 
55989 through 55991), with the exception of some modifications of our 
historical procedures for assigning relative weights in cases of zero 
volume and/or nonmonotonicity resulting from the adoption of the MS-
LTC-DRGs. (For details on these modifications to our historical 
procedures for assigning relative weights in cases of zero volume and/
or nonmonotonicity, we refer readers to the FY 2008 IPPS final rule 
with comment period (72 FR 47289 through 47295) and the FY 2009 IPPS 
final rule (73 FR 48542 through 48550).) Under the LTCH PPS, relative 
weights for each MS-LTC-DRG are a primary element used to account for 
the variations in cost per discharge and resource utilization among the 
payment groups (Sec.  412.515). To ensure that Medicare patients 
classified to each MS-LTC-DRG have access to an appropriate level of 
services and to encourage efficiency, we calculate a relative weight 
for each MS-LTC-DRG that represents the resources needed by an average 
inpatient LTCH case in that MS-LTC-DRG. For example, cases in a MS-LTC-
DRG with a relative weight of 2 will, on average, cost twice as much to 
treat as cases in a MS-LTC-DRG with a relative weight of 1.
b. Development of the MS-LTC-DRG Relative Weights for FY 2016
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50170 through 
50176), we presented our policies for the development of the MS-LTC-DRG 
relative weights for FY 2015.
    In this final rule, as proposed, we are continuing to use our 
existing methodology to determine the MS-LTC-DRG relative weights for 
FY 2016, including the application of established policies related to, 
the hospital-specific relative value methodology, the treatment of 
severity levels in the MS-LTC-DRGs, low-volume and no-volume MS-LTC-
DRGs, adjustments for nonmonotonicity, and the steps for calculating 
the MS-LTC-DRG relative weights with a budget neutrality factor. 
However, as previously noted and discussed in greater detail in section 
VII.B.7.a. of the preamble of this final rule, under the new dual rate 
LTCH PPS payment structure, after consideration of public comments, as 
we proposed, we are establishing that the FY 2016 MS-LTC DRG relative 
weights will be determined based only on data from applicable LTCH 
cases (which includes our finalized policy of using only cases that 
would meet the criteria for exclusion from the site neutral payment 
rate (had those criteria been in effect at the time of the discharge)). 
We discuss the effects of our finalized policies concerning the data 
used to determine the FY 2016 MS-LTC-DRG relative weights on the 
various components of our existing methodology in the discussion that 
follows.
    Furthermore, as we have done since the FY 2008 update, and as we 
proposed, we are applying a two-step budget neutrality adjustment to 
the annual update to the MS-LTC-DRG classifications and relative 
weights at Sec.  412.517(b) (in conjunction with Sec.  412.503), such 
that estimated aggregate LTCH PPS payments would be unaffected, that 
is, would be neither greater than nor less than the estimated aggregate 
LTCH PPS payments that would have been made without the classification 
and relative weight changes (72 FR 26882 through 26884). For additional 
information on the established two-step budget neutrality methodology, 
we refer readers to the FY 2008 IPPS final rule (72 FR 47295 through 
47296). Below we present our proposed methodology for determining the 
proposed MS-LTC-DRG relative weights for FY 2016 LTCH PPS standard 
Federal payment rate payments, which is generally consistent with our 
existing methodology, except for the proposed use of applicable LTCH 
data.
c. Applicable LTCH Data
    For this final rule, to calculate the MS-LTC-DRG relative weights 
for FY 2016 LTCH PPS standard Federal payment rate payments, we 
obtained total charges from FY 2014 Medicare LTCH claims data from the 
March 2015 update of the FY 2014 MedPAR file, which are the best 
available data at this time, and the finalized Version 33 of the 
GROUPER to classify LTCH cases. Consistent with our historical practice 
and as we proposed, we are using those data and the finalized Version 
33 of the GROUPER in establishing the FY 2016 MS-LTC-DRG relative 
weights in this final rule. To calculate the FY 2016 MS-LTC-DRG 
relative weights under the new dual rate LTCH PPS payment structure 
that will be effective beginning October 1, 2015, beginning with the 
annual recalibration of the MS-LTC-DRG relative weights for FY 2016, we 
are using applicable LTCH data, which, as previously discussed in 
section VII.B.7.a. of this preamble of, includes our finalized policy 
of using only cases that meet the criteria for exclusion from the site 
neutral payment rate (or would meet the criteria had they been in 
effect at the time of the discharge). Accordingly, as we proposed, we 
began by first evaluating the LTCH claims data in the March 2015 update 
of the FY 2014 MedPAR file to determine which LTCH cases would have met 
the criteria for exclusion from the site neutral payment rate under 
Sec.  412.522(b) (as discussed in greater detail in section VII.B.3. of 
the preamble of this final rule) had the new dual rate LTCH PPS payment 
structure been in effect at the time of discharge. We identified the FY 
2014 LTCH cases that were not assigned to MS-LTC-DRGs 876, 880, 881, 
882, 883, 884, 885, 886, 887, 894, 895, 896, 897, 945 and 946, which, 
under our finalized policies, will identify LTCH cases that do not have 
a principal diagnosis relating to a psychiatric diagnosis or to 
rehabilitation (as discussed in section VII.B.3.b. of the preamble of 
this final rule); and that either--
     The admission to the LTCH was ``immediately preceded'' by 
discharge from a subsection (d) hospital and the immediately preceding 
stay in that subsection (d) hospital included at least 3 days in an 
ICU, as we define under the ICU criterion (discussed in section 
VII.B.3.e. of the preamble of this final rule); or
     The admission to the LTCH was ``immediately preceded'' by 
discharge from a subsection (d) hospital and the claim for the LTCH 
discharge includes the applicable procedure code that indicates at 
least 96 hours of ventilator services were provided during the LTCH 
stay, as we define under the ventilator criterion (discussed in section 
VII.B.3.f. of the preamble of this final rule). Claims data from the 
March 2015 update of the FY 2014 MedPAR file that reported ICD-9-CM 
procedure code

[[Page 49627]]

96.72 were used to identify cases involving at least 96 hours of 
ventilator services in accordance with the ventilator criterion. (We 
note that the corresponding ICD-10-PCS code for cases involving at 
least 94 hours of ventilation services is 5A1955Z, effective as of 
October 1, 2015.)
    Then, consistent with our historical methodology and as we 
proposed, we excluded any claims in the resulting data set that were 
submitted by LTCHs that are all-inclusive rate providers and LTCHs that 
are reimbursed in accordance with demonstration projects authorized 
under section 402(a) of Public Law 90-248 or section 222(a) of Public 
Law 92-603. In addition, consistent with our historical practice and as 
we proposed, we excluded the Medicare Advantage (Part C) claims that 
were in the resulting data set based on the presence of a GHO Paid 
indicator value of ``1'' in the MedPAR files. The claims that remained 
after these three trims (that is, the applicable LTCH data) were then 
used to calculate the relative weights for the LTCH PPS standard 
Federal payment rate payments for FY 2016.
    In summary, in identifying the claims data for the development of 
the FY 2016 MS-LTC-DRG relative weights in this final rule, we are 
using claims data after we trim the claims data of 10 all-inclusive 
rate providers reported in the March 2015 update of the FY 2014 MedPAR 
file, as well as any Medicare Advantage claims data for cases that 
would have met the criteria for exclusion from the site neutral payment 
rate under Sec.  412.522(b) if the new dual rate LTCH PPS payment 
structure were in effect at the time of discharge. (We note, there were 
no data from any LTCHs that are paid in accordance with a demonstration 
project reported in the March 2015 update of the FY 2014 MedPAR file. 
However, had there been we would we trim the claims data from those 
LTCHs as well, in accordance with our established policy.) We are using 
the remaining data (that is, the applicable LTCH data) to calculate the 
relative weights for the LTCH PPS standard Federal payment rate 
payments for FY 2016. We note, the public comments we received, our 
responses to those comments, and our finalized policy of using only 
cases that would meet the criteria for exclusion from the site neutral 
payment rate (had those criteria been in effect at the time of the 
discharge) for the annual recalibration of the MS-LTC-DRG relative 
weights beginning for FY 2016 is presented in section VII.B.7.a. of 
this preamble of this final rule. We did not receive any public 
comments on the other parts of our proposals on the applicable LTCH 
data used to determine the relative weights for MS-LTC-DRGs for FY 
2016, and are adopting those proposals as final without change.
    After consideration of the public comments we received, we are 
finalizing our proposals on the applicable LTCH data used to determine 
the relative weights for MS-LTC-DRGs for FY 2016 without change.
d. Hospital-Specific Relative Value (HSRV) Methodology
    By nature, LTCHs often specialize in certain areas, such as 
ventilator-dependent patients. Some case types (MS-LTC-DRGs) may be 
treated, to a large extent, in hospitals that have, from a perspective 
of charges, relatively high (or low) charges. This nonrandom 
distribution of cases with relatively high (or low) charges in specific 
MS-LTC-DRGs has the potential to inappropriately distort the measure of 
average charges. To account for the fact that cases may not be randomly 
distributed across LTCHs, consistent with the methodology we have used 
since the implementation of the LTCH PPS, as proposed, we are 
continuing to use a hospital-specific relative value (HSRV) methodology 
to calculate the MS-LTC-DRG relative weights for FY 2016 LTCH PPS 
standard Federal payment rate payments. We believe this method removes 
this hospital-specific source of bias in measuring LTCH average charges 
(67 FR 55985). Specifically, under this methodology, we are reducing 
the impact of the variation in charges across providers on any 
particular MS-LTC-DRG relative weight by converting each LTCH's charge 
for an applicable LTCH case to a relative value based on that LTCH's 
average charge for such cases.
    Under the HSRV methodology, we standardize charges for each LTCH by 
converting its charges for each applicable LTCH case to hospital-
specific relative charge values and then adjusting those values for the 
LTCH's case-mix. The adjustment for case-mix is needed to rescale the 
hospital-specific relative charge values (which, by definition, average 
1.0 for each LTCH). The average relative weight for a LTCH is its case-
mix; therefore, it is reasonable to scale each LTCH's average relative 
charge value by its case-mix. In this way, each LTCH's relative charge 
value is adjusted by its case-mix to an average that reflects the 
complexity of the applicable LTCH cases it treats relative to the 
complexity of the applicable LTCH cases treated by all other LTCHs (the 
average LTCH PPS case-mix of all applicable LTCH cases across all 
LTCHs).
    In accordance with our established methodology, for FY 2016, we 
standardized charges for each applicable LTCH case by first dividing 
the adjusted charge for the case (adjusted for SSOs under Sec.  412.529 
as described in section VII.C.3.g. (Step 3) of the preamble of this 
final rule) by the average adjusted charge for all applicable LTCH 
cases at the LTCH in which the case was treated. SSO cases are cases 
with a length of stay that is less than or equal to five-sixths the 
average length of stay of the MS-LTC-DRG (Sec.  412.529 and Sec.  
412.503). The average adjusted charge reflects the average intensity of 
the health care services delivered by a particular LTCH and the average 
cost level of that LTCH. The resulting ratio was multiplied by that 
LTCH's case-mix index to determine the standardized charge for the case 
(67 FR 55989).
    Multiplying the resulting ratio by the LTCH's case-mix index 
accounts for the fact that the same relative charges are given greater 
weight at a LTCH with higher average costs than they would at a LTCH 
with low average costs, which is needed to adjust each LTCH's relative 
charge value to reflect its case-mix relative to the average case-mix 
for all LTCHs. Because we standardized charges in this manner, we count 
charges for a Medicare patient at a LTCH with high average charges as 
less resource intensive than they would be at a LTCH with low average 
charges. For example, a $10,000 charge for a case at a LTCH with an 
average adjusted charge of $17,500 reflects a higher level of relative 
resource use than a $10,000 charge for a case at a LTCH with the same 
case-mix, but an average adjusted charge of $35,000. We believe that 
the adjusted charge of an individual case more accurately reflects 
actual resource use for an individual LTCH because the variation in 
charges due to systematic differences in the markup of charges among 
LTCHs is taken into account.
    We did not receive any public comments concerning our proposal to 
continue to use HSRV methodology to determine the MS-LTC-DRG relative 
weights for FY 2016, and therefore, we are finalizing this proposed 
policy, without modification.
e. Treatment of Severity Levels in Developing the MS-LTC-DRG Relative 
Weights
    For purposes of determining the MS-LTC-DRG relative weights, under 
our historical methodology, there are three different categories of MS-
DRGs based on volume of cases within specific MS-LTC-DRGs: (1) MS-LTC-
DRGs with at

[[Page 49628]]

least 25 applicable LTCH cases in the data used to calculate the 
relative weight, which are each assigned a unique relative weight; (2) 
low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs that contain between 1 and 
24 applicable LTCH cases that are grouped into quintiles (as described 
below) and assigned the relative weight of the quintile; and (3) no-
volume MS-LTC-DRGs that are cross-walked to other MS-LTC-DRGs based on 
the clinical similarities and assigned the relative weight of the 
cross-walked MS-LTC-DRG (as described in greater detail below). For FY 
2016, we are using applicable LTCH cases to establish the same volume-
based categories to calculate the FY 2016 relative weights for LTCH PPS 
standard Federal payment rate payments. This approach is consistent 
with our policies regarding the continued use of our existing 
methodology related to the treatment of severity levels as presented in 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50172).
    We provide in-depth discussions of our finalized policy regarding 
weight-setting for low-volume MS-LTC-DRGs in section VII.C.3.f. of the 
preamble of this final rule and for no-volume MS-LTC-DRGs, under Step 5 
in section VII.C.3.g. of the preamble of this final rule.) Furthermore, 
in determining the FY 2016 MS-LTC-DRG relative weights for LTCH PPS 
standard Federal payment rate payments, when necessary, as proposed, we 
made adjustments to account for nonmonotonicity, as discussed in 
greater detail below in Step 6 of section VII.C.3.g. of the preamble of 
this final rule. We refer readers to the discussion in the FY 2010 
IPPS/RY 2010 LTCH PPS final rule for our rationale for including an 
adjustment for nonmonotonicity (74 FR 43953 through 43954).
f. Low-Volume MS-LTC-DRGs
    In order to account for MS-LTC-DRGs for LTCH PPS Standard Federal 
payment rate cases with low-volume (that is, with fewer than 25 
applicable LTCH cases), consistent with our existing methodology for 
purposes of determining the FY 2015 MS-LTC-DRG relative weights, as 
proposed, we are employing the quintile methodology for low-volume MS-
LTC-DRGs, such that we grouped the ``low-volume MS-LTC-DRGs'' (that is, 
MS-LTC-DRGs that contained between 1 and 24 applicable LTCH cases into 
one of five categories (quintiles) based on average charges (67 FR 
55984 through 55995 and 72 FR 47283 through 47288). In cases where the 
initial assignment of a low-volume MS-LTC-DRG to a quintile resulted in 
nonmonotonicity within a base-DRG, as proposed, we made adjustments to 
the resulting low-volume MS-LTC-DRGs to preserve monotonicity, as 
discussed in detail below in section VII.C.3.g. (Step 6) of the 
preamble of this final rule.
    In the proposed rule, using the most current available data at that 
time, we noted our identification of 250 MS-LTC-DRGs that contained 
between 1 and 24 applicable LTCH cases. Based on the best available 
data for this final rule (that is, the March 2015 update of the FY 2014 
MedPAR files, we now identified 251 MS-LTC-DRGs that contained between 
1 and 24 applicable LTCH cases. This list of MS-LTC-DRGs was then 
divided into one of the 5 low-volume quintiles, each containing 50 MS-
LTC-DRGs (251/5 = 50, with a remainder of 1). We assigned the low-
volume MS-LTC-DRGs to specific low-volume quintiles by sorting the low-
volume MS-LTC-DRGs in ascending order by average charge in accordance 
with our established methodology. Based on the data available for the 
proposed rule, the number of MS-LTC-DRGs with less than 25 applicable 
LTCH cases was evenly divisible by 5. Therefore, it was not necessary 
to employ our historical methodology for determining which of the low-
volume quintiles contain an additional low-volume MS-LTC-DRG. However, 
for this final rule, based on the most current data available at this 
time, because the number of MS-LTC-DRGs with less than 25 applicable 
LTCH cases has shifted to 251 (which does not divide evenly), as 
proposed, we used our historical methodology for determining which 
quintiles would contain the additional MS-LTC-DRGs. Specifically for 
this final rule, after organizing the MS-LTC-DRGs by ascending order by 
average charge, we assigned the first fifth (1st through 50th) of low-
volume MS-LTC-DRGs (with the lowest average charge) into Quintile 1. 
The 50 MS-LTC-DRGs with the highest average charge cases were assigned 
into Quintile 5. Because the average charge of the 151st low-volume MS-
LTC-DRG in the sorted list was closer to the average charge of the 
150th low-volume MS-LTC-DRG (assigned to Quintile 3) than to the 
average charge of the 152nd low-volume MS-LTC-DRG (assigned to Quintile 
4), we are assigning it to Quintile 3 (such that Quintile 3 contains 51 
low-volume MS-LTC-DRGs before any adjustments for nonmonotonicity, as 
discussed below). This results in 4 of the 5 low-volume quintiles 
containing 50 MS-LTC-DRGs (Quintiles 1, 2, 4 and 5) and one low-volume 
quintile containing 51 MS-LTC-DRGs (Quintiles 3). Table 13A, listed in 
section VI. of the Addendum to this final rule and available via the 
Internet, lists the composition of the low-volume quintiles for MS-LTC-
DRGs for FY 2016.
    Accordingly, in order to determine the FY 2016 relative weights for 
the MS-LTC-DRGs with low-volume, as proposed, we are using the five 
low-volume quintiles described above. We determined a relative weight 
and (geometric) average length of stay for each of the five low-volume 
quintiles using the methodology described in section VII.C.3.g. of the 
preamble of this final rule. As we proposed, we assigned the same 
relative weight and average length of stay to each of the low-volume 
MS-LTC-DRGs that make up an individual low-volume quintile. We note 
that, as this system is dynamic, it is possible that the number and 
specific type of MS-LTC-DRGs with a low-volume of applicable LTCH cases 
will vary in the future. Furthermore, we note that we will continue to 
monitor the volume (that is, the number of applicable LTCH cases) in 
the low-volume quintiles to ensure that our quintile assignments used 
in determining the MS-LTC-DRG relative weights for LTCH PPS standard 
Federal payment rate payments result in appropriate payment for LTCH 
cases that will be grouped to low-volume MS-LTC-DRGs and do not result 
in an unintended financial incentive for LTCHs to inappropriately admit 
these types of cases.
    We did not receive any public comments concerning our proposals 
related to low-volume MS-LTC-DRGs. Therefore, we are finalizing, 
without modification, these proposals.
g. Steps for Determining the FY 2016 MS-LTC-DRG Relative Weights
    In this final rule, as proposed, we are generally using our 
existing methodology to determine the FY 2016 MS-LTC-DRG relative 
weights for LTCH PPS standard Federal payment rate payments. However, 
in doing so, we are using only applicable LTCH cases and data to 
determine the FY 2016 MS-LTC-DRG relative weights (including our 
finalized policy of using only cases that met or would have met the 
criteria for exclusion from the site neutral payment rate (had those 
criteria been in effect at the time of the discharge as discussed in 
section VII.B.7.a. of the preamble of this final rule).
    Comment: Based on their analysis of the proposed FY 2016 MS-LTC-DRG 
weights, some commenters stated that there may be reversal in the 
description of the steps of the CMS methodology for

[[Page 49629]]

calculating the MS-LTC-DRG relative weights. Commenters also noted that 
the data trimming in the step to remove statistical outliers appears to 
only address the removal of statistical outliers based on total charges 
and not the total charges per day requirement.
    Response: We reexamined the description of the methodology for 
calculating the MS-LTC-DRG relative weights and found an inadvertent 
error in the order in which we have been presenting steps 1 and 2 of 
our methodology. Under our longstanding historical methodology to 
calculate the MS-LTC-DRG relative weights, we first remove cases with a 
length of stay of 7 days or less (which has been mistakenly described 
at step 2 in our methodology) and then remove statistical outliers 
(which has been mistakenly described at step 1 in our methodology). 
Cases with a length of stay of 7 days or less are removed in the 
initial step because leaving them in would distort the relative weights 
of the MS-LTC-DRGs. It is essential to remove such cases prior to 
trimming for statistical outliers in order to appropriately identify 
aberrant data when removing statistical outliers that would distort the 
measure of average resource use reflected in the MS-LTC-DRG relative 
weights. We thank commenters for pointing out this error in the 
description of the methodology. We note that the differences between 
applying steps 2 and 1 in the correct order (as we have always 
calculated these values) as opposed to the reversed order described in 
the proposed rule have heretofore been negligible (in fact, our 
understanding is that certain outside parties have replicated and/or 
performed analyses of the MS-LTC-DRG relative weights in prior years). 
However, under our finalized policy to use only cases that would meet 
the criteria for exclusion from the site neutral payment rate (had 
those criteria been in effect at the time of the discharge), the new 
dual rate LTCH PPS payment structure has reduced the number of cases we 
are using to calculate MS-LTC-DRG relative weights, making the 
description/order of the steps more significant. We appreciate the 
commenters bringing this to our attention and regret any confusion 
caused by our misstatement regarding the order of the steps one must 
take to calculate relative weights. We assure the industry that since 
the advent of the LTCH PPS we have been calculating these values by 
first removing the cases with an average length of stay of 7 days or 
less, and then removing statistical outliers. In addition, we agree 
with commenters that, for the FY 2016 proposed rule, we made a 
technical error in our application of the data trimming to remove 
statistical outliers. We appreciate commenters bringing this to our 
attention and the MS-LTC-DRG relative weights calculated for this final 
rule reflect the correct application of the data trimming. That is, we 
have ensured that to identify statistical outliers, we have applied the 
trim based on both charges per case and the charges per day (see step 2 
below), consistent with our longstanding methodology.
    After consideration of the public comments we received, we are 
finalizing our proposal to continue to use our existing methodology to 
calculation the MS-LTC-DRG relative weights for FY 2016, including 
calculating the values in the ordered steps we have employed in this 
calculation from the onset of the LTCH PPS. To reflect this, in this 
final rule, we are correcting the order of steps described in this 
preamble to reflect the order in which they have been, and will 
continue to be applied in the application of our existing policy.
    In summary, to determine the FY 2016 MS-LTC-DRG relative weights, 
we grouped applicable LTCH cases to the appropriate MS-LTC-DRG, while 
taking into account the low-volume quintiles (as described above) and 
cross-walked no-volume MS-LTC-DRGs as described below. After 
establishing the appropriate MS-LTC-DRG (or low-volume quintile), we 
calculated the FY 2016 relative weights for LTCH PPS standard Federal 
payment rate payments by first removing cases with a length of stay of 
7 days or less and statistical outliers (Steps 1 and 2 below). Next, we 
adjusted the number of applicable LTCH cases in each MS-LTC-DRG (or 
low-volume quintile) for the effect of SSO cases (Step 3 below). After 
removing applicable LTCH cases with a length of stay of 7 days or less 
(Step 1 below) and statistical outliers (Step 2 below) and, which are 
the SSO-adjusted applicable LTCH cases and corresponding charges (step 
3 below), we calculated ``relative adjusted weights'' for each MS-LTC-
DRG (or low-volume quintile) using the HSRV method. Below we discuss in 
detail the steps for calculating the FY 2016 MS-LTC-DRG relative 
weights for LTCH PPS standard Federal payment rate payments.
    Step 1--Remove cases with a length of stay of 7 days or less.
    The first step in our calculation of the FY 2016 MS-LTC-DRG 
relative weights for LTCH PPS standard Federal payment rate payments is 
to remove cases with a length of stay of 7 days or less. The MS-LTC-DRG 
relative weights reflect the average of resources used on 
representative cases of a specific type. Generally, cases with a length 
of stay of 7 days or less do not belong in a LTCH because these stays 
do not fully receive or benefit from treatment that is typical in a 
LTCH stay, and full resources are often not used in the earlier stages 
of admission to a LTCH. If we were to include stays of 7 days or less 
in the computation of the FY 2016 MS-LTC-DRG relative weights, the 
value of many relative weights would decrease and, therefore, payments 
would decrease to a level that may no longer be appropriate. We do not 
believe that it would be appropriate to compromise the integrity of the 
payment determination for those LTCH cases that actually benefit from 
and receive a full course of treatment at a LTCH by including data from 
these very short stays. Therefore, consistent with our existing 
relative weight methodology, in determining the FY 2016 MS-LTC-DRG 
relative weights for LTCH PPS standard Federal payment rate payments, 
we removed LTCH cases with a length of stay of 7 days or less from 
applicable LTCH cases. (For additional information on what would be 
removed in this step of the relative weight methodology, we refer 
readers to 67 FR 55989 and 74 FR 43959.)
    Step 2--Remove statistical outliers.
    The next step in our calculation of the FY 2016 MS-LTC-DRG relative 
weights for LTCH PPS standard Federal payment rate payments is to 
remove statistical outlier cases from the LTCH cases with a length of 
stay of at least 8 days. Consistent with our existing relative weight 
methodology, as proposed, we are continuing to define statistical 
outliers as cases that are outside of 3.0 standard deviations from the 
mean of the log distribution of both charges per case and the charges 
per day for each MS-LTC-DRG. These statistical outliers are removed 
prior to calculating the relative weights because we believe that they 
may represent aberrations in the data that distort the measure of 
average resource use. Including those LTCH cases in the calculation of 
the relative weights for LTCH PPS standard Federal payment rate 
payments could result in an inaccurate relative weight that does not 
truly reflect relative resource use among those MS-LTC-DRGs. (For 
additional information on what would be removed in this step of the 
relative weight methodology, we refer readers to 67 FR 55989 and 74 FR 
43959.) After removing cases with a length of stay of 7 days or less 
and statistical outliers, we are left with applicable LTCH cases that 
have a length of stay greater than or

[[Page 49630]]

equal to 8 days. In this final rule, we refer to these cases as 
``trimmed applicable LTCH cases.''
    Step 3--Adjust charges for the effects of SSOs.
    As the next step in the calculation of the FY 2016 MS-LTC-DRG 
relative weights for LTCH PPS standard Federal payment rate payments, 
consistent with our historical approach, we adjusted each LTCH's 
charges per discharge for those remaining cases (that is, trimmed 
applicable LTCH cases) for the effects of SSOs (as defined in Sec.  
412.529(a) in conjunction with Sec.  412.503). Specifically, we made 
this adjustment by counting an SSO case as a fraction of a discharge 
based on the ratio of the length of stay of the case to the average 
length of stay for the MS-LTC-DRG for non-SSO cases. This has the 
effect of proportionately reducing the impact of the lower charges for 
the SSO cases in calculating the average charge for the MS-LTC-DRG. 
This process produces the same result as if the actual charges per 
discharge of an SSO case were adjusted to what they would have been had 
the patient's length of stay been equal to the average length of stay 
of the MS-LTC-DRG.
    Counting SSO cases as full LTCH cases with no adjustment in 
determining the FY 2016 MS-LTC-DRG relative weights for LTCH PPS 
standard Federal payment rate payments will lower the FY 2016 MS-LTC-
DRG relative weight for affected MS-LTC-DRGs because the relatively 
lower charges of the SSO cases will bring down the average charge for 
all cases within a MS-LTC-DRG. This will result in an ``underpayment'' 
for non-SSO cases and an ``overpayment'' for SSO cases. Therefore, as 
proposed, we are continuing to adjust for SSO cases under Sec.  412.529 
in this manner because it results in more appropriate payments for all 
LTCH PPS standard Federal payment rate cases. (For additional 
information on this step of the relative weight methodology, we refer 
readers to 67 FR 55989 and 74 FR 43959.)
    Step 4--Calculate the FY 2016 MS-LTC-DRG relative weights on an 
iterative basis.
    Consistent with our historical relative weight methodology, we then 
calculated the FY 2016 MS-LTC-DRG relative weights for LTCH PPS 
standard Federal payment rate payments using the HSRV methodology, 
which is an iterative process. First, for each SSO-adjusted trimmed 
applicable LTCH case, we calculated a hospital-specific relative charge 
value by dividing the charge per discharge after adjusting for SSOs of 
the LTCH case (from Step 3) by the average charge per SSO-adjusted 
discharge for the LTCH in which the case occurred. The resulting ratio 
was then multiplied by the LTCH's case-mix index to produce an adjusted 
hospital-specific relative charge value for the case. An initial case-
mix index value of 1.0 was used for each LTCH.
    For each MS-LTC-DRG, we calculated the FY 2016 relative weight by 
dividing the SSO-adjusted average of the hospital-specific relative 
charge values for applicable LTCH cases (that is, the sum of the 
hospital-specific relative charge value from above divided by the sum 
of equivalent cases from step 3 for each MS-LTC-DRG) for the MS-LTC-DRG 
by the overall SSO-adjusted average hospital-specific relative charge 
value across all applicable LTCH cases for all LTCHs (that is, the sum 
of the hospital-specific relative charge value from above divided by 
the sum of equivalent applicable LTCH cases from step 3 for each MS-
LTC-DRG). Using these recalculated MS-LTC-DRG relative weights, each 
LTCH's average relative weight for all of its SSO-adjusted trimmed 
applicable LTCH cases (that is, its case-mix) was calculated by 
dividing the sum of all the LTCH's MS-LTC-DRG relative weights by its 
total number of SSO-adjusted trimmed applicable LTCH cases. The LTCHs' 
hospital-specific relative charge values (from above) were then 
multiplied by the hospital-specific case-mix indexes. The hospital-
specific case-mix adjusted relative charge values were then used to 
calculate a new set of MS-LTC-DRG relative weights across all LTCHs. 
This iterative process was continued until there was convergence 
between the relative weights produced at adjacent steps, for example, 
when the maximum difference was less than 0.0001. (We note that, 
although we are not making any changes to this step of our relative 
weight methodology in this final rule, we have made some minor changes 
to the description of this step to clarify the application of our 
existing policy.)
    Step 5--Determine a FY 2016 relative weight for MS-LTC-DRGs with no 
applicable LTCH cases.
    Using the trimmed applicable LTCH cases, we identified the MS-LTC-
DRGs for which there were no claims in the March 2015 update of the FY 
2014 MedPAR file and, therefore, for which no charge data was available 
for these MS-LTC-DRGs. Because patients with a number of the diagnoses 
under these MS-LTC-DRGs may be treated at LTCHs, consistent with our 
historical methodology, we are generally assigning a relative weight to 
each of the no-volume MS-LTC-DRGs for LTCH PPS standard Federal payment 
rate cases based on clinical similarity and relative costliness (with 
the exception of ``transplant'' MS-LTC-DRGs, ``error'' MS-LTC-DRGs, and 
MS-LTC-DRGs that indicate a principal diagnosis related to a 
psychiatric diagnosis or rehabilitation (referred to as the 
``psychiatric or rehabilitation'' MS-LTC-DRGs), as discussed below). 
(For additional information on this step of the relative weight 
methodology, we refer readers to 67 FR 55991 and 74 FR 43959 through 
43960.)
    As proposed, we are cross-walking each no-volume MS-LTC-DRG to 
another MS-LTC-DRG for which we calculated a relative weight 
(determined in accordance with the methodology described above). Then, 
the ``no-volume'' MS-LTC-DRG was assigned the same relative weight (and 
average length of stay) of the MS-LTC-DRG to which it was cross-walked 
(as described in greater detail below).
    Of the 758 MS-LTC-DRGs for FY 2016, we identified 367 MS-LTC-DRGs 
for which there are no trimmed applicable LTCH cases (the number 
identified includes no trimmed applicable LTCH cases in the 8 
``transplant'' MS-LTC-DRGs, the 2 ``error'' MS-LTC-DRGs, and the 15 
``psychiatric or rehabilitation'' MS-LTC-DRGs, which are discussed 
below). As proposed, we are assigning relative weights to each of the 
342 no-volume MS-LTC-DRGs that contained trimmed applicable LTCH cases 
based on clinical similarity and relative costliness to one of the 
remaining 391 (758--367= 391) MS-LTC-DRGs for which we were able to 
calculate relative weights based on the trimmed applicable LTCH cases 
in the FY 2014 MedPAR file data using the steps described above. (For 
the remainder of this discussion, we refer to the ``cross-walked'' MS-
LTC-DRGs as the MS-LTC-DRGs to which we cross-walked one of the 342 
``no volume'' MS-LTC-DRGs.) Then, we generally assigned the 342 no-
volume MS-LTC-DRG the relative weight of the cross-walked MS-LTC-DRG. 
(As explained below in Step 6, when necessary, we made adjustments to 
account for nonmonotonicity.)
    As proposed, we cross-walked the no-volume MS-LTC-DRG to a MS-LTC-
DRG for which we were able to calculate relative weights based on the 
March 2015 update of the FY 2014 MedPAR file, and to which it is 
similar clinically in intensity of use of resources and relative 
costliness as determined by criteria such as care provided during the 
period of time surrounding surgery, surgical approach (if applicable), 
length of time of surgical procedure, postoperative care, and length of 
stay.

[[Page 49631]]

(For more details on our process for evaluating relative costliness, we 
refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule (73 FR 
48543).) We believe in the rare event that there would be a few LTCH 
cases grouped to one of the no-volume MS-LTC-DRGs in FY 2015, the 
relative weights assigned based on the cross-walked MS-LTC-DRGs would 
result in an appropriate LTCH PPS payment because the crosswalks, which 
are based on clinical similarity and relative costliness, would be 
expected to generally require equivalent relative resource use.
    We then assigned the relative weight of the cross-walked MS-LTC-DRG 
as the relative weight for the no-volume MS-LTC-DRG such that both of 
these MS-LTC-DRGs (that is, the no-volume MS-LTC-DRG and the cross-
walked MS-LTC-DRG) have the same relative weight (and average length of 
stay) for FY 2016. We note that, if the cross-walked MS-LTC-DRG had 25 
applicable LTCH cases or more, its relative weight (calculated using 
the methodology described in Steps 1 through 4 above) was assigned to 
the no-volume MS-LTC-DRG as well. Similarly, if the MS-LTC-DRG to which 
the no-volume MS-LTC-DRG was cross-walked had 24 or less cases and, 
therefore, was designated to one of the low-volume quintiles for 
purposes of determining the relative weights, we assigned the relative 
weight of the applicable low-volume quintile to the no-volume MS-LTC-
DRG such that both of these MS-LTC-DRGs (that is, the no-volume MS-LTC-
DRG and the cross-walked MS-LTC-DRG) have the same relative weight for 
FY 2016. (As we noted above, in the infrequent case where 
nonmonotonicity involving a no-volume MS-LTC-DRG resulted, additional 
adjustments as described in Step 6 were required in order to maintain 
monotonically increasing relative weights.)
    For this final rule, a list of the no-volume MS-LTC-DRGs and the 
MS-LTC-DRGs to which each was cross-walked (that is, the cross-walked 
MS-LTC-DRGs) for FY 2016 is shown in Table 13B, which is listed in 
section VI. of the Addendum to this final rule and is available via the 
Internet on the CMS Web site.
    To illustrate this methodology for determining the relative weights 
for the FY 2016 MS-LTC-DRGs with no applicable LTCH cases, we are 
providing the following example, which refers to the no-volume MS-LTC-
DRGs crosswalk information for FY 2016 provided in Table 13B.
    Example: There were no trimmed applicable LTCH cases in the FY 2014 
MedPAR file that we are using for this final rule for MS-LTC-DRG 61 
(Acute Ischemic Stroke with Use of Thrombolytic Agent with MCC). We 
determined that MS-LTC-DRG 70 (Nonspecific Cerebrovascular Disorders 
with MCC) is similar clinically and based on resource use to MS-LTC-DRG 
61. Therefore, we assigned the same relative weight (and average length 
of stay) of MS-LTC-DRG 70 of 0.9070 for FY 2016 to MS-LTC-DRG 61 (we 
refer readers to Table 11, which is listed in section VI. of the 
Addendum to this final rule and is available via the Internet on the 
CMS Web site).
    Again, we note that, as this system is dynamic, it is entirely 
possible that the number of MS-LTC-DRGs with no volume will vary in the 
future. As proposed, we are using the most recent available claims data 
to identify the trimmed applicable LTCH cases from which we determined 
the relative weights in this final rule.
    For FY 2016, consistent with our historical relative weight 
methodology, as we proposed, we are establishing a relative weight of 
0.0000 for the following transplant MS-LTC-DRGs: Heart Transplant or 
Implant of Heart Assist System with MCC (MS-LTC-DRG 1); Heart 
Transplant or Implant of Heart Assist System without MCC (MS-LTC-DRG 
2); Liver Transplant with MCC or Intestinal Transplant (MS-LTC-DRG 5); 
Liver Transplant without MCC (MS-LTC-DRG 6); Lung Transplant (MS-LTC-
DRG 7); Simultaneous Pancreas/Kidney Transplant (MS-LTC-DRG 8); 
Pancreas Transplant (MS-LTC-DRG 10); and Kidney Transplant (MS-LTC-DRG 
652). This is because Medicare will only cover these procedures if they 
are performed at a hospital that has been certified for the specific 
procedures by Medicare and presently no LTCH has been so certified. At 
the present time, we include these eight transplant MS-LTC-DRGs in the 
GROUPER program for administrative purposes only. Because we use the 
same GROUPER program for LTCHs as is used under the IPPS, removing 
these MS-LTC-DRGs would be administratively burdensome. (For additional 
information regarding our treatment of transplant MS-LTC-DRGs, we refer 
readers to the RY 2010 LTCH PPS final rule (74 FR 43964).) In addition, 
consistent with our historical policy and as we proposed, we are 
establishing a relative weight of 0.0000 for the 2 ``error'' MS-LTC-
DRGs (that is, MS-LTC-DRG 998 (Principal Diagnosis Invalid as Discharge 
Diagnosis) and MS-LTC-DRG 999 (Ungroupable)) because applicable LTCH 
cases grouped to these MS-LTC-DRGs cannot be properly assigned to an 
MS-LTC-DRG according to the grouping logic.
    In the proposed rule, for FY 2016, we proposed to establish a 
relative weight equal to the respective FY 2015 relative weight of the 
MS-LTC-DRGs for the following ``psychiatric or rehabilitation'' MS-LTC-
DRGs: MS-LTC-DRG 876 (O.R. Procedure with Principal Diagnoses of Mental 
Illness); MS-LTC-DRG 880 (Acute Adjustment Reaction & Psychosocial 
Dysfunction); MS-LTC-DRG 881 (Depressive Neuroses); MS-LTC-DRG 882 
(Neuroses Except Depressive); MS-LTC-DRG 883 (Disorders of Personality 
& Impulse Control); MS-LTC-DRG 884 (Organic Disturbances & Mental 
Retardation); MS-LTC-DRG 885 (Psychoses); MS-LTC-DRG 886 (Behavioral & 
Developmental Disorders); MS-LTC-DRG 887 (Other Mental Disorder 
Diagnoses); MS-LTC-DRG 894 (Alcohol/Drug Abuse or Dependence, Left 
Ama); MS-LTC-DRG 895 (Alcohol/Drug Abuse or Dependence, with 
Rehabilitation Therapy); MS-LTC-DRG 896 (Alcohol/Drug Abuse or 
Dependence, without Rehabilitation Therapy with MCC); MS-LTC-DRG 897 
(Alcohol/Drug Abuse or Dependence, without Rehabilitation Therapy 
without MCC); MS-LTC-DRG 945 (Rehabilitation with CC/MCC); and MS-LTC-
DRG 946 (Rehabilitation without CC/MCC). Under our proposed 
implementation of the new dual rate LTCH PPS payment structure, LTCH 
discharges that are grouped to these 15 ``psychiatric and 
rehabilitation'' MS-LTC-DRGs would not meet the criteria for exclusion 
from the site neutral payment rate. As such, under our proposed 
implementation of the criterion for a principal diagnosis relating to a 
psychiatric diagnosis or to rehabilitation (which we are finalizing, as 
discussed in section VII.B.3.b. of the preamble of this final rule), 
there are no applicable LTCH cases to use in calculating a relative 
weight for the ``psychiatric and rehabilitation'' MS-LTC-DRGs. In other 
words, any LTCH PPS discharges grouped to any of the 15 ``psychiatric 
and rehabilitation'' MS-LTC-DRGs will always be paid at the site 
neutral payment rate, and, therefore, those MS-LTC-DRGs will never 
include any LTCH cases that meet the criteria for exclusion from the 
site neutral payment rate. However, section 1886(m)(6)(B) of the Act 
establishes a transitional payment method for cases that will be paid 
at the site neutral payment rate for LTCH discharges occurring in cost 
reporting periods beginning during FY 2016 or FY 2017. Under the 
transitional payment method

[[Page 49632]]

for cases for site neutral payment rate cases discussed in detail in 
section VII.B.4.b. of the preamble of this final rule, for LTCH 
discharges occurring in cost reporting periods beginning on or after 
October 1, 2015, and on or before September 30, 2017 (that is, 
discharges occurring in cost reporting periods beginning during FYs 
2016 and 2017), site neutral payment rate cases will be paid a blended 
payment rate, calculated as 50 percent of the applicable site neutral 
payment rate amount for the discharge and 50 percent of the applicable 
LTCH PPS standard Federal payment rate. Because the LTCH PPS standard 
Federal payment rate is based on the relative weight of the MS-LTC-DRG, 
in order to determine the transitional blended payment for site neutral 
payment rate cases grouped to one of the ``psychiatric or 
rehabilitation'' MS-LTC-DRGs in FY 2016, in the proposed rule, we 
proposed to assign a relative weight to these MS-LTC-DRGs for FY 2016, 
that would be the same as the FY 2015 relative weight. We believe that 
using the respective FY 2015 relative weight for each of the 
``psychiatric or rehabilitation'' MS-LTC-DRGs would result in 
appropriate payments for LTCH cases that will be paid at the site 
neutral payment rate under the transition policy provided by the 
statute because there are no clinically similar MS-LTC-DRGs for which 
we were able to determine relative weights based on applicable LTCH 
cases in the FY 2014 MedPAR file data using the steps described above. 
Furthermore, we believe that it would be administratively burdensome 
and introduce unnecessary complexity to the MS-LTC-DRG relative weight 
calculation to use the LTCH discharges in the MedPAR file data to 
calculate a relative weight for those 15 ``psychiatric and 
rehabilitation'' MS-LTC-DRGs to be used for the sole purpose of 
determining half of the transitional blended payment for site neutral 
payment rate cases during the transition period. (80 FR 24548 through 
24549)
    Comment: Some commenters requested that CMS provide more detail 
about how the GROUPER software will account for CCs and MCCs in 
grouping cases into one of the 15 ``psychiatric or rehabilitation'' MS-
LTC-DRGs.
    Response: When we proposed to adopt the severity-adjusted MS-DRGs 
(and by extension the MS-LTC-DRGs) as a replacement patient 
classification to the CMS DRG (and by extension the LTC-DRG) system, we 
present a detailed discussion on the development of the MCC, CC, and 
non-CC severity levels in the MS-DRGs and MS-LTC-DRGs (refer to the FY 
2008 IPPS proposed rule (72 FR 24697 through 24706 and 24756 through 
24757)). We also wish to point out that only two of the 15 
``psychiatric or rehabilitation'' MS-LTC-DRGs are grouped based on 
severity level. These are MS-LTC-DRG 945 (Rehabilitation with CC/MCC) 
and MS-LTC-DRG 946 (Rehabilitation without CC/MCC). The grouping of 
LTCH cases into these MS-LTC-DRGs will be in accordance with our 
established method for grouping discharges into MS-LTC-DRGs when those 
MS-LTC-DRGs are subdivided based on severity level; that is, cases with 
at least one code that is on the CC or MCC list are assigned to the 
``with CC/MCC'' MS-LTC-DRG (MS-LTC-DRG 945) by the GROUPER software and 
LTCH cases without a CC or an MCC are assigned to the ``without CC/
MCC'' MS-LTC-DRG (MS-LTC-DRG 946) by the GROUPER software. Because the 
other 13 ``psychiatric or rehabilitation'' MS-LTC-DRGs (that is, MS-
LTC-DRGs 876, 880, 881, 882, 883, 884, 885, 886, 887, 894, 895, 896, 
and 897), by definition, are not subdivided based on severity level 
under our established method for grouping discharges into MS-LTC-DRGs, 
the presence of code that is on the CC or MCC list will not impact the 
MS-LTC-DRG grouping for such cases. For a full discussion of our method 
of grouping under the MS-DRGs (and by extension, the MS-LTC-DRGs) based 
on severity level, we refer readers to the discussion of the 
development of the severity-adjust MS-DRGs in the FY 2008 IPPS proposed 
rule (72 FR 24697-24706).
    Comment: Commenters generally supported the proposal to adopt the 
FY 2015 relative weights for the ``psychiatric or rehabilitation'' MS-
LTC-DRGs. However, some commenters pointed out a technical error in 
Table 11 of the proposed rule. The commenters noted that although CMS 
stated in the preamble that for the 15 MS-LTC-DRGs CMS identified as 
``psychiatric or rehabilitation,'' CMS proposed to adopt the FY 2015 
relative weights (and average length of stay thresholds) for FY 2016 to 
pay for cases grouped to those MS-LTC-DRGs from LTCHs whose FY 2016 
cost reporting periods had not yet begun and under the transitional 
blended payment rate. However, they added, the proposed FY 2016 
relative weights (and proposed average length of stay thresholds) 
listed in Table 11 of the proposed rule were not the FY 2015 relative 
weights for those MS-LTC-DRGs established in the FY 2015 IPPS/LTCH PPS 
final rule.
    Response: We appreciate the commenters' support of our proposal to 
adopt the FY 2015 relative weights for the ``psychiatric or 
rehabilitation'' MS-LTC-DRGs for FY 2016. The commenters correctly 
pointed out that Table 11 of the proposed rule contained an inadvertent 
technical error in the proposed FY 2016 relative weights (and average 
length of stay thresholds in that table) for the ``psychiatric or 
rehabilitation'' MS-LTC-DRGs. We are correcting that technical error in 
Table 11 of this final rule, and after consideration of public comments 
we are adopting our proposal to assign the FY 2016 MS-LTC-DRG relative 
weights (and average length of stay thresholds) for the 15 
``psychiatric or rehabilitation'' MS-LTC-DRGs the FY 2015 relative 
weights for those respective MS-LTC-DRGs without further change.
    In summary, in this final rule, for FY 2016, as we proposed, we are 
establishing a relative weight (and average length of stay thresholds) 
equal to the respective FY 2015 relative weight of the MS-LTC-DRGs for 
the 15 ``psychiatric or rehabilitation'' MS-LTC-DRGs listed above (that 
is, MS-LTC-DRGs 876, 880, 881, 882, 883, 884, 885, 886, 887, 894, 895, 
896, 897, 945, and 946). Table 11, which is listed in section VI. of 
the Addendum to this final rule and is available via the Internet on 
the CMS Web site, reflects the correction of the technical error 
discussed above.
    Step 6--Adjust the FY 2016 MS-LTC-DRG relative weights to account 
for nonmonotonically increasing relative weights.
    As discussed earlier in this section, the MS-DRGs contain base DRGs 
that have been subdivided into one, two, or three severity of illness 
levels. Where there are three severity levels, the most severe level 
has at least one secondary diagnosis code that is referred to as an MCC 
(that is, major complication or comorbidity). The next lower severity 
level contains cases with at least one secondary diagnosis code that is 
a CC (that is, complication or comorbidity). Those cases without an MCC 
or a CC are referred to as ``without CC/MCC.'' When data do not support 
the creation of three severity levels, the base MS-DRG is subdivided 
into either two levels or the base MS-DRG is not subdivided. The two-
level subdivisions could consist of the MS-DRG with CC/MCC and the MS-
DRG without CC/MCC. Alternatively, the other type of two-level 
subdivision may consist of the MS-DRG with MCC and the MS-DRG without 
MCC.
    In those base MS-LTC-DRGs that are split into either two or three 
severity levels, cases classified into the ``without CC/MCC'' MS-LTC-
DRG are expected to have a lower resource use (and lower

[[Page 49633]]

costs) than the ``with CC/MCC'' MS-LTC-DRG (in the case of a two-level 
split) or both the ``with CC'' and the ``with MCC'' MS-LTC-DRGs (in the 
case of a three-level split). That is, theoretically, cases that are 
more severe typically require greater expenditure of medical care 
resources and will result in higher average charges. Therefore, in the 
three severity levels, relative weights should increase by severity, 
from lowest to highest. If the relative weights decrease as severity 
increases (that is, if within a base MS-LTC-DRG, an MS-LTC-DRG with CC 
has a higher relative weight than one with MCC, or the MS-LTC-DRG 
``without CC/MCC'' has a higher relative weight than either of the 
others), they are nonmonotonic. We continue to believe that utilizing 
nonmonotonic relative weights to adjust Medicare payments would result 
in inappropriate payments because the payment for the cases in the 
higher severity level in a base MS-LTC-DRG (which are generally 
expected to have higher resource use and costs) would be lower than the 
payment for cases in a lower severity level within the same base MS-
LTC-DRG (which are generally expected to have lower resource use and 
costs). Therefore, in determining the FY 2016 MS-LTC-DRG relative 
weights for LTCH PPS standard Federal payment rate payments in this 
final rule, consistent with our historical methodology, as proposed, we 
combined MS-LTC-DRG severity levels within a base MS-LTC-DRG for the 
purpose of computing a relative weight when necessary to ensure that 
monotonicity is maintained. For a comprehensive description of our 
existing methodology to adjust for nonmonotonicity, we refer readers to 
the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43964 through 
43966). Any adjustments for nonmonotonicity that were made in 
determining the FY 2016 MS-LTC-DRG relative weights in this rule by 
applying this methodology are denoted in Table 11, which is listed in 
section VI. of the Addendum to this final rule and is available via the 
Internet on the CMS Web site.
    Step 7-- Calculate the FY 2016 MS-LTC-DRG reclassification and 
recalibration budget neutrality factor.
    In accordance with the regulations at Sec.  412.517(b) (in 
conjunction with Sec.  412.503), the annual update to the MS-LTC-DRG 
classifications and relative weights is done in a budget neutral manner 
such that estimated aggregate LTCH PPS payments would be unaffected, 
that is, would be neither greater than nor less than the estimated 
aggregate LTCH PPS payments that would have been made without the MS-
LTC-DRG classification and relative weight changes. (For a detailed 
discussion on the establishment of the budget neutrality requirement 
for the annual update of the MS-LTC-DRG classifications and relative 
weights, we refer readers to the RY 2008 LTCH PPS final rule (72 FR 
26881 and 26882).)
    The MS-LTC-DRG classifications and relative weights are updated 
annually based on the most recent available LTCH claims data to reflect 
changes in relative LTCH resource use (Sec.  412.517(a) in conjunction 
with Sec.  412.503). Under the budget neutrality requirement at Sec.  
412.517(b), for each annual update, the MS-LTC-DRG relative weights are 
uniformly adjusted to ensure that estimated aggregate payments under 
the LTCH PPS would not be affected (that is, decreased or increased). 
Consistent with that provision, we are updating the FY 2016 MS-LTC-DRG 
classifications and relative weights for LTCH PPS standard Federal 
payment rate payments based on the most recent available LTCH data for 
applicable LTCH cases, and applying a budget neutrality adjustment in 
determining the FY 2016 MS-LTC-DRG relative weights.
    To ensure budget neutrality in the update to the MS-LTC-DRG 
classifications and relative weights under Sec.  412.517(b), as 
proposed, we are continuing to use our established two-step budget 
neutrality methodology. As discussed previously in this section, this 
approach is consistent with our general policies regarding the 
continued use of our existing methodologies, as presented in the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50175 through 50176).
    In this final rule, in the first step of our MS-LTC-DRG budget 
neutrality methodology, for FY 2016, we calculated and applied a 
normalization factor to the recalibrated relative weights (the result 
of Steps 1 through 6 above) to ensure that estimated payments were not 
affected by changes in the composition of case types or the changes to 
the classification system. That is, the normalization adjustment is 
intended to ensure that the recalibration of the MS-LTC-DRG relative 
weights (that is, the process itself) neither increases nor decreases 
the average case-mix index.
    To calculate the normalization factor for FY 2016 (the first step 
of our budget neutrality methodology), we used the following three 
steps: (1.a.) We used the most recent available applicable LTCH cases 
from the most recent available data (that is, LTCH discharges from the 
FY 2014 MedPAR file) and grouped them using the FY 2016 GROUPER (that 
is, Version 33 for FY 2016) and the recalibrated FY 2016 MS-LTC-DRG 
relative weights (determined in Steps 1 through 6 above) to calculate 
the average case-mix index; (1.b.) we grouped the same applicable LTCH 
cases (as are used in Step 1.a.) using the FY 2015 GROUPER (Version 32) 
and FY 2015 MS-LTC-DRG relative weights and calculated the average 
case-mix index; and (1.c.) we computed the ratio of these average case-
mix indexes by dividing the average CMI for FY 2015 (determined in Step 
1.b.) by the average case-mix index for FY 2016 (determined in Step 
1.a.). As a result, in determining the MS-LTC-DRG relative weights for 
FY 2016, each recalibrated MS-LTC-DRG relative weight was multiplied by 
1.27929 (determined in Step 1.c.) in the first step of the budget 
neutrality methodology, which produces ``normalized relative weights.''
    In the second step of our MS-LTC-DRG budget neutrality methodology, 
we calculated a second budget neutrality factor consisting of the ratio 
of estimated aggregate FY 2016 LTCH PPS standard Federal payment rate 
payments for applicable LTCH cases (the sum of all calculations under 
Step 1.a. above) after reclassification and recalibration to estimated 
aggregate payments for FY 2015 LTCH PPS standard Federal payment rate 
payments for applicable LTCH cases before reclassification and 
recalibration (that is, the sum of all calculations under Step 1.b. 
above).
    That is, for this final rule, for FY 2016, under the second step of 
the budget neutrality methodology, we determined the budget neutrality 
adjustment factor using the following three steps: (2.a.) We simulated 
estimated total FY 2016 LTCH PPS standard Federal payment rate payments 
for applicable LTCH cases using the normalized relative weights for FY 
2016 and GROUPER Version 33 (as described above); (2.b.) we simulated 
estimated total FY 2015 LTCH PPS standard Federal payment rate payments 
for applicable LTCH cases using the FY 2015 GROUPER (Version 32) and 
the FY 2015 MS-LTC-DRG relative weights in Table 11 of the FY 2015 
IPPS/LTCH PPS final rule available on the Internet, as described in 
section VI. of the Addendum of that final rule (79 FR 5040 through 
50402); and (2.c.) we calculated the ratio of these estimated total 
payments by dividing the value determined in Step 2.b. by the value 
determined in Step 2.a. In determining the FY 2016 MS-LTC-DRG relative 
weights, each normalized relative weight was then multiplied by a 
budget neutrality factor of 1.0033952

[[Page 49634]]

(the value determined in Step 2.c.) in the second step of the budget 
neutrality methodology to determine the budget neutral FY 2016 relative 
weight for each MS-LTC-DRG.
    Accordingly, in determining the FY 2016 MS-LTC-DRG relative weights 
in this final rule, consistent with our existing methodology, we 
applied a normalization factor of 1.27929 and a budget neutrality 
factor of 1.0033952 (computed as described above). Table 11, which is 
listed in section VI. of the Addendum to this rule and is available via 
the Internet on the CMS Web site, lists the MS-LTC-DRGs and their 
respective relative weights, geometric mean length of stay, five-sixths 
of the geometric mean length of stay (used to identify SSO cases under 
Sec.  412.529(a)), and the ``IPPS Comparable Thresholds'' (used in 
determining SSO payments under Sec.  412.529(c)(3)), for FY 2016 (and 
reflect both the normalization factor of 1.27929 and the budget 
neutrality factor of 1.0033952).
    We did not receive any public comments on our proposed methodology 
for calculating the FY 2016 MS-LTC-DRG reclassification and 
recalibration budget neutrality factor, and we are adopting it as final 
without modification. We note that the public comments we received, our 
responses to those comments, and our finalized policy of applying a 
budget neutrality requirement as part of the annual recalibration of 
the MS-LTC-DRG relative weights for FY 2016 are presented in section 
VII.B.7.a. of this preamble of this final rule.

D. Changes to the LTCH PPS Standard Federal Payment Rates for FY 2016

1. Overview of Development of the LTCH PPS Standard Federal Payment 
Rates
    The basic methodology for determining LTCH PPS standard Federal 
prospective payment rates is set forth at Sec.  412.515 through Sec.  
412.536. In this section, we discuss the factors that we used to update 
the LTCH PPS standard Federal payment rate for FY 2016, that is, 
effective for LTCH discharges occurring on or after October 1, 2015 
through September 30, 2016. As previously discussed, under the dual 
rate LTCH PPS payment structure required by statute, we are 
establishing that, beginning with FY 2016, only LTCH discharges that 
meet the criteria for exclusion from the site neutral payment rate will 
be paid based on the LTCH PPS standard Federal payment rate specified 
at Sec.  412.523. (For additional details on our finalized policies 
related to the dual rate LTCH PPS payment structure required by 
statute, we refer readers to section VII.C. of the preamble of this 
final rule.)
    For details on the development of the initial FY 2003 standard 
Federal rate, we refer readers to the August 30, 2002 LTCH PPS final 
rule (67 FR 56027 through 56037). For subsequent updates to the LTCH 
PPS standard Federal rate as implemented under Sec.  412.523(c)(3), we 
refer readers to the following final rules: RY 2004 LTCH PPS final rule 
(68 FR 34134 through 34140); RY 2005 LTCH PPS final rule (68 FR 25682 
through 25684); RY 2006 LTCH PPS final rule (70 FR 24179 through 
24180); RY 2007 LTCH PPS final rule (71 FR 27819 through 27827); RY 
2008 LTCH PPS final rule (72 FR 26870 through 27029); RY 2009 LTCH PPS 
final rule (73 FR 26800 through 26804); FY 2010 IPPS/RY 2010 LTCH PPS 
final rule (74 FR 44021 through 44030); FY 2011 IPPS/LTCH PPS final 
rule (75 FR 50443 through 50444); FY 2012 IPPS/LTCH PPS final rule (76 
FR 51769 through 51773); FY 2013 IPPS/LTCH PPS final rule (77 FR 53479 
through 53481); FY 2014 IPPS/LTCH PPS final rule (78 FR 50760 through 
50765); and FY 2015 IPPS/LTCH PPS final rule (79 FR 50176 through 
50180).
    In this FY 2016 final rule, we present our finalized policies 
related to the annual update to the LTCH PPS standard Federal payment 
rate for FY 2016, which includes the annual market basket update. 
Consistent with our historical practice of using the best data 
available, as proposed, we also used more recent data to determine the 
FY 2016 annual market basket update to the LTCH PPS standard Federal 
payment rate in this final rule.
    The application of the update to the LTCH PPS standard Federal 
payment rate for FY 2016 is presented in section V.A. of the Addendum 
to this final rule. The components of the annual market basket update 
to the LTCH PPS standard Federal payment rate for FY 2016 are discussed 
below, including the reduction to the annual update for LTCHs that fail 
to submit quality reporting data for fiscal year FY 2016 as required by 
the statute (as discussed in section VII.D.2.c. of the preamble of this 
final rule). In addition, as discussed in section V.A. of the Addendum 
of this final rule, we made an adjustment to the LTCH PPS standard 
Federal payment rate to account for the estimated effect of the changes 
to the area wage level adjustment for FY 2016 on estimated aggregate 
LTCH PPS payments, in accordance with Sec.  412.523(d)(4).
2. FY 2016 LTCH PPS Annual Market Basket Update
a. Overview
    Historically, the Medicare program has used a market basket to 
account for price increases in the services furnished by providers. The 
market basket used for the LTCH PPS includes both operating and 
capital-related costs of LTCHs because the LTCH PPS uses a single 
payment rate for both operating and capital-related costs. As discussed 
in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53468 through 53476), we 
adopted the newly created FY 2009-based LTCH-specific market basket for 
use under the LTCH PPS beginning in FY 2013. For additional details on 
the historical development of the market basket used under the LTCH 
PPS, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53467 through 53468).
    Section 3401(c) of the Affordable Care Act provides for certain 
adjustments to any annual update to the LTCH PPS standard Federal 
payment rate and refers to the timeframes associated with such 
adjustments as a ``rate year'' (which are discussed in more detail in 
section VII.C.2.b. of the preamble of this final rule.) We note that 
because the annual update to the LTCH PPS policies, rates, and factors 
now occurs on October 1, we adopted the term ``fiscal year'' (FY) 
rather than ``rate year'' (RY) under the LTCH PPS beginning October 1, 
2010, to conform with the standard definition of the Federal fiscal 
year (October 1 through September 30) used by other PPSs, such as the 
IPPS (75 FR 50396 through 50397). Although the language of sections 
3004(a) 3401(c), 10319, and 1105(b) of the Affordable Care Act refers 
to years 2010 and thereafter under the LTCH PPS as ``rate year,'' 
consistent with our change in the terminology used under the LTCH PPS 
from ``rate year'' to ``fiscal year,'' for purposes of clarity, when 
discussing the annual update for the LTCH PPS standard Federal payment 
rate, including the provisions of the Affordable Care Act, we use 
``fiscal year'' rather than ``rate year'' for 2011 and subsequent 
years.
b. Revision of Certain Market Basket Updates as Required by the 
Affordable Care Act
    Section 1886(m)(3)(A) of the Act, as added by section 3401(c) of 
the Affordable Care Act, specifies that, for rate year 2010 and each 
subsequent rate year through 2019, any annual update to the LTCH PPS 
standard Federal payment rate shall be reduced:

[[Page 49635]]

     For rate year 2010 through 2019, by the ``other 
adjustment'' specified in sections 1886(m)(3)(A)(ii) and (m)(4) of the 
Act; and
     For rate year 2012 and each subsequent year, by the 
productivity adjustment (which we refer to as ``the multifactor 
productivity (MFP) adjustment'') described in section 
1886(b)(3)(B)(xi)(II) of the Act.
    Section 1886(m)(3)(B) of the Act provides that the application of 
paragraph (3) of section 1886(m) of the Act may result in the annual 
update being less than zero for a rate year, and may result in payment 
rates for a rate year being less than such payment rates for the 
preceding rate year.
    Section 1886(b)(3)(B)(xi)(II) of the Act defines the MFP adjustment 
as equal to the 10-year moving average of changes in annual economy-
wide, private nonfarm business multifactor productivity (as projected 
by the Secretary for the 10-year period ending with the applicable 
fiscal year, calendar year, cost reporting period, or other annual 
period). Under our methodology, the end of the 10-year moving average 
of changes in the MFP coincides with the end of the appropriate FY 
update period. In addition, the MFP adjustment that is applied in 
determining any annual update to the LTCH PPS standard Federal payment 
rate is the same adjustment that is required to be applied in 
determining the applicable percentage increase under the IPPS under 
section 1886(b)(3)(B)(i) of the Act as they are both based on a fiscal 
year. We refer readers to section IV.A.1. of the preamble of this final 
rule for more information on the FY 2016 MFP adjustment.
c. Adjustment to the Annual Update to the LTCH PPS Standard Federal 
Payment Rate Under the Long-Term Care Hospital Quality Reporting 
Program (LTCH QRP)
    In accordance with section 1886(m)(5) of the Act, as added by 
section 3004(a) of the Affordable Care Act, the Secretary established 
the Long-Term Care Hospital Quality Reporting Program (LTCH QRP). The 
reduction in the annual update to the LTCH PPS standard Federal payment 
rate for failure to report quality data under the LTCH QRP for FY 2014 
and subsequent fiscal years is codified under Sec.  412.523(c)(4) of 
the regulations. (As previously noted, although the language of section 
3004(a) of the Affordable Care Act refers to years 2011 and thereafter 
under the LTCH PPS as ``rate year,'' consistent with our change in the 
terminology used under the LTCH PPS from ``rate year'' to ``fiscal 
year,'' for purposes of clarity, when discussing the annual update for 
the LTCH PPS, including the provisions of the Affordable Care Act, we 
use ``fiscal year'' rather than ``rate year'' for 2011 and subsequent 
years.) The LTCH QRP, as required for FY 2014 and beyond by section 
1886(m)(5)(A)(i) of the Act, applies a 2.0 percentage point reduction 
to any update under Sec.  412.523(c)(3) for an LTCH that does not 
submit quality reporting data to the Secretary in accordance with 
section 1886(m)(5)(C) of the Act with respect to such a year (that is, 
in the form and manner and at the time specified by the Secretary under 
the LTCH QRP) (Sec.  412.523(c)(4)(i)). Section 1886(m)(5)(A)(ii) of 
the Act provides that the application of the 2.0 percentage points 
reduction may result in an annual update that is less than 0.0 for a 
year, and may result in LTCH PPS payment rates for a year being less 
than such LTCH PPS payment rates for the preceding year (Sec.  
412.523(c)(4)(iii)). Furthermore, section 1886(m)(5)(B) of the Act 
specifies that the 2.0 percentage points reduction is applied in a 
noncumulative manner, such that any reduction made under section 
1886(m)(5)(A) of the Act shall apply only with respect to the year 
involved, and shall not be taken into account in computing the LTCH PPS 
payment amount for a subsequent year (Sec.  412.523(c)(4)(ii)). We 
discuss the application of the 2.0 percentage point reduction under 
Sec.  412.523(c)(4)(i) in our discussion of the annual market basket 
update to the LTCH PPS standard Federal payment rate for FY 2016 in 
section VII.D.2.e. of the preamble of this final rule. (For additional 
information on the history of the LTCH QRP, including the statutory 
authority and the selected measures, we refer readers to section VII.C. 
of the preamble of this final rule.)
d. Market Basket Under the LTCH PPS for FY 2016
    Under the authority of section 123 of the BBRA as amended by 
section 307(b) of the BIPA, we adopted a newly created FY 2009-based 
LTCH-specific market basket for use under the LTCH PPS beginning in FY 
2013. The FY 2009-based LTCH-specific market basket is based solely on 
the Medicare cost report data submitted by LTCHs and, therefore, 
specifically reflects the cost structures of only LTCHs. For additional 
details on the development of the FY 2009-based LTCH-specific market 
basket, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53467 through 53476).
    For FY 2016, as proposed, we are continuing to use the FY 2009-
based LTCH-specific market basket to update the LTCH PPS for FY 2016. 
We continue to believe that the FY 2009-based LTCH-specific market 
basket appropriately reflects the cost structure of LTCHs for the 
reasons discussed when we adopted the FY 2009-based LTCH-specific 
market basket for use under the LTCH PPS in the FY 2013 IPPS/LTCH PPS 
final rule (77 FR 53467 through 53476).
    Comment: One commenter stated our proposal to use the FY 2009-based 
market basket update for FY 2016 is contradictory to our statements 
about the statutory change in the LTCH PPS payment structure, and the 
proposed rule contains language that states the FY 2009 LTCH-specific 
market basket is being used as the basis for FY 2016 update. The 
commenter referred our statement in the proposed rule that ``[w]e 
continue to believe that the FY 2009-based LTCH-specific market basket 
appropriately reflects the cost structure of LTCHs for the reasons 
discussed when we adopted the FY 2009-based LTCH-specific market basket 
for use under the LTCH PPS. . . '' (80 FR 24552). The commenter 
believed the market basket should reflect the most currently available 
data to update the LTCH PPS standard Federal payment rate that will be 
used to pay LTCH cases that meet the criteria for exclusion from the 
site neutral payment rate.
    Response: The proposed LTCH market basket update reflects the most 
recent forecast of the 2009-based LTCH-specific market basket for FY 
2016. Specifically, the update reflects the projected growth in the 
relative input prices LTCHs are expected to encounter for the period of 
October 1, 2015 through September 30, 2016. The Medicare Cost Report 
used to determine the base year weights for the FY 2009-based LTCH-
specific market basket was the most up-to date data available at the 
time of the rebasing in FY 2013. We have performed sensitivity analysis 
for various market baskets and found that the cost share weights do not 
change substantially from year to year. For this reason, it has been 
our historical practice to rebase the market baskets about every 4 
years. As such, we disagree with the commenter's assertion that the FY 
2009-based LTCH-specific market basket does not reflect the most 
currently available data to update the annual payment rates. Rather the 
FY 2009-based LTCH-specific market basket reflects IGI's latest 
forecast on price inflation at this time, and for these reasons we 
believe that it is appropriate to continue to use the FY 2009-based 
LTCH-specific market basket to update the LTCH PPS standard Federal 
payment rate for FY 2016.

[[Page 49636]]

    After consideration of the public comments we received, we are 
finalizing our proposal to continue to use the FY 2009-based LTCH-
specific market basket to update the LTCH PPS standard Federal payment 
rate for FY 2016.
e. Annual Market Basket Update for LTCHs for FY 2016
    Consistent with our historical practice and our proposal, we 
estimate the market basket update and the MFP adjustment based on IGI's 
forecast using the most recent available data. Based on IGI's second 
quarter 2015 forecast, the FY 2016 full market basket estimate for the 
LTCH PPS using the FY 2009-based LTCH-specific market basket is 2.4 
percent. The current estimate of the MFP adjustment for FY 2016 based 
on IGI's second quarter 2015 forecast is 0.5 percent, as discussed in 
section IV.A. of the preamble of this final rule. In addition, 
consistent with our historical practice, we are using a more recent 
estimate of the market basket and the MFP adjustment) to determine the 
FY 2016 market basket update and the MFP adjustment in this final rule.
    For FY 2016, section 1886(m)(3)(A)(i) of the Act requires that any 
annual update to the LTCH PPS standard Federal payment rate be reduced 
by the productivity adjustment (``the MFP adjustment'') described in 
section 1886(b)(3)(B)(xi)(II) of the Act. Consistent with the statute, 
we are reducing the full FY 2016 market basket update by the FY 2016 
MFP adjustment. To determine the market basket update for LTCHs for FY 
2016, as reduced by the MFP adjustment, consistent with our established 
methodology, we subtracted the FY 2016 MFP adjustment from the FY 2016 
market basket update. Furthermore, sections 1886(m)(3)(A)(ii) and 
1886(m)(4)(E) of the Act requires that any annual update to the LTCH 
PPS standard Federal payment rate for FY 2016 be reduced by the ``other 
adjustment'' described in paragraph (4), which is 0.2 percentage point 
for FY 2016. Therefore, following application of the productivity 
adjustment, as proposed, we are further reducing the adjusted market 
basket update (that is, the full market basket increase less the MFP 
adjustment) by the ``other adjustment'' specified by sections 
1886(m)(3)(A)(ii) and 1886(m)(4) of the Act. (For additional details on 
our established methodology for adjusting the market basket increase by 
the MFP and the ``other adjustment'' required by the statute, we refer 
readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51771).)
    For FY 2016, section 1886(m)(5) of the Act requires that for LTCHs 
that do not submit quality reporting data as required under the LTCHQR 
Program, any annual update to an LTCH PPS standard Federal payment 
rate, after application of the adjustments required by section 
1886(m)(3) of the Act, shall be further reduced by 2.0 percentage 
points. Therefore, the update to the LTCH PPS standard Federal payment 
rate for FY 2016 for LTCHs that fail to submit quality reporting data 
under the LTCH QRP, the full LTCH PPS market basket increase estimate, 
subject to an adjustment based on changes in economy-wide productivity 
(``the MFP adjustment'') as required under section 1886(m)(3)(A)(i) of 
the Act and an additional reduction required by sections 
1886(m)(3)(A)(ii) and 1886(m)(4) of the Act, will also be further 
reduced by 2.0 percentage points.
    In this final rule, in accordance with the statute, consistent with 
our proposal, we are reducing the FY 2016 full market basket estimate 
of 2.4 percent (based on IGI's second quarter 2015 forecast of the FY 
2009-based LTCH-specific market basket) by the FY 2016 MFP adjustment 
of 0.5 percentage point (based on IGI's second quarter 2015 forecast). 
Following application of the productivity adjustment, the adjusted 
market basket update of 1.9 percent (2.4 percent minus 0.5 percentage 
point) was then reduced by 0.2 percentage point, as required by 
sections 1886(m)(3)(A)(ii) and 1886(m)(4)(E) of the Act. Therefore, in 
this final rule, under the authority of section 123 of the BBRA as 
amended by section 307(b) of the BIPA, we are establishing an annual 
market basket update under to the LTCH PPS standard Federal payment 
rate for FY 2016 of 1.7 percent (that is, the most recent estimate of 
the LTCH PPS market basket update of 2.4 percent, less the MFP 
adjustment of 0.5 percentage point, and less the 0.2 percentage point 
required under section 1886(m)(4)(E) of the Act). Accordingly, 
consistent with our finalized policy, we are revising Sec.  
412.523(c)(3) by adding a new paragraph (xii), which specifies that the 
LTCH PPS standard Federal payment rate for FY 2016 is the LTCH PPS 
standard Federal payment rate for the previous LTCH PPS year updated by 
1.7 percent, and as further adjusted, as appropriate, as described in 
Sec.  412.523(d). For LTCHs that fail to submit quality reporting data 
under the LTCH QRP, under Sec.  412.523(c)(3)(xi) in conjunction with 
Sec.  412.523(c)(4), we are further reducing the annual update to the 
LTCH PPS standard Federal payment rate by 2.0 percentage points in 
accordance with section 1886(m)(5) of the Act. Accordingly, consistent 
with our finalized policy, we are establishing an annual update to the 
LTCH PPS standard Federal payment rate of -0.3 percent (that is, 1.7 
percent minus 2.0 percentage points) for FY 2016 for LTCHs that fail to 
submit quality reporting data as required under the LTCH QRP. As stated 
above, consistent with our historical practice, as proposed, we are 
using a more recent estimate of the market basket and the MFP 
adjustment to establish an annual update to the LTCH PPS standard 
Federal payment rate for FY 2016 under Sec.  412.523(c)(3)(xii) in this 
final rule. (We note that we also are adjusting the FY 2016 LTCH PPS 
standard Federal payment rate by an area wage level budget neutrality 
factor in accordance with Sec.  412.523(d)(4) (as discussed in section 
V.B.5. of the Addendum of this final rule).)
    Comment: Based on its assessment of the adequacy of Medicare 
payments to LTCHs, which was presented in its March 2015 Report to the 
Congress, MedPAC concluded that no update to the LTCH PPS standard 
Federal payment rate for FY 2016 is warranted. MedPAC further stated 
that Medicare`s current level of payments appears more than adequate to 
accommodate cost growth, even before any update, citing that Medicare 
margin for LTCHs for the past several years have exceeded five percent. 
For these reasons, MedPAC reiterated its recommendation that the 
Secretary eliminate the market basket update to the LTCH PPS standard 
Federal payment rate for FY 2016.
    Response: We appreciate MedPAC's concerns about the necessity of a 
market basked update to the LTCH PPS standard Federal payment rate for 
FY 2016. However, as noted earlier, there is uncertainty surrounding of 
the LTCH patient universe under the new dual rate LTCH PPS payment 
structure, in particular the uncertainty as to what the costs of those 
cases will be during the transition to that revised system. Given this 
uncertainty, we do not believe that it is appropriate or prudent to 
eliminate the market basket update to the LTCH PPS standard Federal 
payment rate for FY 2016 at this time. For the reasons discussed above, 
we believe it is appropriate that the market basket update less the 
multi-factor productivity adjustment (and the ``other'' statutory 
adjustment) be applied in determining the LTCH PPS standard Federal 
payment rate for FY 2016 in order to keep pace with expected input 
price inflation. However, we will keep this recommendation in mind in 
developing

[[Page 49637]]

policies once we gain experience under the new system.
    Comment: Some commenters requested that CMS clarify that the annual 
update established for IPPS excluded hospitals (that is, hospitals paid 
under the reasonable cost-based TEFRA payment system) for FY 2016, 
discussed in section VI of the Addendum to the proposed rule, is 
applicable to the target amount used to determine the LTCH PPS payment 
adjustment for ``subclause (II) LTCHs'' under existing Sec.  412.526, 
and make any modifications to the regulations if needed.
    Response: When we established the LTCH PPS payment adjustment for 
``subclause (II) LTCHs'' at Sec.  412.526, we established that for cost 
reporting periods beginning during FYs after FY 2015, the target amount 
(used to determine the adjusted payment for Medicare inpatient 
operating costs under reasonable cost-based reimbursement rules) will 
equal the hospital's target amount for the previous cost reporting 
period updated by the applicable annual rate-of-increase percentage 
specified in Sec.  413.40(c)(3) for the subject cost reporting period 
(79 FR 50197). This provision is codified at Sec.  412.526(c)(1)(ii) of 
the regulations, and, therefore, no modifications are needed to the 
existing regulations. However, in response to the commenters' request 
for clarification, we are taking the opportunity to specify that, for 
cost reporting periods beginning during FY 2016, the target amount for 
the payment adjustment for ``subclause (II) LTCHs'' is updated, 
consistent with the existing requirements of Sec.  412.526(c)(1)(ii). 
As discussed in section IV. of the preamble of the proposed rule and 
the Addendum, the FY 2016 rate-of-increase percentage for updating the 
target amounts is equal to the estimated percentage increase in the FY 
2016 IPPS operating market basket, in accordance with applicable 
regulations at Sec.  413.40. Based on IHS Global Insight, Inc.'s 2015 
second quarter forecast, with historical data through the 2015 first 
quarter, we estimate that the FY 2010-based IPPS operating market 
basket update for FY 2016 is 2.4 percent (that is, the estimate of the 
market basket rate of-increase). Therefore, the rate-of-increase 
percentage that will be applied to the FY 2015 target amounts in order 
to determine the FY 2016 target amounts for ``subclause (II) LTCHs'' 
under Sec.  412.526(c)(1)(i) is 2.4 percent.
    Comment: One commenter requested we rebase the LTCH PPS standard 
Federal payment rate (that is, recalculate the LTCH PPS standard 
Federal payment rate based on more recent cost report data). The 
commenter argued that LTCH cases that will receive an LTCH PPS standard 
Federal payment rate payment will be more resource intensive and thus 
warrant a higher base payment.
    Response: While we consider this comment outside the scope of this 
proposed rule as we did not make any proposals to make such a 
recalculation of the LTCH PPS standard Federal rate beyond the annual 
market basked update (including any statutory adjustments), we do not 
believe that it is necessary or appropriate to rebase at this time. As 
we state several times throughout this preamble section, there is a 
good deal of uncertainty about the behavioral response of LTCHs to the 
new dual rate LTCH PPS payment structure as well as the nature of the 
future patient population in LTCHs. Furthermore, as we discuss in 
section VII.B.7.a. of this preamble, beginning with FY 2016, the annual 
update of the MS-LTC-DRG relative weights will be determined using only 
data from LTCH discharges that meet the criteria for exclusion from the 
site neutral payment rate (that is, LTCH PPS standard Federal payment 
rate cases), which will appropriately reflect the relative costliness 
and resource use of LTCH PPS standard Federal payment rate cases. For 
these reasons, we do not believe that rebasing is warranted at this 
time.
    After consideration of the public comments we received, we are 
finalizing our of proposal to update the LTCH PPS standard Federal 
payment rate using the market basket update and the MFP adjustment 
based on IGI's forecast using the most recent available data (and the 
`other' adjustments required by the statute). Accordingly, as stated 
above, consistent with our finalized policy, we are specifying at Sec.  
412.523(c)(3)(xii) that the LTCH PPS standard Federal payment rate for 
FY 2016 is the LTCH PPS standard Federal payment rate for the previous 
LTCH PPS year updated by 1.7 percent, and as further adjusted, as 
appropriate, as described in Sec.  412.523(d).

E. Moratoria on the Establishment of LTCHs and LTCH Satellite 
Facilities and on the Increase in the Number of Beds in Existing LTCHs 
and LTCH Satellite Facilities

    Section 1206(b)(2) of Public Law 113-67, as amended by section 
112(b) of the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 
113-93), established ``new'' statutory moratoria on the establishment 
of new LTCHs and LTCH satellite facilities and on the increase in the 
number of hospital beds in existing LTCHs and LTCH satellite 
facilities. For a discussion on our implementation of these moratoria, 
we refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 50189 
through 50193). Since the implementation of these LTCH PPS policy 
moratoria, we have been informed that some confusion may exist 
regarding the exceptions to the moratorium on the establishment of new 
LTCH and LTCH satellite facilities, as well as the application of the 
moratorium on an increase in the number of beds in existing LTCH and 
LTCH satellite facilities.
    Under existing regulations at 42 CFR 412.23(e)(6), we specify that, 
to qualify for an exception under the moratorium to establish a new 
LTCH or LTCH satellite facility during the timeframe between April 1, 
2014, and September 30, 2017, a hospital or entity must meet the 
following criteria:
     The hospital or entity must have begun its qualifying 
period for payment as an LTCH in accordance with Sec.  412.23(e).
     The hospital or entity must have a binding written 
agreement with an outside, unrelated party for the actual construction, 
renovation, lease, or demolition for an LTCH, and must have expended 
before April 1, 2014, at least 10 percent of the estimated cost of the 
project or, if less, $2,500,000.
     The hospital or entity must have obtained an approved 
certificate of need in a State where one is required.
    As we stated in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24553), we believe that the existing regulation text regarding the 
moratorium on the establishment and classification of new LTCHs and 
LTCH satellite facilities could be misread as requiring fulfillment of 
all three conditions in order to qualify for an exception to the 
moratorium on the establishment of new LTCH and LTCH satellite 
facilities. This was not our intent, and we acknowledge that 
implementing the moratorium in that manner would have been directly 
contradictory to the statutory requirement. Technically, while we did 
not explicitly specify in the regulations text under Sec.  412.23(e)(6) 
that only one of the listed criteria had to be met in order to qualify 
for an exception to the moratorium on the establishment of new LTCHs 
and LTCH satellite facilities (the language text states ``as 
applicable''), we clearly stated it in the preamble of the FY 2015 
IPPS/LTCH PPS final rule. (We refer readers to the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 50189 through 50193).) In addition, the 
requirement that one of the three exceptions had to be met in order to 
qualify for an

[[Page 49638]]

exception to the moratorium was also indicated in our proposal to 
implement the initial application of the moratorium during the FY 2009 
rulemaking cycle. (We refer readers to the FY 2009 IPPS/LTCH PPS final 
rule (73 FR 29705).)
    As we stated in the preamble of the FY 2015 IPPS/LTCH PPS final 
rule, the provisions in the new moratorium are nearly identical to the 
language in the prior ``expired'' moratorium under section 114(d) of 
MMSEA (Pub. L. 110-173). As also noted, the mechanics of exceptions to 
the new and expired moratoria on the establishment of new LTCHs and 
LTCH satellite facilities are analogous. Therefore, except as noted, to 
the extent that the new and expired moratoria were consistent, we 
proposed and adopted the identical implementation mechanisms. To 
minimize the confusion that may exist as a result of the existing 
regulations text, in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24553), we proposed to revise the regulations under Sec.  
412.23(e)(6)(ii) to more clearly convey the established policy that 
only one of the statutory conditions needs to be met in order to 
qualify for the exception to the new moratorium on the establishment of 
new LTCH and LTCH satellite facilities.
    We also have become aware of some confusion concerning what 
constitutes the ``estimated cost of the project'' with regard to the 
second exception. To alleviate confusion, we are further clarifying our 
longstanding policy on what constitutes the ``estimated cost of the 
project.'' In discussing this exception in the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 50189 through 50193), we noted that the ``cost of the 
project'' included the activities (plural) that were enumerated in the 
first prong of the exception. Those enumerated activities included 
``the actual construction, renovation, lease, or demolition for a long-
term care hospital.'' That is, our policy is that the sum total of any 
costs associated with any of the enumerated activities that comprised 
the project as a whole (with the project being the establishment of a 
new LTCH or a new LTCH satellite facility) would be considered in 
determining whether the facility met the amount specified in the 
statute. In using an ``or'' in this list of activities, we intended to 
acknowledge that any one project may or may not include every element 
listed (for example, new construction may not include any demolition), 
but if it does include an element, our policy is that the cost of that 
element and the costs of any other of the listed elements in the 
project are to be summed to determine the total cost of the project. 
Therefore, under our longstanding policy, when determining whether 10 
percent of the estimated cost of the project had been expended prior to 
the start of the moratorium, the ``project'' is the establishment of a 
new LTCH or LTCH satellite facility, not any one element that, when 
combined with other elements listed in the first prong, would lead to 
the establishment of the LTCH or LTCH satellite facility. For example, 
if an entity has expended 10 percent of the costs of demolition, but 
that amount is less than both 10 percent of the estimated cost of the 
project, and less than the $2,500,000.00 ceiling amount, the entity 
would not qualify for this exception to the moratorium.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24554), we also 
noted that we were taking that opportunity to provide additional 
clarification on our policy concerning the moratorium on increases in 
the number of beds in existing LTCH and LTCH satellite facilities. As 
we noted in the FY 2015 IPPS/LTCH PPS final rule, while the expired 
moratorium specifically included an exception to the moratorium on the 
increase in the number of beds in existing LTCHs and LTCH satellite 
facilities, the new moratorium under section 1206(b)(2)(B) of Public 
Law 113-67 expressly noted that the exceptions to the expired moratoria 
would not apply under the ``new'' moratoria. Further amendments made by 
section 112(b) of Public Law 113-93, created certain exceptions, but 
did not retract the prior statement regarding the express omission of 
any exceptions (79 FR 50189 through 50193). As the further amendments 
only provided exception to the moratorium on establishing new 
satellites, the express omission of any exceptions to the new 
moratorium on increasing the number of beds in an existing LTCH or LTCH 
satellite facility remained in place. As such, an LTCH may not increase 
the total number of Medicare certified beds beyond the number that 
existed prior to April 1, 2014, including when an existing LTCH meets 
one of the exceptions to the moratorium on the establishment of a new 
LTCH satellite facility. An LTCH satellite facility's beds historically 
have been, and continue to be, counted as the LTCH's beds. Therefore, 
under our existing regulation at Sec.  412.23(e)(7)(iii), an existing 
LTCH cannot, through meeting the criteria for an exception to the new 
moratorium on the establishment of a new LTCH satellite facility, 
increase its total number of Medicare certified beds by establishing 
any number beds at the new LTCH satellite facility that would result in 
the total number of Medicare certified beds in that LTCH exceeding what 
existed prior to April 1, 2014. That is, if an existing LTCH meets one 
of the statutory exceptions for new satellite facilities and opens a 
new LTCH satellite facility during the moratorium, that new LTCH 
satellite facility's beds must come from the movement of beds in 
existence prior to April 1, 2014, from other locations of the existing 
LTCH to the new LTCH satellite facility. This requirement also applies 
to any remote locations that may be established by an existing LTCH 
during the moratorium on new beds.
    Comment: Several commenters expressed concern with CMS' 
articulation of the existing policy. The commenters believed that CMS 
was proposing to change policy, rather than clarifying existing policy. 
The commenters urged CMS to adopt a final policy expressly inverse to 
its clarification.
    Response: We disagree with any assertion that the clarification in 
the proposed rule represents a change in policy. When we implemented 
the current moratorium in the FY 2015 IPPS/LTCH PPS final rule, we 
stated that an existing LTCH may not increase the number of its 
hospital beds. This policy was not subject to any exceptions (79 FR 
50190). We discussed in that final rule, in response to several 
comments received that urged us to create a regulatory exception to the 
bed moratorium, that we did not believe an exception was warranted and, 
therefore, did not establish one. We believe that our clear statement 
in the FY 2015 final rule, our decision not to provide for exceptions 
to the bed moratorium, and our longstanding policy to count a satellite 
facility's beds as an LTCH's beds were clear articulations of our 
policy. Nonetheless, as we were later informed that there was confusion 
regarding the moratorium, in the FY 2016 IPPS/LTCH PPS proposed rule, 
we reiterated our existing policy to alleviate that confusion.
    In summary, without exception, an LTCH may not increase the total 
number of Medicare certified beds beyond the number that existed prior 
to April 1, 2014. The number of Medicare certified beds in an LTCH 
includes beds in all locations, including, as applicable, satellite 
facilities.

F. Changes to Average Length of Stay Criterion Under Public Law 113-67 
(Sec.  412.23)

    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24554), we 
proposed to revise Sec.  412.23 to bring it into conformance with the 
self-

[[Page 49639]]

implementing statutory changes under section 1206(a)(3) of Public Law 
113-67 regarding how the average length of stay for an LTCH is to be 
calculated. As required by section 1861(ccc) of the Act, in order for a 
hospital to be classified as an LTCH, it must maintain an average 
length of stay of greater than 25 days as calculated by the Secretary 
(or meet the requirements of clause (II) of section 1886(d)(1)(B)(iv) 
of the Act). Prior to the statutory change in Public Law 113-67, the 
Medicare average length of stay was calculated, in accordance with 
Sec.  412.23(e)(3) of the regulations, by dividing the total number of 
covered and noncovered Medicare inpatient days by the total number of 
Medicare discharges. This calculation included Medicare inpatient days 
and discharges that were paid under a Medicare Advantage (MA) plan. 
(For a full discussion of the inclusion of MA days in the average 
length of stay calculation, we refer readers to the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51774).)
    Section 1206(a)(3)(A) of Public Law 113-67 specified that, in 
general, for discharges occurring in cost reporting periods beginning 
on or after October 1, 2015, applicable total Medicare inpatient days 
and discharges that are paid at the site neutral payment rate 
(discussed in section VII.B. of the preamble of the proposed rule and 
this final rule with comment period), or for which payments are made 
under an MA plan, are to be excluded from the calculation of an LTCH's 
average length of stay. Section 1206(a)(3)(B) of Public Law 113-67 
further required that this exclusion of site neutral and MA days would 
not apply to an LTCH that was classified as a ``subsection (d) 
hospital'' as of December 10, 2013. Therefore, in the FY 2016 IPPS/LTCH 
PPS proposed rule, we proposed to amend Sec.  423.23 to conform with 
this self-implementing statutory exclusion and the self-implementing 
statutory exception to the exclusion, by revising paragraphs (e)(3)(ii) 
through (e)(3)(v), adding a new paragraph (e)(3)(vi), and revising the 
introductory text of paragraph (e)(6)(ii).
    We did not receive any public comments on our proposals. However, 
upon further consideration, we realized that section 112(c)(2) of 
Public Law 113-93 altered the ``subsection (d) hospital'' language 
established by section 1206(a)(3)(B) of Public Law 113-67 to ``long-
term care hospital.'' That is, section 112(c)(2) of Public Law 113-93 
removed the phrase ``subsection (d) hospital'' in the provision 
regarding entities ``classified as a subsection (d) hospital as of 
December 10, 2013'' and in its place inserted ``long-term care 
hospital'', resulting in the combined statutory mandates providing 
``classified as a long-term care hospital as of December 10, 2013''. 
While we initially mistakenly thought of this legislative language 
change as a technical change, we now recognize its substantive effect. 
As the change is statutorily mandated and self-implementing, we are 
making conforming changes to what we proposed in paragraph (e)(3)(vi) 
of Sec.  412.23 (which specified that the provisions do not apply to a 
hospital classified as a ``subsection (d) hospital'' as of December 10, 
2013). As the statute does not set forth any discretion on this 
provision, and as commenters did not object to the other content of our 
proposed text for Sec.  412.23, using the authority noted below, we are 
waiving notice-and-comment rulemaking for this change (replacing 
``subsection (d) hospital'' with ``long-term care hospital'') in our 
proposed rule's text, finalizing that change, and otherwise finalizing 
the remaining proposed regulation text changes in Sec.  412.23 without 
modification.
    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register to provide a period for public comment before the 
provisions of a rule take effect. We can waive this procedure, however, 
if we find good cause that notice-and-comment procedures are 
impracticable, unnecessary, or contrary to the public interest and we 
incorporate a statement of finding and its reasons in the rule (5 
U.S.C. 553(b)(B)). To that end, we find that it is unnecessary to 
undertake notice-and-comment rulemaking for the changes to the average 
length of stay calculation at 42 CFR 412.23(e)(3)(vi) (governing the 
exclusion of site neutral stays and MA days from the calculation) 
because those changes are statutorily required modifications to how the 
average length of stay is to be calculated. We find that notice-and-
comment rulemaking is unnecessary to implement these statutory changes 
to the average length of stay calculation because they are self-
implementing provisions of law, not requiring the exercise of any 
discretion on the part of the Secretary. As such, the changes in this 
final rule to the average length of stay calculation in Sec.  
412.23(e)(3)(vi) need not be published in a proposed rule prior to 
publication in this final rule, as such publication is unnecessary in 
the absence of any discretion regarding this aspect of the average 
length of stay calculation. Therefore, we find good cause to waive 
notice-and-comment procedures concerning the average length of stay 
calculation at Sec.  412.23 (e)(3)(vi).

VIII. Quality Data Reporting Requirements for Specific Providers and 
Suppliers

    We seek to promote higher quality and more efficient healthcare for 
Medicare beneficiaries. This effort is supported by the adoption of 
widely agreed-upon quality measures. We have worked with relevant 
stakeholders to define quality measures for most settings and to 
measure various aspects of care for most Medicare beneficiaries. These 
measures assess structural aspects of care, clinical processes, patient 
experiences with care, care coordination, and improving patient 
outcomes.
    We have implemented quality reporting programs for multiple care 
settings, including:
     Hospital inpatient services under the Hospital Inpatient 
Quality Reporting (IQR) Program (formerly referred to as the Reporting 
Hospital Quality Data for Annual Payment Update (RHQDAPU) Program);
     Hospital outpatient services under the Hospital Outpatient 
Quality Reporting (OQR) Program (formerly referred to as the Hospital 
Outpatient Quality Data Reporting Program (HOP QDRP));
     Care furnished by physicians and other eligible 
professionals under the Physician Quality Reporting System (PQRS, 
formerly referred to as the Physician Quality Reporting Program 
Initiative (PQRI));
     Inpatient rehabilitation facilities under the Inpatient 
Rehabilitation Facility Quality Reporting Program (IRF QRP);
     Long-term care hospitals under the Long-Term Care Hospital 
Quality Reporting Program (LTCH QRP) (also referred to as the LTCHQR 
Program);
     PPS-exempt cancer hospitals under the PPS-Exempt Cancer 
Hospital Quality Reporting (PCHQR) Program;
     Ambulatory surgical centers under the Ambulatory Surgical 
Center Quality Reporting (ASCQR) Program;
     Inpatient psychiatric facilities under the Inpatient 
Psychiatric Facilities Quality Reporting (IPFQR) Program;
     Home health agencies under the home health quality 
reporting program (HH QRP); and,
     Hospice facilities under the Hospice Quality Reporting 
Program.
    We have also implemented the End-Stage Renal Disease Quality 
Incentive Program and Hospital VBP Program (described further below) 
that link payment to performance.
    In implementing the Hospital IQR Program and other quality 
reporting

[[Page 49640]]

programs, we have focused on measures that have high impact and support 
CMS and HHS priorities for improved quality and efficiency of care for 
Medicare beneficiaries. Our goal for the future is to align the 
clinical quality measure requirements of the Hospital IQR Program with 
various other Medicare and Medicaid programs, including those 
authorized by the Health Information Technology for Economic and 
Clinical Health (HITECH) Act, so that the reporting burden on providers 
will be reduced. As appropriate, we will consider the adoption of 
clinical quality measures with electronic specifications so that the 
electronic collection of performance information is a seamless 
component of care delivery. Establishing such a system will require 
interoperability between EHRs and CMS data collection systems, 
additional infrastructure development on the part of hospitals and CMS, 
and adoption of standards for capturing, formatting, and transmitting 
the data elements that make up the measures. However, once these 
activities are accomplished, adoption of measures that rely on data 
obtained directly from EHRs will enable us to expand the Hospital IQR 
Program measure set with less cost and reporting burden to hospitals. 
We believe that in the near future, collection and reporting of data 
elements through EHRs will greatly simplify and streamline reporting 
for various CMS quality reporting programs, and that hospitals will be 
able to switch primarily to EHR-based data reporting for many measures 
that are currently manually chart-abstracted and submitted to CMS for 
the Hospital IQR Program.
    We also have implemented a Hospital VBP Program under section 
1886(o) of the Act, described in the Hospital Inpatient VBP Program 
final rule (76 FR 26490 through 26547). We most recently adopted 
additional policies for the Hospital VBP Program in section IV.I. of 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50048 through 50087). Under 
the Hospital VBP Program, hospitals receive value-based incentive 
payments based on their performance with respect to performance 
standards for a performance period for the fiscal year involved. The 
measures under the Hospital VBP Program must be selected from the 
measures (other than readmission measures) specified under the Hospital 
IQR Program as required by section 1886(o)(2)(A) of the Act.
    In selecting measures for the Hospital IQR Program, we are mindful 
of the conceptual framework we have developed for the Hospital VBP 
Program. Because measures adopted for the Hospital VBP Program must 
first have been specified under the Hospital IQR Program, these two 
programs are linked and the reporting infrastructure for the programs 
overlap. We view the Hospital VBP Program as the next step in promoting 
higher quality care for Medicare beneficiaries by transforming Medicare 
from a passive payer of claims into an active purchaser of quality 
healthcare for its beneficiaries. Value-based purchasing is an 
important step to revamping how care and services are paid for, moving 
increasingly toward rewarding better value, outcomes, and innovations.
    We also view the Hospital-Acquired Condition (HAC) payment 
adjustment program authorized by section 1886(p) of the Act, as added 
by section 3008 of the Affordable Care Act, and the Hospital VBP 
Program, as related but separate efforts to reduce HACs. The Hospital 
VBP Program is an incentive program that awards payments to hospitals 
based on quality performance on a wide variety of measures, while the 
HAC Reduction Program creates a payment adjustment resulting in payment 
reductions for poorly performing hospitals based on their rates of 
HACs.
    In the preamble of the FY 2016 IPPS/LTCH PPS proposed rule, we 
proposed changes to the following Medicare quality reporting systems:
     In section VIII.A. (80 FR 24555 through 24590), the 
Hospital IQR Program.
     In section VIII.B. (80 FR 24590 through 24595), the PCHQR 
Program.
     In section VIII.C. (80 FR 24595 through 24611), the LTCH 
QRP.
    In addition, in section VIII.D. of the preamble of the FY 2016 
IPPS/LTCH PPS proposed rule (80 FR 24611 through 24615), we proposed 
changes to the Medicare EHR Incentive Program for eligible hospitals 
and CAHs.

A. Hospital Inpatient Quality Reporting (IQR) Program

1. Background
a. History of the Hospital IQR Program
    We refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule 
(74 FR 43860 through 43861) and the FY 2011 IPPS/LTCH PPS final rule 
(75 FR 50180 through 50181) for detailed discussions of the history of 
the Hospital IQR Program, including the statutory history, and to the 
FY 2015 IPPS/LTCH PPS final rule (79 FR 50217 through 50249) for the 
measures we have adopted for the Hospital IQR measure set through the 
FY 2017 payment determination and subsequent years.
b. Maintenance of Technical Specifications for Quality Measures
    The technical specifications for the Hospital IQR Program measures, 
or links to Web sites hosting technical specifications, are contained 
in the CMS/The Joint Commission (TJC) Specifications Manual for 
National Hospital Quality Measures (Specifications Manual). This 
Specifications Manual is posted on the QualityNet Web site at http://www.qualitynet.org/. We generally update the Specifications Manual on a 
semiannual basis and include in the updates detailed instructions and 
calculation algorithms for hospitals to use when collecting and 
submitting data on required measures. These semiannual updates are 
accompanied by notifications to users, providing sufficient time 
between the change and the effective date in order to allow users to 
incorporate changes and updates to the specifications into data 
collection systems.
    The technical specifications for the HCAHPS patient experience of 
care survey are contained in the current HCAHPS Quality Assurance 
Guidelines manual available at the HCAHPS Web site, http://www.hcahpsonline.org. We maintain the HCAHPS technical specifications 
by updating the HCAHPS Quality Assurance Guidelines manual annually, 
and include detailed instructions on survey implementation, data 
collection, data submission and other relevant topics. As necessary, 
HCAHPS Bulletins are issued to provide notice of changes and updates to 
technical specifications in HCAHPS data collection systems.
    Many of the quality measures used in different Medicare and 
Medicaid reporting programs are endorsed by the National Quality Forum 
(NQF). As part of its regular maintenance process for endorsed 
performance measures, the NQF requires measure stewards to submit 
annual measure maintenance updates and undergo maintenance of 
endorsement review every three years. We refer readers to the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50202 through 50203) for additional 
detail on the measure maintenance process.
    We believe that it is important to have in place a subregulatory 
process to incorporate nonsubstantive updates to the measure 
specifications for measures we have adopted for the Hospital IQR 
Program so that these measures remain up-to-date. We refer readers to 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53504 through 53505) and 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50203) for our policy for 
using the

[[Page 49641]]

subregulatory process to make non-substantive updates to measures used 
for the Hospital IQR Program. We recognize that some changes made to 
NQF-endorsed measures undergoing maintenance review are substantive in 
nature and might not be appropriate for adoption using a subregulatory 
process. We will continue to use rulemaking to adopt substantive 
updates made to measures we have adopted for the Hospital IQR Program.
c. Public Display of Quality Measures
    Section 1886(b)(3)(B)(viii)(VII) of the Act was amended by the 
Deficit Reduction Act (DRA) of 2005. Section 5001(a) of the DRA 
requires that the Secretary establish procedures for making information 
regarding measures submitted available to the public after ensuring 
that a hospital has the opportunity to review its data before they are 
made public. We refer readers to the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50776 through 50778) for a more detailed discussion about public 
display of quality measures. We did not propose to change our current 
policy of reporting data from the Hospital IQR Program as soon as it is 
feasible on CMS Web sites such as the Hospital Compare Web site http://www.medicare.gov/hospitalcompareand/ or the interactive https://data.medicare.gov Web site, after a preview period.
    The Hospital Compare Web site is an interactive Web tool that 
assists beneficiaries by providing information on hospital quality of 
care to those who need to select a hospital. For more information on 
measures reported to Hospital Compare, we refer readers to the Web site 
at: http://www.medicare.gov/hospitalcompare. Other information not 
reported to Hospital Compare may be made available on other CMS Web 
sites such as http://www.cms.hhs.gov/HospitalQualityInits/ or https://data.medicare.gov.
2. Process for Retaining Previously Adopted Hospital IQR Program 
Measures for Subsequent Payment Determinations
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53512 through 53513), for our finalized measure retention policy. When 
we adopt measures for the Hospital IQR Program beginning with a 
particular payment determination, these measures are automatically 
adopted for all subsequent payment determinations unless we propose to 
remove, suspend, or replace the measures.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24556), we did 
not propose any changes to our policy for retaining previously adopted 
measures for subsequent payment determinations.
3. Removal and Suspension of Hospital IQR Program Measures
a. Considerations in Removing Quality Measures From the Hospital IQR 
Program
    As discussed above, we generally retain measures from the previous 
year's Hospital IQR Program measure set for subsequent years' measure 
sets except when we specifically propose to remove, suspend, or replace 
a measure. We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 
FR 50185) and the FY 2015 IPPS/LTCH PPS final rule (79 FR 50203 through 
50204) for more information on the criteria we consider for removing 
quality measures. We also take into account the views of the Measure 
Applications Partnership (MAP) when determining when a measure should 
be removed, and we strive to eliminate redundancy of similar measures 
(77 FR 53505 through 53506). In the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 50203 through 50204), we also finalized our proposal to clarify 
the criteria for determining when a measure is ``topped out.'' In the 
FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24556), we did not propose 
any changes to the two criteria that we use to determine whether or not 
a measure is ``topped out.''
    We use these previously adopted measure removal criteria to help 
evaluate when we should propose a measure for removal. However, we 
continue to believe that there are circumstances in which a measure 
that meets criteria for removal should be retained regardless, because 
the drawbacks of removing a measure could be outweighed by other 
benefits to retaining the measure. Therefore, because of the continued 
need to balance benefits and drawbacks as well as our desire to 
increase transparency, in the FY 2016 IPPS/LTCH PPS proposed rule (80 
FR 24556 through 24557), we proposed additional factors to consider for 
measure removal and also include factors to consider in order to retain 
measures.
    Specifically, we proposed to take into consideration the following 
additional factor in determining whether a measure should be removed:
     Feasibility to implement the measure specifications.
    In addition, we proposed to remove one of the factors 
(``Availability of alternative measures with a stronger relationship to 
patient outcomes'') we take into consideration when determining whether 
to remove measures, because it is duplicates another factor (``The 
availability of a measure that is more strongly associated with desired 
patient outcomes for the particular topic'').
    We also proposed to take into consideration the following factors 
in determining whether a measure should be retained:
     Measure aligns with National Quality Strategy or CMS 
Quality Strategy goals;
     Measure aligns with other CMS programs, including other 
quality reporting programs, or the EHR Incentive Program; and
     Measure supports efforts to move facilities towards 
reporting electronic measures
    For example, we may consider retaining a measure that is 
statistically ``topped-out'' in order to align with the Medicare EHR 
Incentive Program. Below is a table of newly proposed and previously 
adopted factors that we would take into consideration in removing or 
retaining measures:

         Factors CMS Considers in Removing or Retaining Measures
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                         Measure Removal Factors
------------------------------------------------------------------------
1. Measure performance among hospitals is so high and unvarying that
 meaningful distinctions and improvements in performance can no longer
 be made (``topped-out'' measures).
2. A measure does not align with current clinical guidelines or
 practice.
3. The availability of a more broadly applicable measure (across
 settings, populations, or the availability of a measure that is more
 proximal in time to desired patient outcomes for the particular topic).
4. Performance or improvement on a measure does not result in better
 patient outcomes.
5. The availability of a measure that is more strongly associated with
 desired patient outcomes for the particular topic.

[[Page 49642]]

 
6. Collection or public reporting of a measure leads to negative
 unintended consequences other than patient harm.
7. It is not feasible to implement the measure specifications.*
------------------------------------------------------------------------
                         ``Topped-Out'' Criteria
------------------------------------------------------------------------
1.  Statistically indistinguishable performance at the 75th and
 90th percentiles; and
  Truncated coefficient of variation <= 0.10.
------------------------------------------------------------------------
                        Measure Retention Factors
------------------------------------------------------------------------
1. Measure aligns with other CMS and HHS policy goals.*
2. Measure aligns with other CMS programs, including other quality
 reporting programs, or the EHR Incentive Program.
3. Measure supports efforts to move facilities towards reporting
 electronic measures.
------------------------------------------------------------------------
* Consideration proposed in the FY 2016 IPPS/LTCH PPS proposed rule (80
  FR 24556 through 24557).

    We note that these removal/retention factors continue to be 
considerations taken into account when deciding whether or not to 
remove measures; but they are not firm requirements.
    We invited public comments on our proposal.
    Comment: Several commenters supported the considerations in 
removing/retaining quality measures and noted their appreciation for 
our efforts to align with other programs as well as the National 
Quality Strategy or CMS Quality Strategy goals, and to consider the 
feasibility of data collection and reporting. Several commenters 
specifically noted their support for CMS' efforts to transition to 
electronic clinical quality measures.
    Response: We thank the commenters for their support.
    Comment: Several commenters supported the addition of a measure 
retention criterion stating ``Measure supports efforts to move 
facilities towards reporting electronic measures.''
    Response: We thank the commenters for their support.
    Comment: Some commenters requested more detail on the measure 
removal criterion: ``feasibility to implement the measure 
specifications.'' A few commenters recommended that this measure 
removal criterion should include considerations of the difficulty of 
collection experienced by providers. The commenters also recommended 
that the assessment should evaluate the impact on clinical workflow, 
the degree of completeness, and the ease of related data collection 
requirements assumed to be derived from clinical workflow.
    Response: In considering the ``feasibility to implement the measure 
specifications'' as proposed, we consider both our ability to receive 
the necessary data, as well as hospitals' ability to collect the 
measure data. Accordingly, when considering this measure removal 
criterion, we account for data collection challenges, including, but 
not limited to clinical workflow, the degree of completeness, and the 
ease of related data collection requirements, experienced by hospitals 
and providers.
    Comment: One commenter encouraged CMS to consider approaches to 
improve hospital performance on measures that are slow to meet the 
``topped-out'' criteria. Specifically, the commenter indicated that 
there is a need to put additional focus on the process measures that 
are tied to high quality data within IQR in order to support 
improvement of hospital quality and patient outcomes.
    Response: We thank the commenter for its suggestion and note that 
we generally retain measures until they either become ``topped-out'' or 
meet one of the other measure removal criteria. We believe that the 
inclusion of these measures, whether they are process or outcomes 
measures, in the Hospital IQR Program will drive hospitals to improve 
performance. However, we will take the commenter's suggestion to put 
additional focus on process measures tied to high quality data under 
advisement for our plans for education and outreach on the Hospital IQR 
Program.
    Comment: A few commenters opposed the proposed criterion ``measure 
aligns with other CMS and HHS policy goals'' as a factor to be 
considered for measure retention, noting that there may be reasons to 
remove a measure from one program, even though it is still appropriate 
in another.
    Response: We would like to clarify that when we consider whether or 
not a ``measure aligns with other CMS and HHS policy goals,'' we 
evaluate whether a measure supports the CMS Quality Strategy goals or 
the National Quality Strategy, instead of alignment with other quality 
reporting programs. We are however, finalizing another criterion that 
allows retention of a measure that aligns with other quality reporting 
programs, such as the EHR Incentive Program, in order to enable 
hospitals to rely on the same measures to meet the requirements of 
multiple programs.
    Comment: A few commenters opposed the addition of the measure 
removal criterion ``measure supports efforts to move facilities towards 
reporting electronic measures.'' Some commenters suggested that a 
measure-by-measure approach to accelerating/encouraging electronic 
reporting is not adequate.
    Response: We clarify that we have added this criterion in 
acknowledgement that there may be instances when we may consider 
retaining an electronic version of a measure that is statistically 
``topped out'' in its chart-abstracted mode specifically to align with 
the EHR Incentive Program. Accordingly, we make every effort to ensure 
an aligned set of electronic clinical quality measures across the 
Hospital IQR Program and the EHR Incentive Program.
    Comment: One commenter supported the removal of topped out 
measures, noting that they provide little room for improvement, but 
recommended the creation of a system to monitor performance on retired 
measures to ensure that quality gains are sustained.
    Response: We thank the commenter for its support and will take its 
suggestion under consideration.
    After consideration of the public comments we received, we are 
finalizing factors that we would take into consideration in removing or 
retaining measures as proposed. Specifically, we are finalizing: (1) 
The addition of the removal factor ``feasibility to implement the 
measure specifications;'' (2) the removal of the factor ``availability 
of alternative measures with a stronger relationship to patient 
outcomes;'' and (3) the addition of the retention factors ``measure 
aligns with National Quality Strategy or CMS Quality Strategy goals,'' 
``measure aligns with other CMS programs, including other quality 
reporting programs, or the

[[Page 49643]]

EHR Incentive Program,'' and ``measure supports efforts to move 
facilities towards reporting electronic measures.''
b. Removal of Hospital IQR Program Measures for the FY 2018 Payment 
Determination and Subsequent Years
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24557 through 
24560), we proposed to remove the following nine measures, either in 
their entirety or just the chart abstracted form, from the Hospital IQR 
Program measure set for the FY 2018 payment determination and 
subsequent years: STK-01: Venous Thromboembolism (VTE) Prophylaxis (NQF 
#0434), STK-06: Discharged on Statin Medication (NQF #0439), STK-08: 
Stroke Education (NQF endorsement removed), VTE-1: Venous 
Thromboembolism Prophylaxis (NQF #0371), VTE-2: Intensive Care Unit 
Venous Thromboembolism Prophylaxis (NQF #0372), VTE-3: Venous 
Thromboembolism Patients with Anticoagulation Overlap Therapy (NQF 
#0373), IMM-1: Pneumococcal Immunization (NQF #1653), AMI-7a: 
Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival 
(NQF #0164), and SCIP-Inf-4: Cardiac Surgery Patients with Controlled 
Postoperative Blood Glucose (NQF #0300).
(1) STK-01, STK-06, STK-08, VTE-1, VTE-2, and VTE-3
    We proposed to remove the chart-abstracted versions of STK-01, STK-
06, STK-08, VTE-1, VTE-2, and VTE-3 because these measures are 
``topped-out.'' However, we proposed to retain STK-06, STK-08, VTE-1, 
VTE-2, and VTE-3 as electronic clinical quality measures for the FY 
2018 payment determination and subsequent years. As we state in section 
VIII.A.3.a. of the preamble of this final rule, in our discussion of 
factors we consider in removing or retaining a measure, ``topped-out'' 
status is only one of many factors, which we consider.
    In balancing the benefits and disadvantages of removing or 
retaining a measure, we believe that the benefits of retaining the 
electronic versions of these measures outweigh the possible 
disadvantages. Specifically, we believe that while these measures are 
statistically ``topped-out,'' retaining the electronic versions of the 
measures is beneficial because they align the Hospital IQR Program with 
the Medicare EHR Incentive Program. In addition, retaining the 
electronic version of the measures would allow us to monitor the 
effectiveness of measure reporting by EHRs and help to familiarize 
hospitals with reporting electronically specified measures to CMS under 
the Hospital IQR Program.
    Our data show that the electronically specified versions of these 
measures are reported with non-zero values by as many as 2,864 
hospitals attesting under 2014 Meaningful Use and that hospitals report 
on the full range of available electronic clinical quality measures. 
Accordingly, we know that EHRs are certified to these measures, and 
that hospitals do indeed report them. The available data suggest that 
retaining STK-06, STK-08, VTE-1, VTE-2, and VTE-3 as electronic 
clinical quality measures furthers CMS' high priority goal to enable 
the electronic reporting of quality data and to align the Hospital IQR 
and EHR Incentive Programs.
    We also believe that reporting electronic clinical quality measures 
presents minimal burden on hospitals as compared to their chart-
abstracted equivalents and that retaining the electronically specified 
versions of these measures is appropriate until we fully understand the 
differences between the chart-abstracted and electronic versions of 
quality measures. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50808) 
we stated that we do not believe that the measures, in their 
electronically specified form, are substantively different than their 
chart-abstracted form, although we recognized that the EHR-based 
extraction methodology is different from the chart-abstraction data 
collection methodology.
    However, CMS now recognizes that although the intent of a measure 
is the same whether it is reported via chart-abstraction or 
electronically, the submission modes are not the same and measure rates 
may be different.
    As described in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50258), 
we have only heard anecdotal comments about actual performance level 
differences between the two modes of collection. We do not have 
sufficient data to be able to confirm these comments, but in the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50273), we finalized a proposal to 
conduct a validation pilot test for electronically specified measures, 
which we intend to complete in 2015. The results of this pilot are not 
yet available. As we have stated in the FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53555), determining the equivalence of electronic clinical 
quality measures and chart-abstracted measures would require extensive 
testing given that the data for the Hospital IQR Program supports 
public reporting for both the Hospital IQR and Hospital VBP Programs. 
Due to the reasons described above, we believe it is appropriate to 
retain the electronically specified version of these five measures at 
this time.
    We invited public comment on our proposals.
    Comment: Several commenters supported the proposal to remove the 
chart-abstracted versions of the nine indicated measures in the 
Hospital IQR Program and retaining them as electronic clinical quality 
measures. The commenters noted that the removal of these measures 
reduces administrative burdens on hospitals.
    Response: We thank the commenters for their support.
    Comment: Several commenters supported the proposal to remove the 
six ``topped-out'' measures and to retain five of the measures as 
electronic clinical quality measures, noting their support of the 
transition from manually abstracted measures to the electronic 
versions.
    Response: We thank the commenters for their support.
    Comment: One commenter supported the proposed removal of STK-1 in 
its entirety and the removal of the chart abstracted versions of STK-
06, STK-08, VTE-1, VTE-2, and VTE-3. However, the commenter suggested 
that a future policy should be adopted for coordinating measure removal 
and the maintenance of the National Hospital Inpatient Quality Measures 
(NHIQM) specifications such that vendors have adequate time to 
accommodate the changes.\115\
---------------------------------------------------------------------------

    \115\ TJC. Specifications Manual for National Hospital Inpatient 
Quality Measures. Retrieved from: http://www.jointcommission.org/specifications_manual_for_national_hospital_inpatient_quality_measures.aspx.
---------------------------------------------------------------------------

    Response: We thank the commenter for its support. We also note that 
we consider a number of guidelines and considerations, outlined above, 
when determining whether to remove or retain measures from the Hospital 
IQR Program measure set. Considerations include the NHIQM 
specifications,\116\ which represent the result of efforts by CMS and 
The Joint Commission to achieve consistency among common national 
hospital performance measures and to share a single set of common 
documentation. In addition, we note that the retention of the 
electronic versions of STK-06, STK-08, VTE-1, VTE-2, and VTE-3 does not 
introduce new specifications for vendors to accommodate, as these 
measures have been in the Hospital IQR Program in previous years, thus 
negating the

[[Page 49644]]

concern of vendors needing adequate time to accommodate changes.
---------------------------------------------------------------------------

    \116\ TJC. Specifications Manual for National Hospital Inpatient 
Quality Measures. Retrieved from: http://www.jointcommission.org/specifications_manual_for_national_hospital_inpatient_quality_measures.aspx.
---------------------------------------------------------------------------

    Comment: One commenter noted that it is currently developing 
guidelines for VTE that can inform the development of future measures.
    Response: We thank the commenter for sharing that they are working 
in this area and look forward to the insight the guidelines can provide 
for the development of VTE measures.
    Comment: One commenter expressed concern that the proposed removal 
of the chart-abstracted version of measures will reduce quality 
standards and recommends that no chart-abstracted measures be replaced 
until such time that electronic clinical quality measures can be 
submitted and reported with high fidelity, accuracy and quality 
threshold requirements. The commenter also expressed concern that as 
chart-abstracted measures are removed from the Hospital IQR Program, 
abstraction and submission vendors may remove functionality from 
quality measurement submission software, impeding performance tracking, 
limiting hospitals' ability to track both the chart-abstracted and 
electronic version of such measures in parallel, and reducing the 
number of measurements that can be used to implement new payment models 
within the private sector.
    Some commenters recommended that the chart-abstracted versions of 
``topped-out'' measures be retained and requested that both electronic 
clinical quality measure and chart-abstracted measure data be 
published, to enable comparisons.
    Response: We note that the five measures that we proposed for 
removal in their chart-abstracted form but retained the electronic 
versions of met our ``topped-out'' criteria as specified in FY 2013 
IPPS/LTCH PPS final rule (77 FR 53512 through 53513) where the formulas 
are discussed. Accordingly, we believe that the removal of these 
measures is appropriate and that the removal of the functionality to 
capture the chart-abstracted versions of these measures will not 
negatively affect quality.
    In addition, we believe that retaining the electronic versions of 
six measures (STK-06, STK-08, VTE-1, VTE-2, VTE-3, and AMI-7a) is 
appropriate because they align the Hospital IQR Program with the 
Medicare EHR Incentive Program, allow us to monitor the effectiveness 
of measure reporting by EHRs, and help to familiarize hospitals with 
reporting electronically specified measures to CMS. We also note that a 
validation pilot test for electronically specified measures is being 
completed in 2015 in order to ensure that electronic measures can be 
submitted and reported with high fidelity, accuracy and quality 
threshold requirements. Finally, we note that the Hospital IQR Program 
measure set includes six measures (ED-1, ED-2, STK 04, VTE-5, VTE-6, 
and PC-01) which have the capability to be reported both via chart-
abstraction and electronically. We refer readers to section VIII.8.b. 
of the preamble of this final rule below in which we discuss our 
modified policies finalized, including that these measures are required 
via chart-abstraction and data will be posted to Hospital Compare. 
Hospitals may submit these measures via both methods. This information 
may allow us to compare the chart-abstracted and electronic versions of 
measure data, in order to confirm variability between data sources.
    Comment: Several commenters expressed continuing concern regarding 
the removal of measures that are deemed ``topped-out,'' noting their 
belief that the removal of these measures could result in unintended 
adverse consequences, as well as signal a general disinterest in this 
aspect of care on the part of CMS. The commenters recommended that CMS 
ensure that the proposed removal would not cause any gaps in care. A 
few commenters recommended that sample ``topped-out'' measures be 
audited periodically to ensure satisfactory performance, noting that 
periodic auditing could detect reductions on quality of care.
    Response: We believe that removing measures meeting the ``topped-
out'' criteria will not negatively affect quality, because by 
definition, performance on these measures is adequately high. In 
addition, we believe that the addition of measure retention criteria, 
described above, signals our intent to retain measures that address 
high priority aspects of care, even if those measures are ``topped-
out.'' Finally, we want to thank the commenters for their suggestion 
that we consider auditing ``topped-out'' measures.
    Comment: One commenter supported the proposed removal of the STK 
measures. However, the commenter was concerned that the remaining STK-
04 measure will be ineffectual, as it is a measure with low volume.
    Response: We thank the commenter for its support of the proposed 
removal of the STK measures in their chart-abstracted forms. We believe 
that STK-04 should remain in the program in its chart-abstracted form, 
because based on our calculations in accordance with our ``topped out'' 
policy, it does not fall under this category. Due to this, we believe 
there is room for improvement in performance. Over 900 hospitals 
submitted data on this measure in CY 2014 for the FY 2016 payment 
determination, however, we will re-evaluate the measure for next year's 
proposed rule.
    Comment: Several commenters supported the removal of the ``topped-
out'' measures, but questioned the value of retaining the electronic 
versions of those measures. Specifically, the commenters expressed 
concern that the retention of the electronic versions of these 
measures, which were developed for chart abstraction and translated to 
electronic measures, will delay movement to measures that were 
developed using EHRs. One commenter also noted concern that this policy 
requires inappropriate use of resources and has no impact on quality.
    Response: We do not believe that these measures, in their 
electronically specified form, are substantively different than their 
chart-abstracted form, despite our recognition that: (1) The EHR-based 
extraction methodology is different from the chart abstraction data 
collection methodology, and (2) measure rates may vary depending on 
methodology. We believe that retaining the electronic versions of these 
measures is beneficial, because it allows us to align the Hospital IQR 
Program with the Medicare EHR Incentive Program. We refer readers to 
section VIII.8.b. of the preamble of this final rule where we discuss 
our finalized modified policy. We are retaining a variety of electronic 
clinical quality measures in order to ensure that hospitals have 
flexibility and choice in determining which electronic measures to 
report. In addition, retaining the electronic versions of measures does 
not detract from developing new measures based on data elements readily 
available in EHRs.
    In regards to the comment that electronic clinical quality measure 
reporting requires an inappropriate use of resources, we disagree, and 
note that a movement towards the use of electronic data is a national 
priority, as evidenced by the HITECH act and Meaningful Use program 
requirements. We believe that the collection of electronic clinical 
quality measure data will enable hospitals to efficiently capture and 
calculate quality data that can be used to address quality at the point 
of care and track improvements over time.
    We will make note of the issues raised in the comments received for 
next year's proposed rule, when we may consider removing additional 
electronic clinical

[[Page 49645]]

quality measures from the Hospital IQR Program, possibly including:
     VTE-3 VTE Patients with Anticoagulation Overlap Therapy 
(NQF #0373);
     VTE-4 VTE Patients Receiving Unfractionated Heparin (UFH) 
with Dosages/Platelet Count Monitoring by Protocol (or Nomogram) (NQF 
N/A);
     VTE-5 VTE Discharge Instructions (NQF N/A);
     VTE-6 Incidence of Potentially Preventable VTE (NQF N/A);
     PN-6 Initial Antibiotic Selection for Community- Acquired 
Pneumonia (CAP) in Immunocompetent Patients (NQF #0147);
     Healthy Term Newborn (NQF #0716);
     AMI-7a Fibrinolytic Therapy Received Within 30 minutes of 
Hospital Arrival (NQF #0164);
     SCIP-INF-9 Urinary Catheter Removed on Postoperative Day 1 
(POD1) or Postoperative Day 2 (POD2) with Day of Surgery Being Day Zero 
(NQF N/A);
     CAC-3 Home Management Plan of Care (HMPC) Document Given 
to Patient/Caregiver (NQF N/A);
     AMI-2-Aspirin Prescribed at Discharge for AMI (NQF N/A);
     AMI-10 Statin Prescribed at Discharge (NQF N/A);
     SCIP-INF-1a Prophylactic Antibiotic Received within 1 Hour 
Prior to Surgical Incision (NQF #0527); and,
     SCIP-INF-2 Prophylactic Antibiotic Selection for Surgical 
Patients.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove the chart-abstracted versions of STK-
01, STK-06, STK-08, VTE-1, VTE-2, and VTE-3, but also retain STK-06, 
STK-08, VTE-1, VTE-2, and VTE-3 as electronic clinical quality measures 
for the FY 2018 payment determination and subsequent years as proposed.
(2) IMM-2 Influenza Immunization (NQF #1659)
    One additional measure, IMM-2, has been determined to be 
statistically ``topped-out;'' however, after considering the benefits 
and disadvantages of removing or retaining this measure, we are 
retaining this measure in the Hospital IQR Program measure set for the 
FY 2018 payment determination and subsequent years, because the 
benefits outweigh the disadvantages. One of the factors that we 
consider when determining whether to remove or retain a measure is 
whether a measure aligns with National Quality Strategy (NQS) or CMS 
Quality Strategy goals. Currently, IMM-2 is the only Hospital IQR 
Program measure to address the Best Practices to Enable Healthy Living 
NQS Priority and CMS Quality Strategy goal. In addition, IMM-2 supports 
the NQS priorities and CMS Quality Strategy goals to promote effective 
interventions to prevent and reduce the leading causes of 
mortality.\117\
---------------------------------------------------------------------------

    \117\ The Centers for Disease Control and Prevention: Key Facts 
About Seasonal Flu Vaccine. Retrieved from: http://www.cdc.gov/flu/protect/keyfacts.htm.
---------------------------------------------------------------------------

    Comment: Several commenters supported the retention of the IMM-2 
Influenza Immunization measure in the Hospital IQR Program, noting that 
the measure plays a critical role in CMS' Best Practices to Enable 
Healthy Living NQS Priority and CMS Quality Strategy goal.
    Response: We thank the commenters for their support.
    Comment: A few commenters opposed CMS' proposal to retain IMM-2 
despite its ``topped-out'' status, citing the burden associated with 
reporting the measure and the little benefit and value they believe 
retention will add.
    Response: While we recognize that the IMM-2 measure has been 
statistically deemed ``topped-out,'' it is the only Hospital IQR 
Program measure to address the Best Practices to Enable Healthy Living 
NQS Priority and CMS Quality Strategy goal. In addition, IMM-2 supports 
other NQS priorities and CMS Quality Strategy goals to promote 
effective interventions to prevent and reduce the leading causes of 
mortality. In accordance with the measure removal and retention 
criteria discussed in section VIII.8.b of the preamble of this rule, we 
believe that the value of retaining this measure outweighs the burden 
associated with collection as well as the ``topped-out'' status. 
Accordingly, we believe that the measure is valuable in promoting 
quality and that this measure adds value to the Hospital IQR Program 
measure set.
    After consideration of the public comments we received, we are 
finalizing our policy to retain IMM-2 Influenza Immunization (NQF 
#1659) as proposed.
(3) Removal of Immunization 1 (IMM-1) Pneumococcal Immunization (NQF 
#1653)
    We adopted the IMM-1 Pneumococcal Immunization measure (NQF #1653) 
for the FY 2014 payment determination and subsequent years with data 
collection beginning with January 1, 2012 discharges (75 FR 50211). In 
October 2012, subsequent to the beginning of IMM-1 data collection on 
January 1, 2012, the Advisory Committee on Immunization Practices 
(ACIP) published new guidelines on pneumococcal vaccination.\118\ With 
the publication of the new ACIP guidelines, IMM-1, as specified in the 
Hospital IQR Program, was no longer compliant with current clinical 
guidelines.
---------------------------------------------------------------------------

    \118\ MMWR October 12, 2012. Available at http://www.cdc.gov/mmwr/PDF/wk/mm6140.pdf. Accessed on October 31, 2012.
---------------------------------------------------------------------------

    As part of our efforts to re-specify IMM-1 to account for the many 
potential scenarios that must be considered when determining if 
pneumococcal vaccination is appropriate, we determined that it was not 
feasible to implement the measure specifications that incorporated the 
new guidelines given their complexity.
    Specifically, the October 2012 ACIP guidelines recommended the 
routine use of 13-valent pneumococcal conjugate (PCV13) vaccine for 
adults aged >=19 years with certain comorbid conditions, and that PCV13 
should be administered to eligible adults in addition to the 23-valent 
pneumococcal polysaccharide vaccine (PPSV23) that was currently 
recommended for these groups of adults. The timing of vaccination with 
PCV13 and PPSV23 is dependent upon if and when an individual has 
received the other vaccine.
    In order to implement the measure consistent with these new 
guidelines, providers would need reliable, detailed data on: (1) 
Whether or not a pneumococcal vaccine was previously administered; (2) 
which type of pneumococcal vaccine (PCV13 vs. PPSV23) was administered; 
and (3) when it was administered. When considering possible clinical 
scenarios of screening and vaccinating for pneumonia, current chart and 
electronic data do not consistently allow for successful abstraction of 
these varied and detailed historical facts, all of which are needed to 
appropriately administer a pneumococcal vaccine.
    We believe that the measure, as updated by ACIP guidelines, would 
burden hospitals with data abstraction and yield results with only 
questionable meaningfulness and reliability. We outlined these 
pneumococcal vaccination implementation issues in the FY 2014 IPPS/LTCH 
PPS final rule (78 FR 50780 through 50781), and suspended data 
collection for IMM-1 until further notice.
    Since the suspension of IMM-1, ACIP again updated its 2012 
guidelines in

[[Page 49646]]

September 2014.\119\ In reviewing the updated 2014 guidelines, we held 
discussions with other HHS agencies to identify implementation 
strategies for these updated guidelines. However, we were still unable 
to identify a consistent data source, such as a national immunization 
registry, that is available to hospitals which would provide sufficient 
patient-level clinical information to ensure that hospitals would be 
able to accurately and reliably determine whether they were following 
the guidelines. There continues to be a lack of detailed and reliable 
patient level data on prior pneumococcal vaccination that is readily 
available to all hospitals. Without detailed, reliable, and readily 
available data for hospitals, it will be difficult to determine if the 
pneumococcal vaccinations are appropriately administered.
---------------------------------------------------------------------------

    \119\ MMWR September 2014. Available at http://www.cdc.gov/mmwr/pdf/wk/mm6337.pdf.
---------------------------------------------------------------------------

    In determining whether to remove the IMM-1 measure, we considered 
the factors stated above in section VIII.A.3.a. of the preamble of this 
final rule, in our discussion of considerations for the removal and 
retention of quality measures from the Hospital IQR Program. Based on 
the continued lack of ready access to comprehensive patient-level 
immunization data by hospital staff and the continued infeasibility to 
implement or align this measure with current clinical guidelines or 
practice, in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24558) we 
proposed to remove this measure from the Hospital IQR Program. We 
emphasize that, despite the proposed removal of the IMM-1 measure from 
the Hospital IQR Program, we understand and value the role pneumococcal 
vaccines play in preventing pneumococcal disease \120\ and we expect 
hospitals to continue to provide pneumococcal vaccinations for their 
hospital populations as appropriate.
---------------------------------------------------------------------------

    \120\ CDC: Pneumococcal Disease. Retrieved from: http://www.cdc.gov/pneumococcal/about/prevention.html.
---------------------------------------------------------------------------

    We invited public comments on this proposal to remove IMM-1 from 
the Hospital IQR Program beginning in CY 2016 for the FY 2018 payment 
determination and subsequent years.
    Comment: Several commenters supported the removal of the IMM-1 
Pneumococcal Immunization measure, while expressing an appreciation for 
the review and analysis efforts which might have contributed to the 
decision to remove the measure.
    Response: We thank the commenters for their support.
    Comment: Several commenters encouraged CMS to reconsider the 
removal of the pneumococcal immunization measure (IMM-1) and cited the 
importance of this measure to appropriate patient vaccination. The 
commenters recommended that CMS refine the measure to better align with 
the recommendations of the ACIP. One commenter also noted that IMM-1 
aligns with CMS and HHS policy goals, and that its removal is in 
conflict with the stated measure retention criteria. A few commenters 
noted concern that the proposed removal of IMM-1 is in contrast to the 
scope of work outlined in CMS' Quality Improvement Network Quality 
Improvement Organization (QIN-QIO).
    Response: We believe that pneumococcal immunization is extremely 
important in preventing pneumococcal disease. We disagree that removal 
is in conflict with our removal and retention policy. As discussed 
above in section VIII.2.a. of the preamble of this final rule, the 
retention factor ``measure aligns with other CMS and HHS policy goals'' 
is only one factor we consider in removing or retaining measures. We 
must also balance other factors and considerations. While a 
pneumococcal immunization measure aligns with CMS and HHS policy goals, 
we believe that this measure is infeasible to implement without 
comprehensive patient-level immunization data, which is not readily 
available to hospital staff. As indicated, the continued lack of ready 
access to comprehensive patient-level immunization data by hospital 
staff and the continued infeasibility to implement or align this 
measure with current clinical guidelines or practice, are driving 
factors that support the proposal to remove this measure from the 
Hospital IQR Program. We emphasize that, despite the proposed removal 
of the IMM-1 measure from the Hospital IQR Program, we understand and 
value the role pneumococcal vaccines play in preventing pneumococcal 
disease. In instances where hospitals have adequate access to a 
patient's pneumococcal immunization history, we would expect hospitals 
to provide a pneumococcal vaccination if it were indicated. We also 
refer hospitals to the ACIP guidelines for additional information on 
pneumococcal immunization in hospitals http://www.cdc.gov/vaccines/hcp/acip-recs/vacc-specific/pneumo.html.
    In addition, this measure was not required for the Hospital IQR 
Program beginning with January 1, 2014 discharges, and was suspended 
from the program in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50780 
through 50781). Furthermore, while we recognize that CMS awarded QIOs a 
four-year contract to improve immunization rates and reduce 
immunization disparities, we note that QIO performance is not dependent 
upon vaccination in the hospital setting.\121\
---------------------------------------------------------------------------

    \121\ QIO News: QIN-QIOs Awarded Contracts to Improve 
Immunization Rates, Reduce Immunization Disparities in 37 U.S. 
States and Territories. Retrieved from: http://qioprogram.org/qionews/articles/qin-qios-awarded-contracts-improve-immunization-rates-reduce-immunization.
---------------------------------------------------------------------------

    Comment: One commenter expressed concern that CMS has not provided 
data to support its assertion that hospitals will continue to vaccinate 
as appropriate.
    Response: In instances where hospitals have adequate access to a 
patient's pneumococcal immunization history, we would expect hospitals 
to provide a pneumococcal vaccination if it were indicated. The ACIP 
guidelines (http://www.cdc.gov/vaccines/hcp/acip-recs/vacc-specific/pneumo.html) recommended the routine use of 13-valent pneumococcal 
conjugate (PCV13) vaccine for adults aged >=19 years with certain 
comorbid conditions, and that PCV13 should be administered to eligible 
adults in addition to the 23-valent pneumococcal polysaccharide vaccine 
(PPSV23) that was currently recommended for these groups of adults.
    Comment: One commenter recommends that CMS develop a flow chart 
that provides hospitals with guidance on whether patients need a 
pneumococcal vaccination, and which type, based on the patient's 
vaccination history.
    Response: We thank the commenter for its suggestion regarding 
additional guidance on appropriate vaccination, and will take this 
recommendation under consideration. We also note that the ACIP 
guidelines serve as a resource for additional information on 
pneumococcal immunization in hospitals (http://www.cdc.gov/vaccines/hcp/acip-recs/vacc-specific/pneumo.html).
    After consideration of the public comments we received, we are 
finalizing our policy to remove Immunization 1 (IMM-1) Pneumococcal 
Immunization (NQF #1653) for the FY 2018 payment determination and 
subsequent years as proposed.
(4) Removal of AMI-7a Fibrinolytic Therapy Received Within 30 Minutes 
of Hospital Arrival Measure (NQF #0164)
    Our evaluation of the most recently available data shows that AMI-
7a is not widely reported by hospitals, and according to the most 
recent data available, hospitals reporting this

[[Page 49647]]

measure have less than the required number of cases to be publicly 
reported. In determining whether to remove AMI-7a as a chart-abstracted 
measure, we considered the factors stated in above in section 
VIII.A.3.a. of the preamble of this final rule in our discussion of 
considerations for the removal and retention of quality measures from 
the Hospital IQR Program. In the FY 2016 IPPS/LTCH PPS proposed rule 
(80 FR 24558 through 24559), we proposed to remove AMI-7a as a chart-
abstracted measure beginning in CY 2016 for the FY 2018 payment 
determination and subsequent years because performance on this measure 
does not result in better patient outcomes. Specifically, measure data 
are infrequently reported, as most acute myocardial infarction patients 
receive percutaneous coronary intervention instead of fibrinolytic 
therapy. In addition, we believe that the burden of requiring all 
hospitals to report data on this measure, when only a minority of 
facilities report enough cases to be publicly reported, outweighs the 
benefits of retaining the chart-abstracted version of this measure.
    However, we proposed to retain AMI-7a as an electronic clinical 
quality measure. We believe that once electronic capture of the measure 
is possible, the time and resources for electronic reporting should be 
significantly less as compared to manual abstraction. In addition, as 
discussed above in section VIII.A.3.a. of the preamble of this final 
rule, retaining the electronically specified version of a measure 
allows us to support the alignment of the Hospital IQR Program and the 
Medicare EHR Incentive Program. In addition, retaining this measure 
will both allow us to monitor the effectiveness of measure reporting by 
EHRs and help familiarize hospitals with reporting electronically 
specified measures under the Hospital IQR Program.
    We invited public comments on our proposal to remove the chart-
abstracted version of AMI-7a but retain the electronic version for the 
CY 2016/FY 2018 payment determination and subsequent years.
    Comment: Several commenters supported the proposal to remove AMI-
7a.
    Response: We thank the commenters for their support.
    Comment: One commenter requested clarification on whether the 
chart-abstracted version of AMI-7a is being removed from the Hospital 
IQR Program, or if the measure is being removed in its entirety, as is 
the case under the Hospital VBP Program.
    Response: We would like to clarify that we are finalizing our 
proposals to remove the chart-abstracted version of AMI-7a from both 
the Hospital IQR Program and Hospital VBP Program (see section 
IV.F.2.b.(2) of the preamble of this final rule). However, we are 
retaining AMI-7a in its electronic form under the Hospital IQR Program 
as a measure that may be selected to meet the electronic clinical 
quality measure requirement for the FY 2018 payment determination.
    Comment: Several commenters recommended that both the chart-
abstracted and the electronic versions of the AMI-7a Fibrinolytic 
Therapy Received Within 30 Minutes of Hospital Arrival measure be 
removed, and noted that the chart-abstracted version of the measure is 
being removed because it meets the removal criteria ``Performance or 
improvement on a measure does not result in better patient outcomes.''
    Response: In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24558), 
we proposed to remove the AMI-7a measure in its chart-abstracted form. 
We also proposed to retain the measure as an electronic clinical 
quality measure for the FY 2018 payment determination, despite the 
reasons cited for removing the chart-abstracted version, in order to 
support the alignment of the Hospital IQR Program with the Medicare EHR 
Incentive Program. This would allow us to monitor the effectiveness of 
measure reporting by EHRs and help familiarize hospitals with reporting 
electronically. However, we will take this comment into consideration 
in next year's proposed rule when, as noted above, we may consider 
removing some electronic clinical quality measures from the Hospital 
IQR Program.
    After consideration of the public comments we received, we are 
finalizing our policy to remove the chart-abstracted version of AMI-7a 
Fibrinolytic Therapy Received within 30 Minutes of Hospital Arrival 
Measure (NQF #0164), but retain the electronic version for the CY 2016/
FY 2018 payment determination and subsequent years as proposed.
(5) Removal of SCIP-Inf-4 Cardiac Surgery Patients With Controlled 
Postoperative Blood Glucose (NQF #0300)
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66876), we finalized SCIP-Inf-4 Cardiac Surgery Patients with 
Controlled Postoperative Blood Glucose (NQF #0300) for the Hospital IQR 
Program for FY 2009 and subsequent years. We also stated that hospitals 
were required to begin submitting data for SCIP-Inf-4 beginning with 
January 1, 2008 discharges.
    Since the finalization of SCIP-Inf-4 for the Hospital IQR Program, 
the measure underwent routine NQF maintenance endorsement proceedings 
in 2012. During the NQF maintenance proceedings, the NQF Steering 
Committee discussed and recommended that the measure assess a lower 
blood glucose level target and lengthen the timeframe for achieving the 
lower blood glucose level target. As part of the maintenance 
endorsement renewal process, SCIP-Inf-4 was modified with the goal of 
achieving post-operative blood glucose levels of 180 mg/dl at 18-24 
hours after surgery (previously, the timeframe was to achieve 200 mg/dl 
by 6 a.m. on post-operative days 1 and 2). We finalized the adoption of 
these measure refinements (see revised measure specifications at http://www.qualityforum.org/QPS/0300), in the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50788) with data collection beginning with January 1, 2014 
discharges. We also stated then that we would consider whether 
additional refinements should be made to better define the 18-24 hour 
timeframe for the measure.
    Since finalizing the refinements to SCIP-Inf-4, we have been 
contacted by stakeholders and experts in the field of endocrinology 
regarding the newly refined goal of 180 mg/dl within an 18-24 hour 
timeframe. Specifically, there are concerns about the following aspects 
of the measure: (1) Defining ``optimal glycemic control;'' (2) 
measuring the correlation between optimal glycemic goals and better 
outcomes; \122\ and (3) using an arbitrary 18-24 hour timeframe that 
does not cover a physiologically meaningful period of time.
---------------------------------------------------------------------------

    \122\ Optimal glycemic research for 6 a.m. blood glucose control 
shows a weak correlation between optimal glycemic goals and better 
outcomes related to morbidity, mortality and length of stay, 
suggesting that this type of metric may not be valid. LaPar FJ, 
Isbell JM, Kern JA, Ailawadi G, Kron IL. Surgical Care Improvement 
Project measure for postoperative glucose control should not be used 
as a measure of quality after cardiac surgery. J Thorac Cardiovasc 
Surg 2014;147:1041-8.
---------------------------------------------------------------------------

    Experts in the endocrinology field have shared that providers' 
enthusiasm to meet the measure blood glucose goals in the specified 
timeframe may lead to the following unintended consequences: (1) 
Providers delaying patients' meals until the 24-hour timeframe has 
passed; (2) providers keeping diabetic patients in intensive care units 
on insulin drips until the 24-hour timeframe has passed; (3) providers 
ensuring patients' postprandial glucose levels are kept below 180 mg/dl 
by concurrent use of intravenous and subcutaneous insulin

[[Page 49648]]

administration; and (4) undetected hypoglycemic events caused by using 
multiple forms of insulin administration since the measure does not 
assess blood glucose levels past 24 hours. Multiple stakeholders also 
indicate that the Society of Thoracic Surgeons' guidelines \123\ on 
preoperative through postoperative cardiac surgery glucose control, 
which helped inform CMS in maintenance of this measure, are currently 
being reviewed. Newer guidelines will address methods to monitor 
glycemic control in the post-cardiac surgical patient population. 
However, these guidelines are not currently available to guide further 
refinements of SCIP-Inf-4.
---------------------------------------------------------------------------

    \123\ Lazar HL, McDonnell M, Chipkin SR, Furnary AP, Engelman 
RM, Sadhu AR et al. The Society of Thoracic Surgeons Practice 
Guideline Series: Blood Glucose Management During Adult Cardiac 
Surgery. Ann Thorac Surg 2009; 87: 663-9.
---------------------------------------------------------------------------

    In view of stakeholder concerns, the seriousness of the potential 
negative unintended consequences, and recent analysis that shows the 
refined measure is ``topped-out,'' on January 9, 2015, we formally 
suspended the collection of data for SCIP-Inf-4 beginning with July 1, 
2014 discharges. We refer readers to https://www.qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228890406532&blobheader=multipart%2Foctet-stream&blobheadername1=Content-Disposition&blobheadervalue1=attachment%3Bfilename%3D2015-02-IP.pdf&blobcol=urldata&blobtable=MungoBlobs for more information about 
the suspension.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24559), we 
proposed to remove SCIP-Inf-4 from the Hospital IQR Program effective 
beginning with CY 2016 discharges for the FY 2018 payment determination 
and subsequent years. We believe removal of this measure, rather than 
continued suspension, is appropriate for several reasons. First, 
performance on this measure does not result in better patient outcomes. 
Recent literature has highlighted that not meeting optimal glycemic 
control for a narrow point in time does not result in poorer 
outcomes.\124\ Second, the measure does not align with current clinical 
guidelines or practice.\125\ As previously stated, stakeholders and 
experts in the field of endocrinology have voiced their concerns in 
these areas, especially with using an arbitrary 18-24 hour timeframe 
that does not cover a physiologically meaningful period of time, as 
current practice guidelines aim for overall glycemic control.\126\ 
Third, public reporting of a measure leads to negative unintended 
consequences other than patient harm. As mentioned above, these 
negative unintended consequences include potentially delaying patient 
meals or transition from the intensive care unit while keeping patients 
on insulin drips. For more information on the factors we consider for 
removing or retaining quality measures, we refer readers to the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50203 through 50204) and section 
VIII.A.3.a. of the preamble of this final rule. The measure will remain 
suspended until CY 2016 discharges begin. Despite our proposed removal 
of SCIP-Inf-4, we continue to believe glycemic control is important, 
and we hope to include measures focusing on glycemic control in the 
Hospital IQR Program in the near future.
---------------------------------------------------------------------------

    \124\ LaPar FJ, Isbell JM, Kern JA, Ailawadi G, Kron IL. 
Surgical Care Improvement Project measure for postoperative glucose 
control should not be used as a measure of quality after cardiac 
surgery. J Thorac Cardiovasc Surg 2014;147:1041-8.
    \125\ Harold L. Lazar HL, McDonnell ME, Chipkin SR, Furnary AP, 
Engelman RM, Sadhu AR, Bridges CR and Haan CK. The Society of 
Thoracic Surgeons Practice Guideline Series: Blood Glucose 
Management During Adult Cardiac Surgery. Ann Thorac Surg 
2009;87:663-9.
    \126\ Harold L. Lazar HL, McDonnell ME, Chipkin SR, Furnary AP, 
Engelman RM, Sadhu AR, Bridges CR and Haan CK. The Society of 
Thoracic Surgeons Practice Guideline Series: Blood Glucose 
Management During Adult Cardiac Surgery. Ann Thorac Surg 
2009;87:663-9.
---------------------------------------------------------------------------

    We invited public comments on our proposal to remove SCIP-Inf-4 
from the Hospital IQR Program for the FY 2018 payment determination and 
subsequent years.
    Comment: Several commenters supported the removal of the SCIP-4 
measure, noting that unintended consequences have occurred due to 
providers' enthusiasm to meet the measure and acknowledging that SCIP-
Inf-4 does not align with current practice guidelines. One commenter 
noted that the measure is being removed in accordance with the measure 
removal/retention policy described.
    Response: We thank the commenters for their support.
    Comment: A few commenters recommended that we await the results of 
the guideline updates put forward by the Society of Thoracic Surgeons 
before considering the incorporation of metrics of postoperative 
glucose control in cardiac surgery patients into the Hospital IQR 
Program. One commenter encouraged CMS to focus on the creation of a 
better measure that could capture glucose control over time for cardiac 
surgery patients.
    Response: Current practice guidelines, and to our knowledge, future 
guidelines, will aim for overall glycemic control. SCIP-Inf-4 is 
specified to evaluate a particular point in time and not overall 
glycemic control during the postoperative period. If we were to refine 
the measure to look at overall glycemic control instead of one point in 
time, this would require many steps, including an environmental scan 
and literature review to ensure that this is still a gap area that 
would warrant respecification and testing, as well as MAP input and 
proposal through rulemaking. These steps would require significant CMS 
resources, and at this time, we are not considering respecifying this 
measure. A measure looking at overall postoperative glycemic control 
would best be developed as an electronic clinical quality measure and 
tested in this manner. We let our new measure environmental scan and 
literature review, among other factors, inform our selection of new 
measures for development. We also target new measures based on many 
other factors and refer readers to the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53510 through 53512) for a discussion of the considerations we 
use to expand and update quality measure set under the Hospital IQR 
Program.
    Comment: Several commenters supported the proposals to remove the 
chart-abstracted versions of the nine indicated measures in the 
Hospital IQR Program and retain them as electronic clinical quality 
measures. Commenters noted that the removal of these measures reduces 
administrative burdens on hospitals.
    Response: We thank the commenters for their support.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove SCIP-Inf-4 Cardiac Surgery Patients 
with Controlled Postoperative Blood Glucose (NQF #0300) for the FY 2018 
payment determination and subsequent years as proposed.
    The table below lists the measures we are finalizing for removal 
for the FY 2018 payment determination and subsequent years.

[[Page 49649]]



  Measures Removed for the FY 2018 Payment Determination and Subsequent
                                  Years
------------------------------------------------------------------------
                         ``Topped-out'' Measures
-------------------------------------------------------------------------
 STK-01: Venous Thromboembolism (VTE) Prophylaxis (NQF #0434)
 STK-06: Discharged on Statin Medication * (NQF #0439)
 STK-08: Stroke Education * (NQF endorsement removed)
 VTE-1: Venous Thromboembolism Prophylaxis * (NQF #0371)
 VTE-2: Intensive Care Unit Venous Thromboembolism Prophylaxis *
 (NQF #0372)
 VTE-3: Venous Thromboembolism Patients with Anticoagulation
 Overlap Therapy * (NQF #0373)
------------------------------------------------------------------------
                             Other Measures
------------------------------------------------------------------------
 IMM-1 Pneumococcal Immunization (NQF #1653)
 SCIP-Inf-4 Cardiac Surgery Patients with Controlled
 Postoperative Blood Glucose (NQF #0300)
 AMI-7a Fibrinolytic Therapy Received Within 30 Minutes of
 Hospital Arrival * (NQF #0164)
------------------------------------------------------------------------
* Retained as electronic clinical quality measures for the Hospital IQR
  Program FY 2018 payment determination and subsequent years.

4. Previously Adopted Hospital IQR Program Measures for the FY 2017 
Payment Determination and Subsequent Years
a. Background
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50246), we described 
that the Hospital IQR Program measure set for the FY 2017 payment 
determination and subsequent years includes a total of 64 measures:

 6 NHSN measures
 29 electronic clinical quality measures (voluntary; 12 of 
these have the option of being reported as chart-abstracted measures)
 16 chart-abstracted measures (12 of these have the option of 
being reported as electronic clinical quality measures)
 21 claims-based measures
 1 survey measure
 3 structural measures

    In the FY 2015 IPPS/LTCH PPS final rule, we described that of the 
63 measures making up the Hospital IQR Program measure set for the FY 
2017 payment determination and subsequent years, 42 were previously 
finalized measures, 11 were measures newly adopted in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 49865) and 10 were measures that were 
determined to be ``topped-out'' but were retained in the Hospital IQR 
Program as voluntary electronic clinical quality measures (79 FR 
50208).
    The following table shows measures previously adopted for the 
Hospital IQR Program FY 2017 payment determination and subsequent 
years. For a detailed list of the Hospital IQR Program FY 2018 payment 
determination and subsequent years measure set, we refer readers to 
section VIII.A.7.f. of the preamble of this final rule.

   Previously Adopted Hospital IQR Program Measures for the FY 2017 Payment Determination and Subsequent Years
----------------------------------------------------------------------------------------------------------------
                   Short name                                        Measure name                       NQF #
----------------------------------------------------------------------------------------------------------------
                                                      NHSN
----------------------------------------------------------------------------------------------------------------
CLABSI..........................................  National Healthcare Safety Network (NHSN) Central         0139
                                                   Line-Associated Bloodstream Infection (CLABSI)
                                                   Outcome Measure.
Colon and Abdominal Hysterectomy SSI............  American College of Surgeons--Centers for Disease         0753
                                                   Control and Prevention (ACS-CDC) Harmonized
                                                   Procedure Specific Surgical Site Infection (SSI)
                                                   Outcome Measure.
CAUTI...........................................  National Healthcare Safety Network (NHSN)                 0138
                                                   Catheter-associated Urinary Tract Infection
                                                   (CAUTI) Outcome Measure.
MRSA Bacteremia.................................  National Healthcare Safety Network (NHSN)                 1716
                                                   Facility-wide Inpatient Hospital-onset
                                                   Methicillin-resistant Staphylococcus aureus
                                                   (MRSA) Bacteremia Outcome Measure.
CDI.............................................  National Healthcare Safety Network (NHSN)                 1717
                                                   Facility-wide Inpatient Hospital-onset
                                                   Clostridium difficile Infection (CDI) Outcome
                                                   Measure.
HCP.............................................  Influenza Vaccination Coverage Among Healthcare           0431
                                                   Personnel.
----------------------------------------------------------------------------------------------------------------
                                                Chart-abstracted
----------------------------------------------------------------------------------------------------------------
AMI-7a*.........................................  Fibrinolytic Therapy Received Within 30 Minutes           0164
                                                   of Hospital Arrival.
ED-1 *..........................................  Median Time from ED Arrival to ED Departure for           0495
                                                   patients Admitted ED Patients.
ED-2 *..........................................  Admit Decision Time to ED Departure Time for              0497
                                                   Admitted Patients.
Imm-2...........................................  Influenza Immunization...........................         1659
PC-01 *.........................................  Elective Delivery (Collected in aggregate,                0469
                                                   submitted via Web-based tool or electronic
                                                   clinical quality measure).
SCIP-Inf-4......................................  Cardiac Surgery Patients with Controlled                  0300
                                                   Postoperative Blood Glucose.
Sepsis..........................................  Severe Sepsis and Septic Shock: Management Bundle         0500
                                                   (Composite Measure).
STK-01..........................................  Venous Thromboembolism (VTE) Prophylaxis.........         0434
STK-04 *........................................  Thrombolytic Therapy.............................         0437
STK-06 *........................................  Discharged on Statin Medication..................         0439
STK-08 *........................................  Stroke Education.................................          N/A
VTE-1 *.........................................  Venous Thromboembolism Prophylaxis...............         0371
VTE-2 *.........................................  Intensive Care Unit Venous Thromboembolism                0372
                                                   Prophylaxis.
VTE-5 *.........................................  Venous Thromboembolism Discharge Instructions....          N/A

[[Page 49650]]

 
VTE-6 *.........................................  Incidence of Potentially Preventable Venous                N/A
                                                   Thromboembolism.
----------------------------------------------------------------------------------------------------------------
                                                     Claims
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI.....................................  Hospital 30-Day, All-Cause, Risk-Standardized             0230
                                                   Mortality Rate (RSMR) Following Acute Myocardial
                                                   Infarction (AMI) Hospitalization for Patients 18
                                                   and Older.
MORT-30-HF......................................  Hospital 30-Day, All-Cause, Risk-Standardized             0229
                                                   Mortality Rate (RSMR) Following Heart Failure
                                                   (HF) Hospitalization for Patients 18 and Older.
MORT-30-PN......................................  Hospital 30-Day, All-Cause, Risk-Standardized             0468
                                                   Mortality Rate (RSMR) Following Pneumonia
                                                   Hospitalization.
MORT-30-COPD....................................  Hospital 30-Day, All-Cause, Risk-Standardized             1893
                                                   Mortality Rate (RSMR) Following Chronic
                                                   Obstructive Pulmonary Disease (COPD)
                                                   Hospitalization.
STK Mortality...................................  Stroke 30-day Mortality Rate.....................          N/A
CABG Mortality..................................  Hospital 30-Day, All-Cause, Risk-Standardized             2558
                                                   Mortality Rate (RSMR) Following Coronary Artery
                                                   Bypass Graft (CABG) Surgery.
READM-30-AMI....................................  Hospital 30-Day All-Cause Risk-Standardized               0505
                                                   Readmission Rate (RSRR) Following Acute
                                                   Myocardial Infarction (AMI) Hospitalization.
READM-30-HF.....................................  Hospital 30-Day, All-Cause, Risk-Standardized             0330
                                                   Readmission Rate (RSRR) Following Heart Failure
                                                   (HF) Hospitalization.
READM-30-PN.....................................  Hospital 30-Day, All-Cause, Risk-Standardized             0506
                                                   Readmission Rate (RSRR) Following Pneumonia
                                                   Hospitalization.
READM-30-THA/TKA................................  Hospital-Level 30-Day, All-Cause Risk-                    1551
                                                   Standardized Readmission Rate (RSRR) Following
                                                   Elective Primary Total Hip Arthroplasty (THA)
                                                   and/or Total Knee Arthroplasty (TKA).
READM-30-HWR....................................  Hospital-Wide All-Cause Unplanned Readmission             1789
                                                   Measure (HWR).
COPD READMIT....................................  Hospital 30-Day, All-Cause, Risk-Standardized             1891
                                                   Readmission Rate (RSRR) Following Chronic
                                                   Obstructive Pulmonary Disease (COPD)
                                                   Hospitalization.
STK READMIT.....................................  30-Day Risk Standardized Readmission Rate                  N/A
                                                   Following Stroke Hospitalization.
CABG READMIT....................................  Hospital 30-Day, All-Cause, Unplanned, Risk-              2515
                                                   Standardized Readmission Rate (RSRR) Following
                                                   Coronary Artery Bypass Graft (CABG) Surgery.
MSPB............................................  Payment-Standardized Medicare Spending Per                2158
                                                   Beneficiary (MSPB).
AMI payment.....................................  Hospital-Level, Risk-Standardized Payment                 2431
                                                   Associated with a 30-Day Episode-of-Care for
                                                   Acute Myocardial Infarction (AMI).
HF Payment......................................  Hospital-Level, Risk-Standardized Payment                 2436
                                                   Associated with a 30-Day Episode-of-Care For
                                                   Heart Failure (HF).
PN Payment......................................  Hospital-Level, Risk-Standardized Payment                 2579
                                                   Associated with a 30-day Episode-of-Care For
                                                   Pneumonia.
Hip/knee complications..........................  Hospital-Level Risk-Standardized Complication             1550
                                                   Rate (RSCR) Following Elective Primary Total Hip
                                                   Arthroplasty (THA) and/or Total Knee
                                                   Arthroplasty (TKA).
PSI 4 (PSI/NSI).................................  Death among Surgical Inpatients with Serious,             0351
                                                   Treatable Complications.
PSI 90..........................................  Patient Safety for Selected Indicators (Composite         0531
                                                   Measure).
----------------------------------------------------------------------------------------------------------------
                                      Electronic Clinical Quality Measures
----------------------------------------------------------------------------------------------------------------
AMI-2...........................................  Aspirin Prescribed at Discharge for AMI..........          N/A
AMI-7a*.........................................  Fibrinolytic Therapy Received Within 30 Minutes           0164
                                                   of Hospital Arrival.
AMI-8a..........................................  Primary PCI Received Within 90 Minutes of                 0163
                                                   Hospital Arrival.
AMI-10..........................................  Statin Prescribed at Discharge...................          N/A
CAC-3...........................................  Home Management Plan of Care Document Given to             N/A
                                                   Patient/Caregiver.
EHDI-1a.........................................  Hearing Screening Prior to Hospital Discharge....         1354
ED-1*...........................................  Median Time from ED Arrival to ED Departure for           0495
                                                   Admitted ED Patients.
ED-2*...........................................  Admit Decision Time to ED Departure Time for              0497
                                                   Admitted Patients.
HTN.............................................  Healthy Term Newborn.............................         0716
PC-01*..........................................  Elective Delivery (Collected in aggregate,                0469
                                                   submitted via Web-based tool or electronic
                                                   clinical quality measure).
PC-05...........................................  Exclusive Breast Milk Feeding and the Subset              0480
                                                   Measure PC-05a Exclusive Breast Milk Feeding
                                                   Considering Mother[acute]s Choice.
PN-6............................................  Initial Antibiotic Selection for                          0147
                                                   Community[dash]Acquired Pneumonia (CAP) in
                                                   Immunocompetent Patients.
SCIP-Inf-1a.....................................  Prophylactic Antibiotic Received Within One Hour          0527
                                                   Prior to Surgical Incision.
SCIP-Inf-2a.....................................  Prophylactic Antibiotic Selection for Surgical            0528
                                                   Patients.
SCIP-Inf-9......................................  Urinary Catheter Removed on Postoperative Day 1            N/A
                                                   (POD 1) or Postoperative Day 2 (POD 2) with Day
                                                   of Surgery Being Day Zero.
STK-02..........................................  Discharged on Antithrombotic Therapy.............         0435
STK-03..........................................  Anticoagulation Therapy for Atrial Fibrillation/          0436
                                                   Flutter.
STK-04*.........................................  Thrombolytic Therapy.............................         0437
STK-05..........................................  Antithrombotic Therapy by the End of Hospital Day         0438
                                                   Two.
STK-06*.........................................  Discharged on Statin Medication..................         0439
STK-08*.........................................  Stroke Education.................................          N/A
STK-10..........................................  Assessed for Rehabilitation......................         0441
VTE-1*..........................................  Venous Thromboembolism Prophylaxis...............         0371
VTE-2*..........................................  Intensive Care Unit Venous Thromboembolism                0372
                                                   Prophylaxis.

[[Page 49651]]

 
VTE-3...........................................  Venous Thromboembolism Patients with                      0373
                                                   Anticoagulation Overlap Therapy.
VTE-4...........................................  Venous Thromboembolism Patients Receiving                  N/A
                                                   Unfractionated Heparin with Dosages/Platelet
                                                   Count Monitoring by Protocol or Nomogram.
VTE-5*..........................................  Venous Thromboembolism Discharge Instructions....          N/A
VTE-6*..........................................  Incidence of Potentially Preventable Venous                N/A
                                                   Thromboembolism.
----------------------------------------------------------------------------------------------------------------
                                                 Patient Survey
----------------------------------------------------------------------------------------------------------------
HCAHPS..........................................  HCAHPS + 3-Item Care Transition Measure (CTM-3)..         0166
                                                                                                            0228
----------------------------------------------------------------------------------------------------------------
                                                   Structural
----------------------------------------------------------------------------------------------------------------
Registry for Nursing Sensitive Care.............  Participation in a Systematic Clinical Database            N/A
                                                   Registry for Nursing Sensitive Care.
Registry for General Surgery....................  Participation in a Systematic Clinical Database            N/A
                                                   Registry for General Surgery.
Safe Surgery Checklist..........................  Safe Surgery Checklist Use.......................          N/A
----------------------------------------------------------------------------------------------------------------
* Measure is listed twice, as both chart-abstracted and electronic clinical quality measure.

    Comment: One commenter requested clarification on whether or not 
the Sepsis Bundle measure is currently suspended. The commenter had 
concerns with the sepsis measure as it is currently specified. 
Specifically, the commenter noted that the measure is abstract, 
untested, and that elements of the bundle that apply to physical 
reassessment of patients with persistent hypotension do not have strong 
evidence supporting a process-outcome link. The commenter recommended 
the suspension or removal of the measure from the program until the 
listed concerns are addressed.
    Response: We are clarifying here that the Severe Sepsis and Septic 
Shock: Management Bundle measure (NQF #0500) was suspended in August of 
2014,\127\ while the measure steward worked with NQF and other 
stakeholders to incorporate the results of recent studies into NQF 
#0500's ``element F.'' ``Element F'' included measuring central venous 
pressure and central venous oxygen saturation; the measure steward was 
working with NQF and stakeholders on whether this part of ``element F'' 
should be retained or removed from the measure. On March 26, 2015 \128\ 
we issued a notification announcing that hospitals are required to 
submit data on the Sepsis Bundle measure for the Hospital IQR Program 
beginning with October 1, 2015 discharges for the FY 2017 payment 
determination and subsequent years based on updates to the measure and 
subsequent NQF re-endorsement.\129\
---------------------------------------------------------------------------

    \127\ Reference ID 2014-59-IP, Dated August 22, 2014. Available 
at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=12287
73795707.
    \128\ Reference ID 2015-29-IP; Dated March 26, 2015. Available 
at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=12287
74625060.
    \129\ http://www.qualityforum.org/ProjectMeasures.aspx?projectID=73701.
---------------------------------------------------------------------------

    Since publication of the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50236), where we discuss the original finalized version of the measure, 
changes to the specifications have been undertaken by the steward and 
endorsed by NQF in response to newly published evidence. Changes have 
centered on one of the composite elements, referred to as ``Element 
F.'' These changes do not reflect variations to the measurement 
strategy. The measure has seven elements. ``Element F'' reassesses the 
patient for volume status (that is, does the patient have enough fluid 
in circulation?) and perfusion status (that is, is that fluid 
circulated appropriately?).
    In 2014, the measure was updated so that it reassessed volume and 
perfusion (Element F) using a complicated and invasive approach to 
patient care. It called for assessment of central venous pressure (CVP) 
and percent of oxygen saturation in blood returning to the heart 
(ScVO2). This assessment required providers to place a long catheter in 
the patient's neck or chest in a position that approximated the 
location of the heart. Blood and pressure readings were obtained from 
this catheter.
    The measure has since been updated,\130\ again so that the measure 
reassesses volume and perfusion (Element F) giving providers the 
opportunity to simply re-examine their patients with a physical exam. 
Rather than placing an invasive catheter into a patient, requiring 
consent to do so, and risking complications to patients and hospitals, 
providers may now simply return to the bedside to manually re-examine 
their patient. The simple, focused physical exam replaces what was an 
onerous requirement, and one of the most cited objections to the 
measure by commenters. Element F now allows a provider choice and does 
not mandate the use of invasive strategies.
---------------------------------------------------------------------------

    \130\ http://www.qualityforum.org/ProjectMeasures.aspx?projectID=73701.
---------------------------------------------------------------------------

    These changes to the requirement to reassess volume and perfusion 
(Element F) were made after three clinical research studies were 
published. In March 2014, the Protocolized Care for Early Septic Shock 
(ProCESS) \131\ trial demonstrated that an invasive approach was not 
required. This trial was followed in October 2014 by the Australian 
Resuscitation in Sepsis Evaluation Randomized Controlled Trial 
(ARISE),\132\ which arrived at the same conclusion. In March 2015, the 
Protocolised Management in Sepsis Trial (ProMISe) \133\ also reached 
the same conclusion. NQF and the measure developers acted on the basis 
of the first trial, ProCESS4, and liberalized the requirement to 
reassess volume and perfusion (Element F).
---------------------------------------------------------------------------

    \131\ ProCESS Investigators, Yealy DM, Kellum JA, Juang DT, et 
al. A randomized trial of protocol-based care for early septic 
shock. N Engl J Med 2014; 370(18):1683-1693.
    \132\ The ARISE Investigators and the ANZICS Clinical Trials 
Group. Goal-directed resuscitation for patients with early septic 
shock. N Engl J Med 2014; 371:1496-1506.
    \133\ Mouncey PR, Osborn TM, Power GS, et al for the ProMISe 
trial investigators. Trial of early, goal-directed resuscitation for 
septic shock. N Engl J Med 2015: DOI: 10.1056/NEJMoa1500896.
---------------------------------------------------------------------------

    The revised Element F only makes compliance with the previously 
posted

[[Page 49652]]

measure easier. The revision retains the same strategy, but makes it 
easier for hospitals and clinicians to be compliant. The measure is 
based on the International Guidelines for Management of Severe Sepsis 
and Septic Shock (2012). Accordingly, the measure has been tested for 
its reliability and validity and evaluated to determine the importance 
of collecting measure data.
b. NHSN Measures Standard Population Data
    The previously adopted NHSN measures include the CAUTI, CLABSI, 
MRSA Bacteremia, CDI, colon and abdominal hysterectomy SSI measures, 
and HCP for the FY 2017 payment determination and subsequent years. We 
refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50200 
through 50202) and the FY 2012 IPPS/LTCH PPS final rule (76 FR 51616 
through 51618; 76 FR 51629 through 51633) for more information about 
these measures. These NHSN measures measure the incidence of HAIs in 
hospitals participating in the Hospital IQR Program. In order to 
calculate the NHSN measures for use in the Hospital IQR Program, CDC 
must go through several steps.
    First, CDC determines each NHSN measure's number of predicted 
infections. CDC determines this number using both specific hospital 
characteristics (for example, number of central line days for CLABSI) 
and infection rates that occurred among a standard population 
(sometimes referred to by CDC as ``national baseline'' but referred to 
here as ``standard population data''). CDC currently uses data it 
collected in calendar year (CY) 2009 for the CAUTI measure's standard 
population data.
    In addition, for each NHSN measure, CDC calculates the Standardized 
Infection Ratio (SIR) by comparing a hospital's reported number of HAIs 
with the standard population data. For more information about the way 
NHSN measures are calculated, we refer readers to the QualityNet Web 
page on HAI measures at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=12287604
87021.
    We are notifying the public that CDC will update the standard 
population data to ensure the NHSN measures' number of predicted 
infections reflect the current state of HAIs in the United States. The 
standard referent population that CDC uses to calculate the 
Standardized Infection Ratios (SIRs) is comprised of healthcare-
associated infection data that CDC's NHSN collects from healthcare 
facilities throughout the United States for infection events that 
occurred in a specified baseline time period. Beginning in CY 2016, CDC 
will use data collected for infection events that occurred in 2015 as 
the new standard referent population. To do so, CDC will collect HAI 
data that healthcare facilities are reporting for events that have or 
will occur in CY 2015 to use in updating the standard population data 
for HAI measures. This new CY 2015 standard population data for HAI 
measures will hereinafter be referred to as ``new standard population 
data.''
    While this is not a Hospital IQR Program proposal, in the FY 2016 
IPPS/LTCH PPS proposed rule (80 FR 24562), we still invited public 
input on the CDC's plans to update the standard population data for HAI 
measures.
    Comment: Several commenters supported the plan to use data 
collected for infection events in 2015 as the new standard referent 
population, stating that updated population data could help facilitate 
more accurate comparisons of infection rates.
    Response: We thank the commenters for their support.
    Comment: A few commenters supported the planned updates to the 
standard population data for the NHSN measures, but requested that CMS 
further assess the use of CY 2015 data for CAUTI, noting that due to 
changes in measure definitions, CY 2015 CAUTI data may not be 
reflective of actual infection rates.
    Response: We appreciate the commenters' views on the stability of 
the 2015 data. CDC's new CAUTI definition was developed by a subject 
matter expert working group comprised of CDC and non-CDC participants 
who systematically assessed each definitional component. The end result 
is a new CAUTI definition that is simplified from previous iterations 
and allows for less subjectivity while optimizing clinical credibility. 
An assessment of the impact of the definition change on CAUTI incidence 
was completed as part of the definition development. In addition, the 
NHSN application provides a technical infrastructure and built-in 
controls on data entry that serve as safeguards against the reporting 
of events that do not meet the new CAUTI definition. For these reasons, 
the CDC has informed us of its confidence that the CAUTI data reported 
in 2015 will be reflective of actual infection rates and appropriate to 
use for a new standard population.
    Comment: A few commenters expressed confusion regarding when CAUTI 
and CLABSI results would reflect the expanded population reported. In 
addition, one commenter asked for clarification on when SIR rates will 
reflect the use of the updated standard population data. That commenter 
also requested information on when these updates will be reported on 
Hospital Compare for the Hospital IQR Program. In addition, commenters 
urged CMS to coordinate with CDC to communicate the changes to the 
public.
    Response: As noted above, data collected for infection events 
occurring in 2015 will be used as the new standard referent population 
to determine the predicted number of infections beginning for CY 2016/
FY 2018 payment determination for CAUTI and CLABSI results as well as 
SIR rates. For additional clarifications on public display of quality 
measures, we refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 
FR 50203) or the FY 2012 IPPS/LTCH PPS final rule (76 FR 51608), where 
we explain that we report data on Hospital Compare as soon as is 
feasible. In addition, we note that CMS continues to coordinate with 
CDC in regards to communicating with the public.
    Comment: One commenter opposed the proposed updates to the standard 
population of the NHSN measure. Specifically, the commenter expressed 
concern that the intent of the claims data is to pay bills and not to 
measure quality. In addition, the commenter noted that the proposed 
method of HAI data retrieval may not be the most accurate or reliable.
    Response: We believe this method of receiving data from the CDC is 
accurate, reliable and otherwise appropriate, because NHSN users are 
trained to identify HAIs and report HAI data to NHSN in accordance with 
standard surveillance protocols, all of which specify the clinical 
findings and laboratory results that are to be used when reporting to 
NHSN.\134\ In all instances, these protocols avoid use of claims data 
to make determinations of whether a clinical event should be reported 
as an HAI to NHSN.
---------------------------------------------------------------------------

    \134\ http://www.cdc.gov/nhsn/acute-care-hospital/index.html.
---------------------------------------------------------------------------

    While this was not a Hospital IQR Program proposal, we appreciated 
public input on the CDC's plans to update the standard population data 
for HAI measures.
5. Expansion and Updating of Quality Measures
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53510 through 53512) for a discussion of the

[[Page 49653]]

considerations we use to expand and update quality measures under the 
Hospital IQR Program. In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24562), we did not propose any changes to these considerations.
6. Refinements to Existing Measures in the Hospital IQR Program
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24562 through 
24566) we proposed refinements to the measure cohorts for: (1) The 
Hospital 30-day, All-cause, Risk-Standardized Mortality Rate (RSMR) 
following Pneumonia Hospitalization (NQF #0468) measure; and (2) the 
Hospital 30-day, All-Cause, Risk-Standardized Readmission Rate 
following Pneumonia Hospitalization (NQF #0506) measure. The proposed 
refined measures were included on a publicly available document 
entitled ``List of Measures Under Consideration for December 1, 2014'' 
in compliance with section 1890A(a)(2) of the Act, and they were 
reviewed by the MAP as discussed in its MAP Pre-Rulemaking Report.\135\ 
These measure refinements are discussed in greater detail below.
---------------------------------------------------------------------------

    \135\ National Quality Forum ``Process and Approach for MAP Pre-
Rulemaking Deliberations 2015'' found at: http://www.qualityforum.org/Publications/2015/01/Process_and_Approach_for_MAP_Pre-Rulemaking_Deliberations_2015.aspx 
and ``Spreadsheet of MAP 2015 Final Recommendations'' available at: 
http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

a. Refinement of Hospital 30-Day, All-Cause, Risk-Standardized 
Mortality Rate (RSMR) Following Pneumonia Hospitalization (NQF #0468) 
Measure Cohort
(1) Background
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24562 through 
24564), we proposed a refinement to the previously adopted Hospital 30-
Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following 
Pneumonia Hospitalization (NQF #0468) measure (hereinafter referred to 
as the CMS 30-day Pneumonia Mortality Measure), which expands the 
measure cohort. For the purposes of describing the refinement of this 
measure, we note that ``cohort'' is defined as the hospitalizations, or 
``index admissions,'' that are included in the measure and evaluated to 
ascertain whether the patient subsequently died within 30 days of the 
index admission. This cohort is the set of hospitalizations that meet 
all of the inclusion and exclusion criteria, and we proposed an 
expansion to this set of hospitalizations.
    The previously adopted CMS 30-day Pneumonia Mortality Measure (72 
FR 47351) includes hospitalizations for patients with a principal 
discharge diagnosis of pneumonia indicating viral or bacterial 
pneumonia. For more cohort details on the measure as currently 
implemented, we refer readers to the measure methodology report and 
measure risk adjustment statistical model in the AMI, HF, PN, COPD, and 
Stroke Mortality Update zip file on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    The proposed measure refinement would have expanded the measure 
cohort to include hospitalizations for patients with a principal 
discharge diagnosis of aspiration pneumonia and for patients with a 
principal discharge diagnosis of either sepsis or respiratory failure 
who also have a secondary diagnosis of pneumonia present on admission.
    This refinement to the CMS 30-Day Pneumonia Mortality Measure was 
proposed for several reasons. First, recent evidence has shown an 
increase in the use of sepsis and respiratory failure as principal 
diagnosis codes among patients hospitalized with pneumonia.\136\ 
Pneumonia patients with these principal diagnosis codes are not 
currently included in the measure cohort, and including them would 
better capture the complete patient population of a hospital with 
patients receiving clinical management and treatment for pneumonia.
---------------------------------------------------------------------------

    \136\ Lindenauer PK, Lagu T, Shieh MS, Pekow PS, Rothberg MB. 
Association of diagnostic coding with trends in hospitalizations and 
mortality of patients with pneumonia, 2003-2009. Journal of the 
American Medical Association. Apr 4 2012;307(13):1405-1413.
---------------------------------------------------------------------------

    Second, because patients with a principal diagnosis of sepsis and 
respiratory failure are not included in the current CMS 30-Day 
Pneumonia Mortality Measure specifications, efforts to evaluate changes 
over time in pneumonia outcomes could be biased as coding practices 
change.
    Finally, another published study \137\ has also demonstrated wide 
variation in the use of sepsis and respiratory failure codes as 
principal discharge diagnoses for pneumonia patients across hospitals, 
potentially biasing efforts to compare hospital performance on 30-day 
mortality. These published studies and CMS analyses show that hospitals 
that use sepsis and respiratory failure codes for the principal 
diagnosis frequently have better performance on the CMS 30-Day 
Pneumonia Mortality Measure. This coding practice improves performance 
on the measure because patients with greatest severity of illness (for 
example, those with sepsis) are systematically excluded from the 
measure under current measure specifications, leaving only patients 
with less severity of illness in the cohort.
---------------------------------------------------------------------------

    \137\ Rothberg MB, Pekow PS, Priya A, Lindenauer PK. Variation 
in diagnostic coding of patients with pneumonia and its association 
with hospital risk-standardized mortality rates: A cross-sectional 
analysis. Annals of Internal Medicine. Mar 18 2014;160(6):380-388.
---------------------------------------------------------------------------

    In response to these emerging data, we examined coding patterns 
across hospitals caring for Medicare patients and sought to forecast 
the impact of enhancing or broadening the measure cohort to include the 
complete patient population, at each hospital, who are receiving 
clinical management and treatment for pneumonia. Our findings were 
consistent with a published study.\138\ That is, our results suggested 
that there is: (1) An increasing use of respiratory failure and sepsis 
as principal discharge diagnoses for pneumonia patients; and (2) wide 
variation across hospitals in the use of these codes.
---------------------------------------------------------------------------

    \138\ Rothberg MB, Pekow PS, Priya A, Lindenauer PK. Variation 
in diagnostic coding of patients with pneumonia and its association 
with hospital risk-standardized mortality rates: A cross-sectional 
analysis. Annals of Internal Medicine. Mar 18 2014;160(6):380-388.
---------------------------------------------------------------------------

    In addition to assessing the use of the principal diagnosis codes 
of sepsis and respiratory failure, we also analyzed coding patterns and 
the impact of expanding the pneumonia measure to include patients with 
the principal diagnosis of aspiration pneumonia. We noted after our 
analyses that aspiration pneumonia: (1) Is a common reason for 
pneumonia hospitalization, particularly among the elderly; (2) is 
currently not included in the CMS hospital outcome measure 
specifications for pneumonia patients; and (3) appears to be similarly 
subject to variation in diagnosis, documentation, and coding. These 
findings suggest that a measure with an enhanced or broader cohort for 
the current CMS 30-Day Pneumonia Mortality Measure will ensure that the 
measure includes more complete and comparable populations across 
hospitals. Use of comparable populations would reduce measurement bias 
resulting from different coding practices across hospitals.
    The proposed 30-Day Pneumonia Mortality Measure with this expanded 
measure cohort was included on a publicly available document entitled 
``List of Measures Under Consideration for December 1, 2014'' with 
identification number E0468 and has been reviewed by the MAP. The 
revised measure was conditionally supported

[[Page 49654]]

pending NQF endorsement of the measure update, as detailed in the 
``Spreadsheet of MAP 2015 Final Recommendations'' available at: http://www.qualityforum.org/map/. The refined pneumonia mortality measure will 
be submitted to NQF for re-endorsement when the appropriate measure 
endorsement project has a call for measures this year. We will work to 
minimize potential confusion when publicly reporting the updated 
measure.
(2) Overview of Measure Cohort Change
    The proposed measure refinement expands the cohort to include 
hospitalizations for patients with a principal discharge diagnosis of 
aspiration pneumonia and for patients with a principal discharge 
diagnosis of sepsis or respiratory failure who also have a secondary 
diagnosis of pneumonia that is coded as present on admission. The data 
sources, exclusion criteria, assessment of the outcome of mortality, 
and 3 year data evaluation period all remained unchanged.
(3) Risk Adjustment
    The statistical modeling approach as well as the measure 
calculation remained unchanged from the previously adopted measure. The 
risk adjustment approach also remains unchanged; however, we included 
additional risk variables to account for the discharge diagnoses added 
as part of the expanded cohort. For the full measure specifications of 
the proposed change to the measure, we referred readers to the AMI, HF, 
PN, COPD, and Stroke Readmission Update zip file on our Web site at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(4) Effect of Refinement of Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate (RSMR) Following Pneumonia Hospitalization 
Measure Cohort
    Using administrative claims data for FY 2015 (that is, discharges 
between July 2010-June 2013), we analyzed and simulated the effect of 
the proposed cohort refinements on the CMS 30-day Pneumonia Mortality 
Measure as if these changes had been applied for FY 2015. We note that 
these statistics are for illustrative purposes only, and we did not 
propose to revise the measure calculations for the FY 2015 payment 
determination.
    Expanding the measure cohort to include a broader population of 
patients as proposed would have added a large number of patients, as 
well as additional hospitals (which would now meet the minimum 
threshold of 25 eligible cases), to the CMS 30-day Pneumonia Mortality 
Measure. In the FY 2010 IPPS/LTCH PPS final rule (74 FR 43881), we 
established that if a hospital has fewer than 25 eligible cases 
combined over a measure's reporting period, we would replace the 
hospital's data with a footnote indicating that the number of cases is 
too small to reliably determine how well the hospital is performing. 
These cases are still used to calculate the measure; however, for 
hospitals with fewer than 25 eligible cases, the hospital's mortality 
rates and interval estimates are not publicly reported for the measure. 
For more information about this minimum case threshold for public 
reporting, we refer readers to section VIII.A.13. of the preamble of 
this final rule. The increase in the size of the measure cohort 
proposed in the FY 2016 IPPS/LTCH PPS proposed rule would have changed 
results for many hospitals and would change the number of hospitals 
that have greater than 25 cases.
    The previously adopted pneumonia mortality measure cohort includes 
976,590 patients and 4,418 hospitals for the FY 2015 payment 
determination. We noted the following effects for the CMS 30-Day 
Pneumonia Mortality Measure if the proposed expanded cohort had been 
applied for FY 2015: (1) The expansion of the cohort would include an 
additional 686,605 patients (creating a total measure cohort size of 
1,663,195 patients); (2) an additional 86 hospitals would meet the 
minimum 25 patient cases volume threshold over the 3-year measure 
period and would be publicly reported for the measure; (3) 41 percent 
of the refined measure cohort would consist of patients with a 
principal discharge diagnosis of aspiration pneumonia and patients with 
a principal discharge diagnosis of sepsis or respiratory failure who 
also have a secondary diagnosis of pneumonia present on admission; and 
(4) there would be an increase in the number of hospitals considered 
outliers and a shift in some hospitals' outlier status classification, 
for example from ``better than the national rate'' to ``no different 
than the national rate'' or from ``worse than the national rate'' to 
``no different than the national rate.''
    A detailed description of the refinements to the CMS 30-Day 
Pneumonia Mortality Measure and the effects of the change are available 
in the AMI, HF, PN, COPD, and Stroke Readmission Update zip file on our 
Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. 
We note that this file contains information for both Mortality and 
Readmission.
    We invited public comment on our proposal to refine the previously 
adopted Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate 
(RSMR) Following Pneumonia Hospitalization (NQF #0468) measure, 
expanding the measure cohort.
    Because comments for this proposal also overlap with those for the 
next section (VIII.A.6.b. of the preamble of this final rule 
(Refinement of Hospital 30-Day, All-Cause, Risk-Standardized 
Readmission Rate (RSRR) following Pneumonia Hospitalization (NQF #0506) 
Measure Cohort)), we address comments related to both proposals after 
the next section.
b. Refinement of Hospital 30-Day, All-Cause, Risk-Standardized 
Readmission Rate (RSRR) Following Pneumonia Hospitalization (NQF #0506) 
Measure Cohort
(1) Background
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24564 through 
24566), we proposed a refinement of the previously adopted measure, 
Hospital 30-day all-cause, risk-standardized readmission rate following 
pneumonia hospitalization (NQF #0506) (hereinafter referred to as the 
CMS 30-Day Pneumonia Readmission Measure) which expands the measure 
cohort. For the purposes of describing the refinement of this measure, 
we note that ``cohort'' is defined as the hospitalizations, or ``index 
admissions,'' that are included in the measure and evaluated to 
ascertain whether the patient was subsequently readmitted to the 
hospital within 30 days of the index admission. This cohort is the set 
of hospitalizations that meets all of the inclusion and exclusion 
criteria and we proposed an expansion to this set of hospitalizations.
    The previously adopted CMS 30-Day Pneumonia Readmission Measure, as 
specified in the FY 2009 IPPS PPS proposed rule (73 FR 23648) and 
adopted in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68780 through 68781), includes hospitalizations for patients with a 
principal discharge diagnosis of pneumonia indicating viral or 
bacterial pneumonia. For measure cohort details of the currently 
implemented measure, we refer readers to the measure methodology report 
and measure risk adjustment statistical model in the AMI, HF, PN, COPD, 
and Stroke Readmissions Update zip file on our Web site at: http://
www.cms.gov/

[[Page 49655]]

Medicare/Quality-Initiatives-Patient-Assessment-Instruments/
HospitalQualityInits/Measure-Methodology.html.
    This proposed measure refinement would have expanded the measure 
cohort to include hospitalizations for patients with a principal 
discharge diagnosis of aspiration pneumonia and for patients with a 
principal discharge diagnosis of either sepsis or respiratory failure 
who also have a secondary diagnosis of pneumonia present on admission. 
The determination to refine the measure cohort was based on our 
evaluation of both the frequency and variation in utilization of these 
diagnosis codes, as such coding practices have been described in 
recently published studies.
    This refinement to the CMS 30-Day Pneumonia Readmission Measure was 
being proposed in response to recent evidence showing increasing use of 
the principal diagnosis codes of sepsis and respiratory failure among 
patients hospitalized with pneumonia. Including such patients could 
better represent the complete population of a hospital's patients who 
are receiving clinical management and treatment for pneumonia. In 
addition, because patients with a principal diagnosis of sepsis and 
respiratory failure are not included in the current CMS 30-Day 
Pneumonia Readmission Measure specifications, efforts to evaluate 
changes over time in pneumonia outcomes could be biased as coding 
practices change.
    Wide variation exists in the use of sepsis and respiratory failure 
codes across hospitals, potentially biasing efforts to compare hospital 
performance on 30-day readmission rates.\139\ While the referenced 
study \140\ evaluated the effect of coding practices on mortality 
measure performance, the rationale is applicable to readmission measure 
performance as well. The increased use of sepsis and respiratory 
failure diagnosis codes improves performance because the patients with 
greatest severity of illness (for example, those with sepsis or 
respiratory failure) are currently systematically excluded from the 
measure, leaving only patients with lesser severity of illness in the 
measure cohort.
---------------------------------------------------------------------------

    \139\ Rothberg MB, Pekow PS, Priya A, Lindenauer PK.: Variation 
in diagnostic coding of patients with pneumonia and its association 
with hospital risk-standardized mortality rates: A cross-sectional 
analysis. Annals of Internal Medicine. Mar 18 2014;160(6):380-388.
    \140\ Rothberg MB, Pekow PS, Priya A, Lindenauer PK.: Variation 
in diagnostic coding of patients with pneumonia and its association 
with hospital risk-standardized mortality rates: A cross-sectional 
analysis. Annals of Internal Medicine. Mar 18 2014;160(6):380-388.
---------------------------------------------------------------------------

    In response to this emerging data, we examined coding patterns 
across hospitals caring for Medicare patients and sought to forecast 
the impact of broadening the measure cohort to include the complete 
population of patients at each hospital who are receiving clinical 
management and treatment for pneumonia. Our findings were consistent 
with a published study \141\ for mortality; that is, our results 
suggested that there is an increasing use of respiratory failure and 
sepsis as principal discharge diagnoses for pneumonia patients, as well 
as showed wide variation across hospitals in the use of these codes. In 
addition to assessing the use of the principal diagnosis codes of 
sepsis and respiratory failure, we also analyzed coding patterns and 
the impact of expanding the pneumonia measure to include patients with 
the principal diagnosis of aspiration pneumonia. We noted after our 
analyses that aspiration pneumonia: (1) Is a common reason for 
pneumonia hospitalization, particularly among the elderly; (2) is 
currently not included in the CMS hospital outcome measure 
specifications for pneumonia patients; and (3) appears to be similarly 
subject to variation in diagnosis, documentation, and coding. These 
findings suggest that expanding the measure cohort for the current CMS 
30-Day Pneumonia Readmission Measure will ensure the measure includes 
more complete and comparable populations across hospitals. Use of 
comparable populations would reduce measurement bias resulting from 
different coding practices seen across hospitals. We believe that 
measure results derived from refinement of the measure cohort in the 
manner we proposed, which will include additional pneumonia patients 
that are not being included under the current measure specifications, 
will improve the fidelity of the measure's assessment of quality and 
outcome for pneumonia.
---------------------------------------------------------------------------

    \141\ Rothberg MB, Pekow PS, Priya A, Lindenauer PK. Variation 
in diagnostic coding of patients with pneumonia and its association 
with hospital risk-standardized mortality rates: A cross-sectional 
analysis. Annals of Internal Medicine. Mar 18 2014;160(6):380-388.
---------------------------------------------------------------------------

    The proposed refined measure was included on a publicly available 
document entitled ``List of Measures Under Consideration for December 
1, 2014'' with identification number E0506, has been reviewed by the 
MAP, and was conditionally supported pending NQF review of the measure 
update. In particular, MAP members noted that the measure should be 
considered for sociodemographic status (SDS) adjustment in the upcoming 
NQF trial period, reviewed for the empirical and conceptual 
relationship between SDS factors and risk-standardized readmission 
rates, and endorsed with appropriate consideration of SDS factors as 
determined by NQF standing committees. We refer readers to the 
``Spreadsheet of MAP 2015 Final Recommendations'' available at: http://www.qualityforum.org/map/ for more information. When the appropriate 
measure endorsement project has a call for measures in 2015, this 
measure will be submitted to the NQF for reendorsement with special 
consideration of the potential impact of SDS adjustment on the measure.
(2) Overview of Measure Cohort Change
    The proposed measure refinement would have expanded the measure 
cohort to include hospitalizations for patients with a principal 
discharge diagnosis of aspiration pneumonia and for patients with a 
principal discharge diagnosis of sepsis or respiratory failure who also 
have a secondary diagnosis of pneumonia that is coded as present on 
admission. The data sources, exclusion criteria, assessment of the 
outcome of readmission, and previous 3 years data evaluation period 
remained unchanged.
(3) Risk Adjustment
    The statistical modeling approach as well as the measure 
calculation remained unchanged from the previously adopted measure. The 
risk adjustment approach also remains unchanged; however, we included 
additional risk variables to account for the discharge diagnoses added 
as part of the expanded cohort. For the full measure specifications of 
the proposed changes to the measure, we referred readers to the AMI, 
HF, PN, COPD, and Stroke Readmissions Update zip file on our Web site 
at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(4) Effect of Refinement of Hospital 30-Day, All-Cause, Risk-
Standardized Readmission Rate (RSRR) Following Pneumonia 
Hospitalization Measure Cohort
    Using administrative claims data for FY 2015 (that is, discharges 
between July 2010-June 2013); we analyzed and simulated the effect of 
the proposed measure cohort refinements on the CMS 30-Day Pneumonia 
Readmission Measure as if these changes had been applied for FY 2015. 
We note that these statistics are for illustrative purposes

[[Page 49656]]

only, and we did not propose to revise the measure calculations for the 
FY 2015 payment determination. We anticipate that this measure will 
first be publicly reported with the proposed cohort change in CY 2016.
    Based on our analysis, we anticipate that expanding the measure 
cohort to include a broader population of patients as proposed would 
have added a large number of patients, as well as additional hospitals 
(which would now meet the minimum threshold of 25 eligible cases), to 
the CMS 30-Day Pneumonia Readmission Measure. In the FY 2010 IPPS/LTCH 
PPS final rule (74 FR 43881), CMS established that if a hospital has 
fewer than 25 eligible cases combined over a measure's reporting 
period, we would replace the hospital's data with a footnote indicating 
that the number of cases is too small to reliably tell how well the 
hospital is performing. These cases are still used to calculate the 
measure; however, for hospitals with fewer than 25 eligible cases, the 
hospital's readmission rates and interval estimates are not publicly 
reported for the measure. For more information about this minimum case 
threshold for public reporting, we refer readers to section VIII.A.13of 
the preamble of this final rule. The increase in the size of the 
measure cohort proposed in FY 2016 IPPS/LTCH PPS proposed rule for this 
measure cohort would have changed results for many hospitals and would 
change the number of hospitals that have greater than 25 cases.
    The previously adopted pneumonia readmission measure cohort 
includes 1,094,959 patients and 4,451 hospitals for FY 2015 payment 
determination. We noted the following effects for the CMS 30-Day 
Pneumonia Readmission Measure if the proposed expanded cohort had been 
applied for FY 2015: (1) The expansion of the CMS 30-Day Pneumonia 
Readmission Measure cohort would include an additional 670,491 patients 
(creating a total measure cohort of 1,765,450 patients); (2) there 
would be an additional 67 hospitals that meet the minimum 25 patient 
cases volume threshold over the 3-year applicable period and would be 
publicly reported for the measure; (3) patients with a principal 
discharge diagnosis of aspiration pneumonia and patients with a 
principal discharge diagnosis of sepsis or respiratory failure who also 
have a secondary diagnosis of pneumonia present on admission would 
represent 38 percent of the total expanded measure cohort; and (4) 
there would be an increase in the number of hospitals considered 
outliers and a shift in some hospitals' outlier status classification, 
for example from ``better than the national rate'' to ``no different 
than the national rate'' or from ``worse than the national rate'' to 
``no different than the national rate.''
    A detailed description of the refinements to the CMS 30-Day 
Pneumonia Readmission Measure and the effects of the change are 
available in the AMI, HF, PN, COPD, and Stroke Readmission Updates zip 
file on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    We invited public comment on our proposals to refine the previously 
adopted Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate 
(RSRR) following Pneumonia Hospitalization (NQF #0506) measure, and the 
Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) 
following Pneumonia Hospitalization (NQF #0468) measure which expands 
the measure cohort.
    Comment: Several commenters supported CMS' proposal to expand the 
cohort for identifying Pneumonia patients for the two PN measures, and 
noted that the expanded cohort would address the concern of coding 
variation. One commenter encouraged CMS to expand this cohort to also 
apply to the Payment Episode for PN. Another commenter noted the 
refinement would better reflect the population of patients who are 
managing and being treated for pneumonia. One commenter supported the 
proposed refinement to the Hospital 30-day, All-Cause, Risk-
Standardization Readmission Rate following Pneumonia Hospitalization 
(NQF #0506) measure, indicating that the expanded cohort would address 
the concern of coding variation. Another commenter supported the 
proposed cohort expansions for the Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate Following Pneumonia Hospitalization and 
Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate 
Following Pneumonia Hospitalization measures.
    Response: We thank the commenters for their support and are 
considering updating other measures that contain the same pneumonia 
cohort, such as the Hospital-Level, Risk-Standardized Payment 
Associated with a 30-Day Episode of Care for Pneumonia measure, which 
uses the same cohort as the currently reported Hospital 30-Day, All-
Cause, Risk-Standardized Mortality Rate Following Pneumonia 
Hospitalization measure.
    Comment: One commenter commended CMS' proposal and associated 
rationale for incorporating the refinements to the patient populations 
for the pneumonia mortality and readmission measures. The commenter 
agreed with CMS that, without modification, the current specifications 
may result in significant variation in the number of pneumonia cases 
captured due to differences in hospital coding and that, by refining 
the population for these measures, CMS will ensure better collection of 
more complete and comparable data across hospitals.
    Response: We thank the commenter for its support.
    Comment: Many commenters expressed concern that the proposed 
Refinements of the Hospital 30-Day, All-Cause, Risk-Standardized 
Mortality Rate Following Pneumonia Hospitalization and the Hospital 30-
Day, All-Cause, Risk-Standardized Readmissions Rate Following Pneumonia 
Hospitalization measure cohorts, stating that the proposed expansions 
of the measures were not revisions, but a wholesale expansion which 
could have unintended consequences. The commenters also noted concern 
that these changes could inappropriately expand the measure to a 
population of patients with greater severity of illness and higher 
costs. One commenter acknowledged that although some risk-adjustment 
processes were proposed, the adequacy of the revised risk adjustment 
for handling the expanded population is unknown. Finally, some 
commenters noted concern that the measures do not appropriately account 
for variation in patient acuity and that hospitals treating the sickest 
patients will appear to perform poorly. One commenter also suggested 
that the expansion could artificially increase readmission rates unless 
the measures are risk-adjusted.
    Response: We appreciate the commenters' concerns about the extent 
of the expansion of these measures and the inclusion of patients with 
greater illness severity.
    In the proposed rule, we described an expanded measure cohort that 
included patients with: (1) A principal discharge diagnosis of 
bacterial/viral pneumonia; (2) a principal discharge diagnosis of 
aspiration pneumonia; (3) a principal discharge diagnosis of sepsis if 
pneumonia was POA; (4) a principal discharge diagnosis of severe sepsis 
(including septic shock) if pneumonia was POA; and (5) principal 
discharge diagnosis of respiratory failure if pneumonia was POA. We 
also proposed including the presence of sepsis or respiratory failure 
in the index admission as covariates, or risk-adjusters, in the model.

[[Page 49657]]

    However, analyses conducted after publication of the proposed rule 
as part of the measure reevaluation and respecification process 
revealed challenges to risk adjustment with respect to patients with 
severe sepsis and respiratory failure, and suggested that this proposed 
cohort expansion could exacerbate the bias in the existing measure that 
it was intended to mitigate. Specifically, hospital coding frequency 
was found to be even more strongly, and inversely, associated with 
performance; hospitals with the greatest proportion of patients 
receiving a principal diagnosis of sepsis or respiratory failure had 
the lowest risk-adjusted mortality and were more likely to be `better-
performing' outliers. This finding was concerning, because clinically, 
we do not expect differences in coding practices to be related to 
performance on the measure. Our aim was to expand the cohort to 
adequately capture the wide range of pneumonia patients across 
hospitals, regardless of coding patterns, but that would adequately 
account for different degrees of illness among the hospitals' 
population.
    The reevaluation and respecification of the proposed expansions 
resulted in measure cohorts that are a broader clinical representation 
than the currently reported measures cohorts and that account for the 
wider spectrum of clinical severity of pneumonia among Medicare 
beneficiaries receiving acute care at IPPS U.S. hospitals. During this 
subsequent analysis, the measures were then modified so that the 
cohorts were expanded to only include: (1) Patients with a principal 
discharge diagnosis of pneumonia (current reported cohort), (2) 
patients with a principal discharge diagnosis of aspiration pneumonia, 
and (3) patients with a principal discharge diagnosis of sepsis 
(excluding severe sepsis) with a secondary diagnosis of pneumonia that 
was POA. Patients with: (4) A principal discharge diagnosis of severe 
sepsis (including septic shock) if pneumonia was POA; and (5) principal 
discharge diagnosis of respiratory failure if pneumonia was POA were 
not included. The finalized measures, with the modified expanded 
cohort, also do not include additional risk variables for the presence 
of sepsis or respiratory failure in index admission as part of the 
measures' risk-adjustment since the patients with respiratory failure 
or severe sepsis will not be included in the finalized measures. This 
respecification was determined to be statistically robust, such that in 
the finalized measures, with the modified expanded cohort, risk-
standardization adequately accounted for case-mix differences across 
hospitals, without being confounded by hospital coding patterns. 
Furthermore, this respecification is also consistent with clinical 
patterns of care, as the very sickest patients (those with principal 
discharge diagnosis of severe sepsis or respiratory failure) often 
require care in an intensive care unit (ICU) and other specialized 
interventions (such as ventilator support) that is clinically distinct 
from the care provided to patients with less severe forms of pneumonia.
    These analyses led to our decision to not include the sickest 
patients in the refinements of the Hospital 30-day, All-Cause, Risk 
Standardized Mortality Rate (RSMR) following Pneumonia Hospitalization 
(NQF #0468) measure and the Hospital 30-day, All-Cause, Risk 
Standardized Readmission Rate following Pneumonia Hospitalization (NQF 
#0506) measure. Upon this further analysis and in response to public 
comment, we are modifying our proposal and finalizing a modified 
version of the expanded pneumonia cohort. Instead of including all five 
proposed diagnosis categories as described above, we are finalizing 
only three: (1) Patients with a principal discharge diagnosis of 
pneumonia (the current reported cohort); (2) patients with a principal 
discharge diagnosis of aspiration pneumonia; and (3) patients with a 
principal discharge diagnosis of sepsis (excluding severe sepsis) with 
a secondary diagnosis of pneumonia POA. We are not including patients 
with the most severe illness, which are represented in the two patient 
groups we are not finalizing: (4) Patients with a principal discharge 
diagnosis of respiratory failure; and (5) patients with a principal 
discharge diagnosis of severe sepsis (including septic shock). As a 
result, we are also not finalizing our proposal to risk adjust with 
respect to these two conditions being present during the index 
admission.
    We find that this modified cohort expansion produces a measure that 
does not favor or disadvantage hospitals on the basis of their coding 
practices. Although the modified expansion of the cohort for these 
measures will increase the number of included patients and change the 
national readmission and mortality rates, we do not believe this 
constitutes a new measure; the intent of the measure has not changed 
since initial development and NQF endorsement. The modified measures 
will not expand the population by as much or change the national rate 
as much as noted in the proposed rule. The modified mortality measure 
cohort will be approximately 18 percent smaller than what was proposed 
and the modified readmission measure cohort will be approximately 15 
percent smaller than what was proposed.
    We believe the modified versions of the measure refinements being 
finalized effectively broadens the cohort of patients included to be 
more clinically comprehensive than that of the current reported 
measures (bringing in sepsis and aspiration pneumonia patients), but 
avoids including patients that are most severely ill on arrival (those 
with severe sepsis and respiratory failure). Those patients' increased 
risk was challenging to appropriately account for across hospitals. By 
limiting measure expansion without including risk-adjustment for these 
alternate principal diagnoses (that is, severe sepsis and respiratory 
failure), we brought in a large portion of patients currently excluded 
from the measures, but mitigated the biases introduced by hospital 
coding patterns.
    Based on our additional evaluation, we confirmed that after 
removing the risk variables for sepsis and respiratory failure during 
the index admission from the previously proposed approach, risk-
adjustment was effective for the modified refinements to the measures, 
as hospital coding frequency was no longer associated with performance 
on either the mortality or readmission measures. As was previously 
proposed, the risk adjustment factors used in the current publicly 
reported versions of the mortality and readmission measures 
142 143 were retained, with the addition of 5 new risk-
adjustment variables (Septicemia/sepsis (CC2), Disorders of fluid/
electrolyte/acid-base (CC23), Delirium and encephalopathy (CC48), 
Respiratory dependence/tracheostomy (CC77), Decubitus ulcer of skin 
(CC148)) and two modified risk-adjustment variables (addition of 
Pleural effusion/pneumothorax (CC114) and respiratory arrest (CC78) to 
existing risk-adjustment variables) for the mortality measure and 1 new 
risk-adjustment variable (respiratory dependence/tracheostomy (CC77)) 
for the readmission measure. No additional risk adjustment variables 
were added for the patients included in the modified expanded cohort 
(that is, aspiration pneumonia and sepsis patients). The

[[Page 49658]]

previously proposed risk adjustment approach (now excluding variables 
for sepsis, and respiratory failure present during the index admission) 
adequately accounts for the varying severity and comorbidities of 
patients across the finalized, modified cohort; therefore, hospitals 
will not be unfairly penalized for treating sicker patients. 
Specifically, hospital performance among those with higher rates of 
patients with sepsis or aspiration pneumonia is similar to those with 
fewer such patients, suggesting that the risk-adjustment methodology 
adequately accounts for the differences in risk among the subgroups of 
patients. For details of the modified refinements of the measures we 
are finalizing, including risk-adjustment and impact on hospitals, we 
refer readers to the measure methodology report and measure risk 
adjustment statistical model in the AMI, HF, PN, COPD, and Stroke 
Readmission Updates zip file on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    \142\ For more cohort details on the measure as currently 
implemented, we refer readers to the measure methodology report and 
measure risk adjustment statistical model in the AMI, HF, PN, COPD, 
and Stroke Mortality Update zip file on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    \143\ Pneumonia RSMR finalized at (72 FR 473510) and Pneumonia 
RSRR finalized at (76 FR 51666 through 51667).
---------------------------------------------------------------------------

    Comment: Many commenters opposed the expansion of the patient 
cohorts for the Refinement of PN Mortality Cohort: 30-Day, All-Cause, 
Risk-Standardized Mortality Rate and the Refinement of PN Readmission 
Cohort: 30-Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) 
measures until the proposed changes have been reviewed by the National 
Quality Forum. One commenter stated that the preliminary information 
provided in the proposed rule and to the MAP in December was not 
sufficient for evaluation, and that additional information regarding 
the measures' reliability, validity and appropriateness must be fully 
considered. Specifically, the commenter was not convinced that CMS has 
provided enough evidence to support such a significant expansion of 
these measures at this time, with the commenter's own analysis 
indicating that cohort size could increase 67 percent. Several 
commenters also expressed concern that the conditions proposed by the 
MAP were not addressed with regard to NQF endorsement.
    Response: As noted in both measure refinement discussions above, 
the MAP conditionally supported these refined measures during the 2014 
MAP Hospital Workgroup Meeting and conditionally supported them pending 
NQF review of the updates. We do not agree that the information 
presented to the MAP was insufficient, because while the MAP provides a 
recommendation on whether measures are appropriate for a program, it 
does not provide an in-depth review of evidence and testing. The NQF 
review, on the other hand, provides stakeholders an opportunity for in-
depth review of such aspects.
    In addition, we believe the finalized measures' (with the modified 
expanded cohort) reliability, validity and appropriateness are 
sufficient. CMS' reliability testing demonstrated moderate reliability 
that is comparable to other CMS claims-based outcome measures. The 
finalized measures, with the modified expanded cohort, have both 
clinical and face validity. The inclusion of additional patient groups 
is based on research findings and an aim to maintain clinically 
comparable cohorts across hospitals. The validity of the measures is 
further based on prior findings demonstrating the adequacy of claims-
based risk-adjustment outcome measures. Furthermore, the finalized 
measures' validity is based on the demonstration that they mitigate 
biases introduced by hospital coding patterns. For more details on the 
measures, including predictive ability, reliability, and validity, we 
refer readers to the measure methodology reports in the AMI, HF, PN, 
COPD, and Stroke Readmission Updates zip file on our Web site at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. This data 
was presented to the MAP and will also be included in the NQF 
applications.
    When the appropriate measure endorsement project has a call for 
measures in 2015, the finalized measures, with the modified expanded 
cohorts, will be submitted to the NQF for reendorsement. The original 
30-day, All-Cause, Risk-Standardized Readmission Rate following 
Pneumonia Hospitalization and 30-day, All-Cause, Risk-Standardized 
Mortality Rate following Pneumonia Hospitalization measures were 
previously NQF-endorsed, and we do not believe the intent of the 
measures have changed.
    Comment: Some commenters did not support the inclusion of 
aspiration pneumonia in the cohort for the Hospital 30-Day, All-Cause, 
Risk-Standardized Mortality Rate (RSMR) Following Pneumonia 
Hospitalization (NQF #0468) and the Hospital 30-Day, All-Cause, Risk-
Standardized Readmission Rate (RSRR) Following Pneumonia 
Hospitalization (NQF #0506) measures. One commenter noted that these 
diagnoses have different causes and associated risks and that patients 
with these diagnoses may have higher acuity, higher mortality and 
readmission rates, and more comorbidities than patients with community 
acquired pneumonia. Another commenter noted concern that the majority 
of patients with aspiration pneumonia are medically frail patients with 
comorbidities that predispose them to recurrent aspiration events and 
another was concerned that stroke patients can be at higher risk for 
re-aspiration and therefore pneumonia readmission. This commenter 
further suggested that the measure could inappropriately become a catch 
all for neuro-muscular diseases, CVA, head injury, advanced dementia, 
among other diagnoses, which would not measure true pneumonia 
readmissions.
    Response: The purpose of expanding the cohort of the current 
pneumonia readmission measure is to include a broader spectrum of 
pneumonia patients and respond to changes in coding practices that were 
potentially biasing estimates of the performance of hospitals. We 
believe the modified expanded cohorts for the finalized measures 
effectively broaden the patients included in the measure to be more 
clinically comprehensive (bringing in sepsis and aspiration pneumonia 
patients) but avoids including those patients that are most severely 
ill on arrival (those with severe sepsis and respiratory failure).
    We appreciate the commenters concerns that community acquired 
pneumonia and aspiration pneumonia have different causes and associated 
risks (for example, recurrent aspiration due to other comorbidities). 
While the pathological causes of aspiration pneumonia are slightly 
different from the causes of community acquired pneumonia, in routine 
clinical practice, evidence shows it can be very challenging for 
physicians to differentiate aspiration syndromes including pneumonitis 
and pneumonia, from other types of pneumonia included in the measure. 
This is reflected in the tremendous variation across hospitals in the 
use of aspiration pneumonia diagnosis codes. This variation suggests 
that hospitals are not consistently distinguishing between these 
conditions as distinct subtypes regardless of patients' comorbid 
conditions.
    Moreover, the treatment of patients hospitalized for pneumonia, 
aspiration pneumonia, or sepsis due to pneumonia is very similar and 
involves treatment with antibiotics, IV fluids, and symptom management. 
In addition, although some patients with aspiration pneumonia, such as 
medically frail patients or those who have suffered a stroke as noted 
by the commenter, have a higher predicted mortality or readmission 
risk, many of the associated

[[Page 49659]]

comorbidities, are captured in the measures' risk-adjustment 
methodology. For example, the risk models include clinical history of 
stroke, as well as conditions associated with frailty, such as 
neuromuscular disease, and dementia. Therefore, we do not believe that 
the measure would inappropriately become a catch-all for neuro-muscular 
diseases, cerebrovascular accident (CVA), head injury, advanced 
dementia, among other diagnoses, which would not measure true pneumonia 
readmissions. Our analyses, as described above and in the measure 
methodology reports (available in the AMI, HF, PN, COPD, and Stroke 
Readmission Updates zip file on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html), show that hospital 
performance among hospitals with higher rates of patients with 
aspiration pneumonia is similar to those with fewer such patients, 
confirming that the risk-adjustment methodology adequately accounts for 
the differences in risk among the subgroups of patients.
    Comment: One commenter suggested that CMS should consider 
stratifying the measures, and evaluate the impact of the proposed 
change on hospital performance, as it is currently unknown.
    Response: We appreciate the suggestion to consider stratification 
of the measure. Stratification can be used as a means to account for 
differences among subgroups of patients within a measure. It can be 
used to report outcomes separately for different groups, unadjusted by 
a risk model. For example, a measure may specify stratification of 
results within a major clinical category (for example, diabetes) by 
severity or other clinical differences, as well as by race or age 
category. However, we did not find that stratification was required in 
the modified expanded cohort that is being finalized for these measures 
because risk adjustment adequately accounts for the varying severity 
and comorbidities of patients across the finalized cohort. Therefore, 
hospitals will not be unfairly penalized for treating sicker patients.
    Specifically, our analyses found that hospital performance among 
hospitals with higher rates of patients with sepsis or aspiration 
pneumonia hospital performance is similar to those with fewer such 
patients, suggesting that the risk adjustment methodology adequately 
accounts for the differences in risk among the subgroups of patients; 
further information can be found in the subsequent link provided. 
Details regarding the number of hospitals that would change performance 
categories and how their performance is related to their coding 
practices is detailed in the measure specifications report for the 
measure as finalized are provided in the measure methodology report and 
measure risk adjustment statistical model in the AMI, HF, PN, COPD, and 
Stroke Readmission Updates zip file on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    Comment: Some commenters advised CMS to articulate its public 
reporting approach for both the old and new versions of the measures so 
that the observed changes are not perceived as changes in care by 
consumers. In addition, one commenter noted that previous pneumonia 
mortality and readmission data and benchmarks did not include patients 
with this expanded set of diagnoses, so the change may erroneously show 
worsening hospital performance on these measures. One commenter 
recommended that CMS develop a communication strategy regarding the 
changes to the measures and the impact of those changes on public 
reporting.
    Response: We note that consumers typically view the main Hospital 
Compare Web site: http://www.medicare.gov/hospitalcompare/search.html, 
which does not include information about how hospitals performed in the 
past, only how they are currently performing as compared to the 
national rate. Archived hospital performance data is instead available 
at: https://data.medicare.gov/data/archives/hospital-compare. While 
hospitals may shift performance categories (for example, from worse 
than to better than the national rate) between the current publically 
reported and finalized measures (with modified expanded cohorts), we do 
not believe measure rates over time will be abundantly evident to 
consumers. Nonetheless, we will ensure that adequate information be 
available to the public regarding which version of the measures are 
displayed on Hospital Compare to reduce any potential confusion for 
consumers.
    Comment: Some commenters recommended that CMS conduct a study to 
validate the expanded measures and one recommended a review by outside 
experts.
    Response: We will submit the finalized measures with the modified 
expanded cohort to the NQF for review when the appropriate project is 
called. The NQF will assess the modified, refined measures for 
validity. As discussed above, we determined the finalized readmission 
and mortality measures with the modified expanded cohorts to have both 
clinical and face validity. Prior studies have demonstrated that using 
comorbidity information from administrative claims is a valid approach 
to risk adjustment and adequately assesses the difference in case mix 
among hospitals. Furthermore, the finalized measures have greater 
validity than the current publically reported measures, because they 
mitigate biases introduced by hospital coding patterns. A detailed 
description of the refinements to the CMS 30-Day Pneumonia Readmission 
and Mortality Measures and the effects of the changes are available in 
the AMI, HF, PN, COPD, and Stroke Readmission Updates zip file on our 
Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    Comment: One commenter noted that hospitals have not had the 
opportunity to develop and evaluate interventions for the proposed 
expanded cohort. The commenter suggested that hospitals be given an 
entire performance period of cohort expansion knowledge, and requested 
that CMS delay the proposed expansion until FY 2021.
    Response: These measure refinements focus on coordination-of-care 
and care-transitions interventions to reduce mortality and 
readmissions. These practices, such as ensuring appropriate follow-up 
post-discharge and medication reconciliation, should already be in 
place for patients in hospitals and would not differ greatly for the 
modified expanded cohort of patients included in the measure 
refinements being finalized. Therefore, we do not agree with delaying 
the implementation of these measures, especially because the publicly 
reported versions of the measures are subject to bias resulting from 
differences in coding patterns among hospitals, which the refined 
measures address. We believe that this refinement provides a less 
biased and more comprehensive look at pneumonia patients.
    Comment: One commenter agreed with the addition of respiratory 
failure and sepsis with a secondary diagnosis of pneumonia, as their 
inclusion will provide a better account of pneumonia readmissions.
    Response: As discussed above, after extensive evaluation and 
analysis of the results of the proposed refinement of these measures, 
we are finalizing, with modifications, the refinements to both measures 
without the inclusion of

[[Page 49660]]

patients with a principal diagnosis of respiratory failure or severe 
sepsis in the expanded cohort. We refer readers to our responses above.
    Comment: One commenter expressed concern that one of the cited 
studies noted their risk adjustment approach was insufficient and could 
penalize hospitals treating sicker patients, and that the CMS approach 
was similar.
    Response: We refer readers to our earlier responses to comments for 
a more detailed discussion on the rationale for finalizing the modified 
expanded cohort and not the proposed expanded cohort. We believe the 
modified version of the measure refinements being finalized effectively 
broadens the cohort of patients included in the measures to be more 
clinically comprehensive (bringing in sepsis and aspiration pneumonia 
patients), but avoids including those patients in the proposed expanded 
cohort that are most severely ill on arrival (those with severe sepsis 
and respiratory failure). After removal of the most severely ill, the 
modified risk adjustment model being finalized adequately accounts for 
the varying severity and comorbidities of patients across the modified 
cohort; therefore, we believe that hospitals will not be unfairly 
penalized for treating sicker patients. As described in more detail 
above, our analyses demonstrated that hospital performance among 
hospitals with higher rates of patients with sepsis or aspiration 
pneumonia is similar to those with fewer such patients, suggesting that 
the risk adjustment methodology adequately accounts for the differences 
in risk among the subgroups of patients.
    After consideration of the public comments we received and 
extensive evaluation and analysis of the results of the refined 
measures, we are finalizing a modified version of the measure 
refinements (expanded pneumonia cohort) proposed for the FY 2017 
payment determination and subsequent years for both the Hospital 30-
Day, All-Cause, Risk-Standardized Readmission Rate (RSRR) following 
Pneumonia Hospitalization (NQF #0506) measure and the Hospital 30-Day, 
All-Cause, Risk-Standardized Mortality Rate (RSMR) following Pneumonia 
Hospitalization (NQF #0468) measure. Instead of including all five 
proposed diagnosis categories, we are finalizing only three: (1) 
Patients with a principal discharge diagnosis of pneumonia (the current 
reported cohort); (2) patients with a principal discharge diagnosis of 
aspiration pneumonia; and (3) patients with a principal discharge 
diagnosis of sepsis (excluding severe sepsis) with a secondary 
diagnosis of pneumonia coded as present on admission (POA). We are not 
including patients with the most severe illness, which are represented 
in the 2 diagnosis categories we are not finalizing: (1) Patients with 
a principal discharge diagnosis of respiratory failure with a secondary 
diagnosis of pneumonia present on admission; and (2) patients with a 
principal discharge diagnosis of sepsis (including septic shock) with a 
secondary diagnosis of pneumonia present on admission. As a result, we 
are also not finalizing our proposal to risk adjust with respect to 
these two conditions.
7. Additional Hospital IQR Program Measures for the FY 2018 and FY 2019 
Payment Determinations and Subsequent Years
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24566 through 
24581), we proposed to add eight new measures to the Hospital IQR 
Program for the FY 2018 payment determination and subsequent years. We 
proposed to adopt seven new claims-based measures and one new 
structural measure: (1) Hospital Survey on Patient Safety Culture 
(structural); (2) Kidney/UTI Clinical Episode-Based Payment measure 
(claims-based); (3) Cellulitis Clinical Episode-Based Payment measure 
(claims-based); (4) Gastrointestinal Hemorrhage Clinical Episode-Based 
Payment measure (claims-based); (5) Lumbar Spine Fusion/Re-Fusion 
Clinical Episode-Based Payment measure (claims-based); (6) Hospital-
Level, Risk-Standardized Payment Associated with an Episode-of-Care for 
Primary Elective THA/TKA (claims-based); (7) Excess Days in Acute Care 
after Hospitalization for Acute Myocardial Infarction (claims-based); 
and (8) Excess Days in Acute Care after Hospitalization for Heart 
Failure (claims-based).
    The proposed measures were included on a publicly available 
document entitled ``List of Measures Under Consideration for December 
1, 2014'' \144\ in compliance with section 1890A(a)(2) of the Act, and 
they were reviewed by the MAP as discussed in its MAP Pre-Rulemaking 
Report and Spreadsheet of MAP 2015 Final Recommendations.\145\
---------------------------------------------------------------------------

    \144\ Measure Applications Partnership: List of Measures Under 
Consideration (MUC) for December 1, 2014. Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78318.
    \145\ National Quality Forum ``Process and Approach for MAP Pre-
Rulemaking Deliberations 2015'' available at: http://www.qualityforum.org/Publications/2015/01/Process_and_Approach_for_MAP_Pre-Rulemaking_Deliberations_2015.aspx 
and ``Spreadsheet of MAP 2015 Final Recommendations'' available at: 
http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

    For purposes of the Hospital IQR Program, section 
1886(b)(3)(B)(IX)(aa) of the Act requires that any measure specified by 
the Secretary must have been endorsed by the entity with a contract 
under section 1890(a) of the Act. The NQF currently holds this 
contract. However, section 1886(b)(3)(B)(IX)(bb) of the Act provides an 
exception that, in the case of a specified area or medical topic 
determined appropriate by the Secretary for which a feasible and 
practical measure has not been endorsed by the entity with a contract 
under section 1890(a) of the Act, the Secretary may specify a measure 
that is not so endorsed as long as due consideration is given to 
measures that have been endorsed or adopted by a consensus organization 
identified by the Secretary.
    We invited public comment on each of the proposed measures listed 
above. We address general comments received on all proposed measures 
here and discuss more specific comments in subsequent sections below.
    Comment: One commenter expressed concern regarding the continued 
use of claims data for some measure reporting, noting that there is 
variation in coding practices across hospitals, and that unlike chart-
abstracted data, internal validation practices may not occur. The 
commenter recommended that CMS regularly perform audits of hospital 
coding practices and require hospitals to annually attest that they are 
following specific coding practices.
    Response: We thank the commenter for their suggestion and note that 
we rely on accurate claims data for both billing and quality reporting 
purposes. We believe that claims-based measures are valuable forms of 
data that do not add to hospital burden. In addition, we disagree with 
the commenter's suggestion that we should require hospitals to attest 
that they are following specific coding practices, as we believe this 
would pose an unnecessary burden on hospitals. We continue to rely on 
the Medicare Claims Review Programs,\146\ (a collection of initiatives 
enacted to prevent or identify and recover improper payments before CMS 
processes a claim, and to identify and recover improper payments after 
processing a claim) to conduct audits of hospital coding practices, if 
appropriate.
---------------------------------------------------------------------------

    \146\ http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/MCRP_Booklet.pdf.
---------------------------------------------------------------------------

    Comment: Many commenters opposed the proposal to include eight new 
measures in the Hospital IQR Program;

[[Page 49661]]

indicating that the lack of NQF endorsement poses questions about their 
reliability, validity, and feasibility. The commenters also noted that 
the measures do not address any national priority area or goal for 
improving care, or concerns over institutional behavior.
    Response: We acknowledge the credibility of NQF endorsement, 
however, section 1886(b)(3)(B)(IX)(bb) of the Act provides an exception 
that, in the case of a specified area or medical topic determined 
appropriate by the Secretary for which a feasible and practical measure 
has not been endorsed by the entity with a contract under section 
1890(a) of the Act, the Secretary may specify a measure that is not so 
endorsed as long as due consideration is given to measures that have 
been endorsed or adopted by a consensus organization identified by the 
Secretary. We also reviewed the NQF-endorsed measures and were unable 
to identify any other NQF-endorsed measures that addressed excess days 
in acute care or the clinical episode-based payment conditions. 
Regardless, as discussed previously and below, all measures being 
finalized in this rule will be submitted for NQF endorsement when the 
next call for measures opens except the Hospital Survey on Patient 
Safety Culture measure. This measure may be a time-limited measure that 
will assist us in assessing the feasibility of implementing a single 
survey on patient safety culture in the future.
    In addition, all of the proposed measures were reviewed by the MAP, 
as discussed in its MAP Pre-Rulemaking Report and Spreadsheet of MAP 
2015 Final Recommendations, indicating that they have been determined 
to be appropriate for the Hospital IQR Program. We note that measure 
developers conduct reliability and validity testing and that the MAP 
considers whether the measure under consideration is appropriate for a 
program.\147\ Aside from the structural measure (Hospital Survey on 
Patient Safety Culture), the development and testing (including 
validity and reliability) results of the finalized measures has 
undergone review by physicians from a variety of specialties and more 
details concerning testing results of these measures are detailed in 
the methodology reports that are mentioned under each measure section. 
Furthermore, feasibility is not an issue of concern since the claims-
based measures are calculated by CMS using administrative claims data.
---------------------------------------------------------------------------

    \147\ MAP's ``Process and Approach for MAP Pre-Rulemaking 
Deliberations 2015'' January 2015 http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx.
---------------------------------------------------------------------------

    Finally, we note that we specifically select and propose measures 
that address goals for improving care and that the measures being 
finalized in this final rule all address NQS or CMS Quality Strategy 
Goals, which include \148\ making care safer by reducing harm 
strengthening person & family engagement as partners in care, promoting 
effective communication & coordination of care, promoting effective 
prevention & treatment of chronic diseases, community coordination to 
promote ``best practices'' of healthy living, and making care 
affordable.
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    \148\ http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/CMS-Quality-Strategy-Goals.pdf.
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    The factors we take into account in implementing and expanding the 
Hospital IQR Program are described in the FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53510).
    Comment: A few commenters recommended that CMS consider adopting 
the recommendations outlined in the Institute of Medicine's (IOM) Vital 
Signs report for streamlining and focusing national quality measurement 
efforts.
    Response: We refer readers to http://iom.nationalacademies.org/~/
media/Files/Report%20Files/2015/Vital_Signs/VitalSigns_RB.pdf for 
recommendations outlined in the Institute of Medicine's (IOM) Vital 
Signs report. We thank the commenters for this suggestion and will take 
this under consideration.
    Comment: One commenter encouraged CMS to study the effects of SDS 
factors and incorporate appropriate risk-adjustments on all proposed 
measures in the Hospital IQR Program in order for results to accurately 
reflect the differences in patients treated in hospitals. The commenter 
also specifically requested that the following measures be assessed for 
the impact of SDS factors: Kidney/UTI Clinical Episode-Based Payment 
measure; Cellulitis Clinical Episode-Based Payment measure; 
Gastrointestinal Hemorrhage Clinical Episode-Based Payment measure; 
Lumbar Spine Fusion/Re-Fusion Clinical Episode-Based Payment measure; 
Hospital-Level, Risk-Standardized Payment Associated with an Episode-
of-Care for Primary Elective THA/TKA; Excess Days in Acute Care after 
Hospitalization for Acute Myocardial Infarction; Excess Days in Acute 
Care after Hospitalization for Heart Failure; Hospital 30-Day, All-
Cause, Risk-Standardized Readmission Rate (RSRR) Following Pneumonia 
Hospitalization Measure, and the Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate (RSMR) Following Pneumonia Hospitalization 
Measure.
    Response: While we appreciate these comments and the importance of 
the role that sociodemographic status plays in the care of patients, we 
continue to have concerns about holding hospitals to different 
standards for the outcomes of their patients of low sociodemographic 
status because we do not want to mask potential disparities or minimize 
incentives to improve the outcomes of disadvantaged populations. We 
routinely monitor the impact of sociodemographic status on hospitals' 
results on our measures. To date, we have found that hospitals that 
care for large proportions of patients of low sociodemographic status 
are capable of performing well on our measures (we refer readers to the 
2014 Chartbook pages 48-57, 70-73, and 78 at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/Medicare-Hospital-Quality-Chartbook-2014.pdf).
    NQF is currently undertaking a 2-year trial period in which new 
measures and measures undergoing maintenance review will be assessed to 
determine if risk-adjusting for sociodemographic factors is appropriate 
for each measure. For 2 years, NQF will conduct a trial of a temporary 
policy change that will allow inclusion of sociodemographic factors in 
the risk-adjustment approach for some performance measures. At the 
conclusion of the trial, NQF will determine whether to make this policy 
change permanent. Measure developers must submit information such as 
analyses and interpretations as well as performance scores with and 
without sociodemographic factors in the risk adjustment model.
    Furthermore, the HHS Office of the Assistant Secretary for Planning 
and Evaluation (ASPE) is conducting research to examine the impact of 
socioeconomic status on quality measures, resource use, and other 
measures under the Medicare program as directed by the IMPACT Act. We 
will closely examine the findings of these reports and related 
Secretarial recommendations and consider how they apply to our quality 
programs at such time as they are available.
    We discuss specific comments and our finalized policies for each of 
the proposed measures below.

[[Page 49662]]

a. Hospital Survey on Patient Safety Culture
(1) Background
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24566 through 
24567), for the FY 2018 payment determination and subsequent years, we 
proposed to adopt the Hospital Survey on Patient Safety Culture. This 
proposed structural measure assesses whether a hospital administers a 
patient safety culture survey. Improving the safety of patient care is 
a priority and a quality improvement goal for CMS. We believe this 
structural measure will allow us to gain an understanding of whether 
hospitals are using a survey of patient safety culture in their 
hospitals. Because the number of questions in this measure is limited 
to five and can be completed using a Web-based tool, we believe this 
structural measure will not add undue reporting burden to hospitals.
    We note that patient safety culture surveys are useful tools for 
measuring organizational conditions that can lead to adverse events and 
other incidences that can cause harm to patients in health care 
organizations.\149\ Patient safety culture surveys can be used to: (1) 
Raise staff awareness about patient safety; (2) assess the current 
status of patient safety culture; (3) identify strengths and areas for 
improvement; and (4) examine trends in patient safety culture over 
time.\150\
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    \149\ Nieva VF, Sorra J.: Safety culture assessment: a tool for 
improving patient safety in healthcare organizations. Qual Saf 
Health Care 2003; 12:ii17-23.
    \150\ Frequently Asked Questions: Surveys on Patient Safety 
Culture. October 2014. Agency for Healthcare Research and Quality, 
Rockville, MD. Available at: http://www.ahrq.gov/professionals/quality-patient-safety/patientsafetyculture/pscfaq.html.
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    There are multiple surveys that are currently used by the 
healthcare industry to assess patient safety culture including: The 
Pascal Metrics' Safety Attitudes Questionnaire (SAQ); \151\ the Agency 
for Healthcare Research and Quality (AHRQ) Hospital Survey on Patient 
Safety Culture (HSOPSC); \152\ the Patient Safety Climate in Healthcare 
Organizations (PSCHO); \153\ and the Manchester Patient Safety 
Framework.\154\ However, it is not clear which patient safety culture 
survey is used most frequently, or how many hospitals consistently 
assess their performance on these surveys. One example of use of a 
patient safety culture survey is the HSOPSC, which is nonproprietary 
and available to hospitals at no cost. AHRQ developed the survey, with 
CMS input, released it in 2004, and subsequently displayed results from 
653 hospitals in 2014.\155\ Use of the HSOPSC, as well as reporting 
results to AHRQ, was and continues to be voluntary. Among the reporting 
hospitals, there was variation in frequency of survey use, format of 
administration (Web versus paper) and staff sampling scheme.\156\
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    \151\ Survey. (n.d.). Available at: http://www.pascalmetrics.com/solutions/survey/.
    \152\ Hospital Survey on Patient Safety Culture. (n.d.). 
Available at: http://www.ahrq.gov/professionals/quality-patient-safety/patientsafetyculture/hospital/index.html.
    \153\ Measurement Instrument Database for the Social Sciences. 
(n.d.). Available at: http://www.midss.org/content/patient-safety-climate-healthcare-organizations-pscho.
    \154\ Dianne, P. (n.d.). Manchester Patient Safety Framework 
(MaPSaF). National Patient Safety Agency. Available at: http://www.nrls.npsa.nhs.uk/resources/?entryid45=59796.
    \155\ Hospital Survey on Patient Safety Culture: 2014 User 
Comparative Database Report: Executive Summary. March 2014. Agency 
for Healthcare Research and Quality, Rockville, MD. Available at: 
http://www.ahrq.gov/professionals/quality-patient-safety/patientsafetyculture/hospital/2014/hosp14summ.html.
    \156\ Hospital Survey on Patient Safety Culture: 2014 User 
Comparative Database Report: Executive Summary. March 2014. Agency 
for Healthcare Research and Quality, Rockville, MD. Available at: 
http://www.ahrq.gov/professionals/quality-patient-safety/patientsafetyculture/hospital/2014/hosp14summ.html.
---------------------------------------------------------------------------

    Through the proposed Hospital Survey on Patient Safety Culture 
Measure, we will begin to understand how hospitals are using surveys, 
like the examples cited above, in improving their patient safety 
culture. This proposed measure will allow CMS to collect data on 
whether a hospital conducts a patient safety culture survey, and if so, 
which tool they use, how frequently the tool is administered, and the 
response rate. This structural measure will help inform CMS of whether 
a measure targeting the culture of patient safety using a specific 
survey is feasible.
    Finally, we note that the MAP supports this measure and 
specifically highlighted that a patient safety culture survey is an 
important tool for hospitals to use to build a system of quality 
improvement within health care facilities.\157\ While this measure is 
not currently NQF-endorsed, we proposed this measure in the Hospital 
IQR Program under the exception authority in section 
1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section 
VIII.A.7. of the preamble of this final rule. We considered other 
existing measures related to patient safety that have been endorsed by 
the NQF and we were unable to identify any NQF-endorsed measures that 
assess a patient safety culture, and found no other feasible and 
practical measures on this topic. We also are not aware of any other 
measures that assess whether a hospital administers a survey on patient 
safety.
---------------------------------------------------------------------------

    \157\ National Quality Forum Measure Application Partnership. 
``Spreadsheet of MAP 2015 Final Recommendations.'' Available at: 
http://www.qualityforum.org/map/.
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(2) Overview of Measure
    Reporting on a patient safety culture survey involves providing 
answers to the following questions listed below. Hospitals would submit 
answers via a Web-based tool on the QualityNet Web site:
    (A) Does your facility administer a detailed assessment of patient 
safety culture using a standardized collection protocol and structured 
instrument?
    (B) What is the name of the survey that is administered?
    (C) How frequently is the survey administered?
    (D) Does your facility report survey results to a centralized 
location? (Optional response options include the following: National 
data repository; state-based data repository; health system repository; 
other; and do not report the data outside the facility.)
    (E) During the most recent assessment:
    (a) How many staff members were requested to complete the survey?
    (b) How many completed surveys were received?
    (These questions can allow calculation of a response rate.)
(3) Data Sources
    For FY 2018 payment determination and subsequent years, we proposed 
that data collection for this structural measure for hospitals occur 
from January 1 through December 31 of each calendar year, with data 
submission occurring the following year. For the first year, data 
collection would be from January 1, 2016 through December 31, 2016. 
These data will be collected via a Web-based tool available on the 
QualityNet Web site.
    We invited public comment on our proposal to adopt the Hospital 
Survey on Patient Safety Culture measure for the FY 2018 payment 
determination and subsequent years.
    Comment: Several commenters supported the adoption of the Hospital 
Survey on Patient Safety Culture within the Hospital IQR Program, 
stating their approval of a tool that could improve a culture of safety 
in hospitals. One commenter recommended that CMS leverage the findings 
from this measure to identify a consistent tool for measuring this 
attribute in future proposals. One commenter noted that a safety 
culture survey allows hospitals to

[[Page 49663]]

identify gaps in patient safety, build awareness of critical issues, 
and examine trends in patient safety trends over time.
    Response: We thank the commenters for their support. The purpose of 
this measure is to obtain comprehensive information on which surveys 
are being utilized from all hospitals eligible to report under the 
Hospital IQR Program. We hope to obtain valuable information from the 
structural measure that can assist us in assessing the feasibility of 
implementing a single survey on patient safety culture in the future. 
We note that patient safety culture surveys are useful tools for 
measuring organizational conditions that can lead to adverse events and 
other incidences that can cause harm to patients in health care 
organizations. Improving the safety of patient care is a priority and a 
quality improvement goal for CMS.
    Comment: Several commenters noted that they are not confident that 
the measure will add value to the Hospital IQR Program because it 
assesses whether hospitals utilize a patient safety culture survey but 
does not actually assess a hospital's culture. The commenters 
recommended that CMS focus on development measures for patient safety 
outcomes.
    Response: The purpose of this measure is to obtain comprehensive 
information on which surveys are being utilized from all hospitals 
eligible to report under the Hospital IQR Program. While we agree with 
the commenters that this particular measure does not assess the safety 
cultures of hospitals, this measure will provide us with more 
information on whether there is widespread use of a single survey on 
patient safety culture and inform future measure development 
activities.
    Comment: One commenter expressed concern that the use of this 
measure will burden hospitals by increasing administrative costs 
associated with survey implementation and evaluation.
    Response: We are clarifying that the adoption of this structural 
measure is not mandating the use of a specific patient safety culture 
survey or one at all; the purpose is to obtain comprehensive 
information on which, if any, surveys are being utilized from all 
hospitals eligible to report under the Hospital IQR Program. For 
hospitals that do not currently have a survey in place, they would 
simply respond that they do not administer a detailed assessment of 
patient safety culture using a standardized collection protocol or 
structured instrument (the first question in the Overview of Measure 
section), and leave the rest of the questionnaire blank.
    Comment: Some commenters recommended that CMS refrain from making 
the Patient Safety Culture survey data immediately publicly available. 
The commenters expressed concern that because it is not established 
which survey is associated with higher quality, displaying data on this 
measure may be misleading to beneficiaries.
    Response: We disagree with commenters that posting data about this 
measure should be delayed on the Hospital Compare Web site. 
Beneficiaries would not be misled by the posted information. Data 
displayed on Hospital Compare for this measure would not link the use 
of a specific survey with higher quality. The purpose of this measure 
is to obtain comprehensive information on whether hospitals are using a 
survey and which surveys are being utilized.
    Comment: Some commenters opposed the Hospital Survey on Patient 
Safety Culture measure, and recommended that CMS should obtain this 
information from other sources, such as Partnership for Patients. The 
commenters also believed that this survey does not provide CMS with 
data on a particular patient safety culture survey that CMS could 
require in the future.
    Response: The purpose of this measure is to obtain comprehensive 
information on whether hospitals are using surveys and which surveys 
are being utilized from all hospitals eligible to report under the 
Hospital IQR Program. The goal is to assess the landscape of which 
surveys are currently used. The Partnership for Patients' 
Organizational Assessment Tool (OAT) \158\ does not collect information 
on specific surveys utilized by hospitals or particularly those 
participating in the Hospital IQR Program, which is our main purpose 
for adopting this measure.
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    \158\ Organizational Assessment Tool retrieved from http://partnershipforpatients.cms.gov/p4p_resources/organizational-assessment-tool/organizationalassessmenttool.html.
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    Comment: Some commenters expressed concern that the Patient Safety 
Culture Measure is not NQF-endorsed.
    Response: As stated above in our measure discussion, we note that 
the MAP supports this measure and specifically highlighted that a 
patient safety culture survey is an important tool for hospitals to use 
to build a system of quality improvement within health care 
facilities.\159\ While this measure is not NQF-endorsed, we proposed 
this measure in the Hospital IQR Program under the exception authority 
in section 1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in 
section VIII.A.7. of the preamble of this final rule. We considered 
other existing measures related to patient safety that have been 
endorsed by the NQF and we were unable to identify any NQF-endorsed 
measures that assess a patient safety culture, and found no other 
feasible and practical measures on this topic. We also are not aware of 
any other measures that assess whether a hospital administers a survey 
on patient safety.
---------------------------------------------------------------------------

    \159\ National Quality Forum Measure Application Partnership. 
``Spreadsheet of MAP 2015 Final Recommendations.'' Available at: 
http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

    This structural measure will allow us to assess whether hospitals 
are using surveys, which surveys are being utilized, and the frequency 
of their use. This information will assist us in assessing the 
feasibility of implementing a single survey on patient safety culture 
in the future.
    Comment: One commenter recommended that CMS consider a metric in 
which hospital survey scores are indicated and noted that a climate 
survey measure may be more appropriate than a culture survey measure.
    Response: We thank the commenter for its recommendations. This 
structural measure will allow us to assess whether and which patient 
safety culture surveys are being utilized by hospitals and the 
frequency of their use. This is a necessary first step in determining 
whether a single survey could be implemented in the future, such as one 
in which hospital survey scores are indicated. Furthermore, the terms 
``climate survey'' and ``culture survey'' tend to be used 
interchangeably, thus, making it difficult to assess which climate 
surveys are not already considered culture surveys. In addition, we 
were unable to identify any NQF-endorsed measures that assess a patient 
safety climate.
    Comment: One commenter recommended that CMS focus on patient safety 
measures addressing falls as well as nurse staffing and skill mix.
    Response: We disagree that we should only focus on patient safety 
measures that address falls and nurse staffing and skill mix. This 
structural measure will allow us to assess whether and which patient 
safety culture surveys are being utilized by hospitals and the 
frequency of their use. We note that some surveys, such as the AHRQ 
Hospital Survey on Patient Safety Culture, include a staffing 
assessment.
    Comment: One commenter expressed concern that structural measures 
do not provide meaningful differences in the

[[Page 49664]]

quality of care for patients and urged CMS to provide hospitals more 
information on the time period for conducting such a survey.
    Response: Structural measures may be perceived as not providing 
meaningful differences in quality of care since, many times, these 
types of measures request information on whether a hospital is 
participating in or utilizing a registry or checklist, which is then 
displayed on Hospital Compare as a ``yes'' or ``no.'' However, we 
believe registries can provide meaningful feedback to hospitals to 
improve their practices, and a safe surgery checklist is considered a 
best practice.\160\ At this time, we have not determined how many years 
we will keep this measure in the Hospital IQR Program.
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    \160\ For example: De Vries et al. (2010). Effect of a 
Comprehensive Surgical Safety System on Patient Outcomes. The New 
England Journal of Medicine, 363, 1928-1937. DOI: 10.1056/
NEJMsa0911535. Available at http://www.nejm.org/doi/full/10.1056/NEJMsa0911535. ``WHO Guidelines for Safe Surgery'' available at: 
http://whqlibdoc.who.int/publications/2009/9789241598552_eng.pdf.
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    After consideration of the public comments we received, we are 
finalizing the adoption of the Hospital Survey on Patient Safety 
Culture measure for the FY 2018 payment determination and subsequent 
years as proposed.
b. Clinical Episode-Based Payment Measures
(1) Background
    Clinical Episode-Based Payment measures are clinically coherent 
groupings of healthcare services that can be used to assess providers' 
resource use. Combined with other clinical quality measures, they 
contribute to the overall picture of providers' clinical effectiveness 
and efficiency. Episode-based performance measurement allows meaningful 
comparisons between providers based on resource use for certain 
clinical conditions or procedures, as noted in the NQF report for the 
``Episode Grouper Evaluation Criteria'' project available at: http://www.qualityforum.org/Publications/2014/09/Evaluating_Episode_Groupers__A_Report_from_the_National_Quality_Forum.aspx) and in various peer-reviewed articles.\161\ Episode-based 
measurement further supports CMS' efforts in response to the mandate in 
section 3003 of the Affordable Care Act that the Secretary develop an 
episode grouper to improve care efficiency and quality.
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    \161\ For example: Hussey, P. S., Sorbero, M. E., Mehrotra, A., 
Liu, H., & Damberg, S. L.: (2009). Episode-Based Performance 
Measurement and Payment: Making It a Reality. Health Affairs, 28(5), 
1406-1417. Doi:10.1377/hlthaff.28.5.1406.
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    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24567 through 
24572), we proposed four Clinical Episode-Based Payment measures for 
inclusion in the Hospital IQR Program beginning with the FY 2018 
payment determination: The Kidney/Urinary Tract Infection Clinical 
Episode-Based Payment measure, the Cellulitis Clinical Episode-Based 
Payment measure, the Gastrointestinal Hemorrhage Clinical Episode-Based 
Payment measure, and the Lumbar Spine Fusion/Refusion Clinical Episode-
Based Payment measure. The proposed measures evaluate the difference 
between observed and expected episode cost at the episode level before 
comparing at the provider level.
    The MAP conditionally supported these measures pending NQF 
endorsement.\162\ Once the call for measures for the Cost and Resource 
Use project at NQF is announced, these measures will be submitted for 
endorsement.
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    \162\ National Quality Forum. The report is available at: http://www.qualityforum.org/Publications/2015/01/Process_and_Approach_for_MAP_Pre-Rulemaking_Deliberations_2015.aspx 
and the ``Spreadsheet of MAP 2015 Final Recommendations'' is 
available at: http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

    The measures we proposed are described below, and detailed 
specifications can be found in the ``Measure Methodology'' report for 
proposed episodic payment measures, available at: http://
www.qualitynet.org  Hospital-Inpatient  Claims-
Based Measures  Proposed episodic payment measures 
 Measure Methodology. The measures follow the general 
construction of the previously adopted, NQF-endorsed, Hospital IQR 
Program measure, Payment-Standardized Medicare Spending per Beneficiary 
(MSPB), described in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51626) 
and include standardized payments for Medicare Part A and Part B 
services.\163\ Similar to the MSPB measure, the episodes are risk 
adjusted for individual patient characteristics and other factors (for 
example, attributes of inpatient stays). Unlike the MSPB measure 
however, these clinical episode-based measures include only Medicare 
Part A and B services that are clinically related to the triggering 
diagnosis or procedure.
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    \163\ Detailed measure specifications can be found in the 
``Medicare Spending Per Beneficiary (MSPB) Measure Overview,'' 
available at: http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228772053996.
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    Mathematically, the methodology described below first computes the 
provider's Episode Amount (calculated as the average of the ratios of 
each episode's observed costs to its expected costs multiplied by the 
national average observed episode cost) and then divides the provider's 
Episode Amount by the episode-weighted median of all providers' Episode 
Amounts (as shown in equation (A) below).
[GRAPHIC] [TIFF OMITTED] TR17AU15.001

where
Oij = observed episode cost for episode i in provider j,
Eij = expected episode cost for episode i in provider j,
Oi[egr]I = average observed episode cost across all episodes i 
nationally, and
nj = total number of episodes for provider j.

    This methodology builds on that which was submitted to the MAP, in 
response to MAP feedback, and in order to yield a national episode-
weighted measure. We proposed these Clinical Episode-Based Payment 
measures because they meet the following episode selection criteria we 
established for the purpose of selecting the best conditions and 
procedures to begin with, for Clinical Episode-Based Payment measures: 
(1) The condition constitutes a significant share of Medicare payments 
and potential savings for hospitalized patients during and surrounding 
a hospital stay; (2) there was a high degree of agreement among 
clinical experts consulted for this project that standardized Medicare 
payments for services provided during

[[Page 49665]]

this episode can be linked to the care provided during the 
hospitalization; (3) episodes of care for the condition are comprised 
of a substantial proportion of payments and potential savings for 
postacute care, indicating episode payment differences are driven by 
utilization outside of the MS-DRG payment; (4) episodes of care for the 
condition reflect high variation in post-discharge payments, enabling 
differentiation among hospitals; and (5) the medical condition is 
managed by general medicine physicians or hospitalists and the surgical 
conditions are managed by surgical subspecialists, enabling comparison 
between similar practitioners.
    We discuss measure-specific comments after each measure discussion. 
However, because many comments apply to all of the proposed Clinical 
Episode-Based Payment measures, a discussion of comments that are not 
measure-specific can be found after the measure discussions.

(2) Kidney/Urinary Tract Infection Clinical Episode-Based Payment 
Measure

(A) Background
    Inpatient hospital stays and associated services assessed by the 
Kidney/Urinary Tract Infection Clinical Episode-Based Payment measure 
have high costs with substantial variation. In CY 2012, Medicare FFS 
beneficiaries experienced over 234,000 kidney/urinary tract infection 
episodes triggered by related inpatient stays.\164\ Payment-
standardized, risk-adjusted episode costs for these episodes (cost of 
the hospitalization plus the cost of clinically related services in the 
episode window) totaled more than $2.5 billion in 2012, with an average 
episode cost of over $10,000. There is substantial variation in kidney/
urinary tract infection episode costs--ranging from approximately 
$4,800 at the 5th percentile to approximately $27,000 at the 95th--that 
is driven by variation in post-discharge costs clinically-related to 
the inpatient hospitalization. These clinically-related post-discharge 
costs are an indicator of the quality of care provided during the 
hospitalization.
---------------------------------------------------------------------------

    \164\ The number of episodes and associated costs are calculated 
using the methodology for developing hospital-based episode measures 
proposed by Acumen LLC and outlined in the supplemental 
documentation for the FY 2015 IPPS and LTCH Prospective Payment 
System Proposed Rule. Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html.
---------------------------------------------------------------------------

    The MAP conditionally supported this measure pending NQF review and 
endorsement. Members noted that this measure addresses the cost of care 
for common conditions, but other members expressed caution that the 
most efficient providers may reduce overall hospitalizations and that 
the remaining hospitalizations may be a biased sample for measuring 
performance across providers. In response to this concern, we note that 
this measure is limited by design to the inpatient hospital, which 
means that resource use is evaluated only for patients that have been 
hospitalized for the episode condition, and providers are evaluated 
relative to other providers treating hospitalized patients. To address 
the concern that providers involved in the hospitalization of only the 
most complex cases might be disadvantaged under the measure, we note 
that the episode is risk-adjusted to account for differences in patient 
characteristics that may affect costs, such that expected costs for 
more complex patients will be higher and expected costs for less 
complex patients will be lower. Once the call for measures for the Cost 
and Resource Use project at NQF is announced, this measure will be 
submitted for endorsement.
    We proposed this measure in the Hospital IQR Program under the 
exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as 
previously discussed in section VIII.A.7. of the preamble of this final 
rule. We considered other existing measures related to efficiency that 
have been endorsed by the NQF and we were unable to identify any NQF-
endorsed measures that assess kidney/urinary tract infection. We also 
are not aware of any other measures that assess kidney/urinary tract 
infection treatment efficiency and found no other feasible and 
practical measures on this topic.
(B) Overview of Measure
    The Kidney/Urinary Tract Infection Clinical Episode-Based Payment 
measure includes the set of services provided to treat, manage, 
diagnose, and follow up on (including postacute care) a kidney/urinary 
tract infection-related hospital admission. This measure, like the NQF-
endorsed MSPB measure (NQF #2158), assesses the cost of services 
initiated during an episode that spans the period immediately prior to, 
during, and following a beneficiary's hospital stay (the ``episode 
window''). In contrast to the MSPB measure, however, this measure 
includes Medicare payments for services during the episode window only 
if they are clinically related to the health condition that was treated 
during the index hospital stay.
(C) Data Sources
    The Kidney/Urinary Tract Infection Clinical Episode-Based Payment 
measure is an administrative claims-based measure. It uses Part A and 
Part B Medicare administrative claims data from Medicare FFS 
beneficiaries hospitalized with an MS-DRG that identifies a kidney/
urinary tract infection.
(D) Measure Calculation
    The measure sums the Medicare payment amounts for clinically 
related Part A and Part B services provided during the episode window 
and attributes them to the hospital at which the index hospital stay 
occurred. Medicare payments included in this episode-based measure are 
standardized and risk-adjusted. The period of performance for the 
measure is 1 year, beginning with CY 2016. Similar to the MSPB 
measure's construction, this measure is expressed as a risk-adjusted 
ratio, which allows for ease of comparison over time, without need to 
adjust for inflation or any potential changes in CMS payment policy. 
The numerator is the Episode Amount, calculated as the average of the 
ratios of each episode's observed costs to its expected costs 
multiplied by the national average observed episode cost. The 
denominator is the episode-weighted median of all providers' Episode 
Amounts. A kidney/urinary tract infection episode begins 3 days prior 
to the initial (that is, index) admission and extends 30 days following 
the discharge from the index hospital stay.
(E) Cohort
    The measure cohort includes Medicare FFS beneficiaries hospitalized 
with an MS-DRG that indicates a kidney/urinary tract infection. 
Additional details including the exclusion criteria are described in 
section VIII.A.7.b.(6) of the preamble of this final rule.
    We invited public comment on our proposal to adopt the Kidney/
Urinary Tract Infection Clinical Episode-Based Payment measure for the 
FY 2018 payment determination and subsequent years.
    Comment: One commenter opposed the proposed addition of the Kidney/
Urinary Tract Infection Clinical Episode-Based Payment measure and 
noted that it may be more appropriate in an outpatient setting. The 
commenter noted that kidney and urinary tract infection is often seen 
with comorbidities, resulting in a more severe episode of care. The 
commenter

[[Page 49666]]

suggested that the measure be limited to a more specifically defined 
set of patients so that comparisons can be made.
    Response: We appreciate the commenter's concerns about the variety 
of clinical conditions associated with kidney and urinary tract 
infection. With regard to the suggestion that the measure should be 
limited to the outpatient setting, we believe that this measure is 
appropriate for the hospital inpatient setting, because it does not 
include all cases of kidney/urinary tract infection, but rather, are 
limited to cases with infections whose severity required admission to a 
hospital. We also believe that risk adjustment will account for the 
heterogeneity present among patients hospitalized with kidney and 
urinary tract infections. The risk adjustment model includes 
demographics (for example, age) and a range of health conditions that 
are clinically related to kidney/urinary tract infections: Diabetes, 
end-stage renal disease, and paralysis (which may be associated with 
neurogenic bladder), among others. Furthermore, services grouped to the 
episode are limited to those that are directly related to the episode 
condition. Creation of this episode was based on the observation that 
significant costs are associated with this condition.
    Comment: One commenter expressed concern about how hospitals can 
determine when a kidney/urinary tract infection begins, which 
determines whether an index admission is triggered for the episode.
    Response: Because this measure begins with a hospital admission for 
a kidney/urinary tract infection, the episode is triggered by the 
admission. Only infections that were serious enough to require 
hospitalization are included.
    Comment: One commenter supported the proposal to include the 
Kidney/Urinary Tract Infection Clinical Episode-Based Payment measure, 
on the condition that the methodology is tested and validated.
    Response: We appreciate the commenter's support. The methodology 
has been tested on the population of 2012 Medicare beneficiaries. The 
testing was conducted with Medicare claims data and is therefore, 
expected to be valid. Historically, the NQF has found Medicare claims-
based measures, such as the Hospital-Wide All-Cause Unplanned 
Readmission Measure (HWR) (NQF #1789), to be valid. For this all-cause 
readmission measure, `reliability and validity [at the data element 
level and at the measured score level] was generally received as 
adequate by the steering committee' (NQF: 2012 Proc. Feb 2012, 
available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=70455).
    The proposed Clinical Episode-Based Payment measures' episodes were 
created using the methodology for grouping treatment and post-discharge 
services as well as the risk adjustment model all outlined in the 
supplemental documentation for the FY 2016 IPPS and LTCH Prospective 
Payment System Proposed Rule available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html. After episodes were constructed, medical 
services grouped to the episodes were validated by a team of clinicians 
with expertise in Medicare claims data. However, in response to 
comments, we will give hospitals an opportunity to validate data 
included in the episodes during review of the confidential hospital-
specific feedback reports discussed in more detail below.
(3) Cellulitis Clinical Episode-Based Payment Measure
(A) Background
    Inpatient hospital stays and associated services assessed by the 
Cellulitis Clinical Episode-Based Payment measure have high costs with 
substantial variation. In CY 2012, Medicare FFS beneficiaries 
experienced more than 143,000 cellulitis episodes triggered by related 
inpatient stays.\165\ Payment-standardized, risk-adjusted episode costs 
for these episodes (cost of the hospitalization plus the cost of 
clinically related services in the episode window) totaled more than 
$1.4 billion in 2012, with an average episode cost of approximately 
$10,000. There is substantial variation in cellulitis episode costs--
ranging from about $5,000 at the 5th percentile to about $24,000 at the 
95th--that is driven by variation in post-discharge costs clinically-
related to the inpatient hospitalization. These clinically related 
post-discharge costs are an indicator of the quality of care provided 
during the hospitalization.
---------------------------------------------------------------------------

    \165\ The number of episodes and associated costs are calculated 
using the methodology for developing hospital-based episode measures 
proposed by Acumen LLC and outlined in the supplemental 
documentation for the FY 2015 IPPS and LTCH Prospective Payment 
System Proposed Rule. Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html.
---------------------------------------------------------------------------

    The MAP conditionally supported this measure pending NQF review and 
endorsement. Members noted that this measure addresses the cost of care 
for an important condition. Other members expressed caution on the use 
of this measure noting that cellulitis is a highly variable condition 
that may be challenging to measure using an episode-based framework. 
Once the call for measures for the Cost and Resource Use project at NQF 
is announced, this measure will be submitted for endorsement. We note 
that there is substantial variation in cellulitis episode costs that is 
driven by variation in post-discharge costs clinically-related to the 
inpatient hospitalization. This variation suggests that there may be 
opportunity to improve the efficiency of care for cellulitis treatment.
    We proposed this measure in the Hospital IQR Program under the 
exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as 
previously discussed in section VIII.A.7. of the preamble of this final 
rule. We considered other existing measures related to efficiency that 
have been endorsed by the NQF and we were unable to identify any NQF-
endorsed measures that assess cellulitis. We also are not aware of any 
other measures that assess cellulitis treatment efficiency, and found 
no other feasible and practical measures on this topic.
(B) Overview of Measure
    The Cellulitis Clinical Episode-Based Payment measure includes the 
set of services provided to treat, manage, diagnose, and follow up on 
(including post-acute care) a cellulitis-related hospital admission. 
The Cellulitis Clinical Episode-Based Payment measure, like the MSPB 
measure, assesses the cost of services initiated during an episode that 
spans the period immediately prior to, during, and following a 
beneficiary's hospital stay (the ``episode window''). In contrast to 
the MSPB measure, the Cellulitis Clinical Episode-Based Payment measure 
includes Medicare payments for services during the episode window only 
if they are clinically related to the health condition that was treated 
during the index hospital stay.
(C) Data Sources
    The Cellulitis Clinical Episode-Based Payment measure is an 
administrative claims-based measure. It uses Part A and Part B Medicare 
administrative claims data from Medicare FFS beneficiaries hospitalized 
with an MS-DRG that identifies cellulitis.
(D) Measure Calculation
    The measure sums the Medicare payment amounts for clinically 
related Part A and Part B services provided during this episode window 
and

[[Page 49667]]

attributes them to the hospital at which the index hospital stay 
occurred. Medicare payments included in this episode-based measure are 
standardized and risk-adjusted. The period of performance is one year, 
beginning with calendar year 2016. Similar to the MSPB measure's 
construction, this measure is expressed as a risk-adjusted ratio, which 
allows for ease of comparison over time, without need to adjust for 
inflation or any potential changes in CMS payment policy. The numerator 
is the Episode Amount, calculated as the average of the ratios of each 
episode's observed costs to its expected costs multiplied by the 
national average observed episode cost. The denominator is the episode-
weighted median of all providers' Episode Amounts. A cellulitis episode 
begins 3 days prior to the initial (that is, index) admission and 
extends 30 days following the discharge from the index hospital stay.
(E) Cohort
    The measure cohort includes Medicare FFS beneficiaries hospitalized 
with an MS-DRG that indicates cellulitis. Additional details including 
the exclusion criteria are described in section VIII.A.7.b.(6) of the 
preamble of this final rule.
    We invited public comment on our proposal to adopt the Cellulitis 
Clinical Episode-Based Payment measure for the FY 2018 payment 
determination and subsequent years.
    Comment: A few commenters opposed the proposed addition of the 
Cellulitis Clinical Episode-Based Payment measure and recommended that 
it may be more appropriate as an outpatient cost measure because 
treatment for cellulitis can largely be handled in the outpatient 
setting. The commenters also noted that patients with cellulitis often 
have comorbidities that might make it difficult to group all cellulitis 
patients together. One commenter specifically expressed concern that 
the cellulitis measure does not adequately capture differences in acute 
and chronic cellulitis.
    Response: We appreciate the commenter's concerns about the variety 
of clinical conditions associated with cellulitis. With regard to the 
suggestion that the measure would be better suited to an outpatient 
setting, we believe that this measure is appropriate for the hospital 
inpatient setting, because it does not include all cases of cellulitis. 
Rather, it is limited to either an exacerbation or acute flare of 
cellulitis whose severity requires admission to a hospital. Whether the 
cellulitis is chronic or acute, the design of the episode measure, 
which is limited to the inpatient hospitalization and the immediate 
follow-up period, allows for meaningful comparison across providers. 
Hospitalized cellulitis patients, with more serious soft tissue 
infections, are clinically distinct from patients who can be treated in 
other Medicare settings.
    Furthermore, we do not agree that comorbidities might make it 
difficult to group all cellulitis patients together. The episode 
measure contains three clinical subtypes to address the heterogeneity 
present among beneficiaries hospitalized for this condition: (1) 
Cellulitis as a complication of diabetes; (2) cellulitis as a 
complication of decubitus pressure ulcers; and (3) other cellulitis. We 
note that beneficiaries with ulcers were not compared to beneficiaries 
with uncomplicated cellulitis. This breakdown creates more cohorts of 
beneficiaries for comparison. Risk adjustment is also applied to 
account for other comorbidities and complex issues in cellulitis 
patients. Finally, the episode focuses only on care that is directly 
related to those infections. The high frequency of cellulitis episodes 
highlights the importance of creating a measure for this condition.
(4) Gastrointestinal (GI) Hemorrhage Clinical Episode-Based Payment 
Measure
(A) Background
    Inpatient hospital stays and associated services assessed by the 
Gastrointestinal (GI) Hemorrhage Clinical Episode-Based Payment measure 
have high costs with substantial variation. In calendar year 2012, 
Medicare FFS beneficiaries experienced 181,646 GI hemorrhage episodes 
triggered by related inpatient stays.\166\ Payment-standardized, risk-
adjusted episode costs for these episodes (cost of the hospitalization 
plus the cost of clinically related services in the episode window) 
totaled nearly $2 billion in 2012, with an average episode cost of 
about $11,000. There is substantial variation in GI hemorrhage episode 
costs--ranging from approximately $6,500 at the 5th percentile to 
approximately $23,000 at the 95th--that is driven by variation in post-
discharge costs clinically related to the inpatient hospitalization. 
These clinically related post-discharge costs are an indicator of the 
quality of care provided during the hospitalization. For the purposes 
of reporting, and as suggested by the MAP, the GI hemorrhage episodes 
may be split into those treating an upper GI bleed and those treating a 
lower GI bleed due to clinical differences in patterns of care for 
those treatments. More information can be found in the supplemental 
documentation for the FY 2016 IPPS and LTCH Prospective Payment System 
Proposed Rule available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html.
---------------------------------------------------------------------------

    \166\ The number of episodes and associated costs are calculated 
using the methodology for developing hospital-based episode measures 
proposed by Acumen LLC and outlined in the supplemental 
documentation for the FY 2015 IPPS and LTCH Prospective Payment 
System Proposed Rule. Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html.
---------------------------------------------------------------------------

    The MAP conditionally supported this measure pending NQF review and 
endorsement. MAP members noted that this measure addresses the cost of 
care for GI bleeding. Several members expressed caution that the most 
efficient providers may reduce overall hospitalizations thus those 
inpatient hospitalizations that remain are a biased sample for 
measuring performance across providers. In response to these concerns, 
we note that this measure is limited by design to GI hemorrhage 
episodes treated in the inpatient hospital, which means that resource 
use is evaluated only for patients that have been hospitalized for the 
episode condition, and providers are evaluated relative to other 
providers treating hospitalized patients. With regard to the concern 
that efficient providers may reduce hospitalizations, leaving a biased 
sample of less efficient providers, we note that the episode is risk-
adjusted to account for differences in patient characteristics that may 
affect costs, thus to the extent that variation in treatment prior to 
hospitalization results in patterns of sicker (or healthier) GI 
hemorrhage patients admitted to certain hospitals, risk adjustment 
addresses these differences. For example, for providers who admit 
comparatively less complex patients to the inpatient hospital for 
treatment of GI bleeds, risk adjustment would cause their expected 
costs to be lower. Once the call for measures for the Cost and Resource 
Use project at NQF is announced, this measure will be submitted for 
endorsement.
    We proposed this measure in the Hospital IQR Program under the 
exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as 
previously discussed in section VIII.A.7. of the preamble of this final 
rule. We considered other existing measures related to efficiency that 
have been endorsed by the NQF and we were unable to identify any NQF-
endorsed

[[Page 49668]]

measures that assess GI hemorrhage. We also are not aware of any other 
measures that assess GI hemorrhage treatment efficiency, and found no 
other feasible and practical measures on this topic.
(B) Overview of Measure
    The Gastrointestinal Hemorrhage Clinical Episode-Based Payment 
measure includes the set of services provided to treat, manage, 
diagnose, and follow up on (including postacute care) a 
gastrointestinal hemorrhage-related hospital admission. This measure, 
like the MSPB measure, assesses the cost of services initiated during 
an episode that spans the period immediately prior to, during, and 
following a beneficiary's hospital stay (the ``episode window''). In 
contrast to the MSPB measure, the Gastrointestinal Hemorrhage Clinical 
Episode-Based Payment measure includes Medicare payments for services 
during the episode window only if they are clinically related to the 
health condition that was treated during the index hospital stay.
(C) Data Sources
    The Gastrointestinal Hemorrhage Clinical Episode-Based Payment 
measure is an administrative claims-based measure. It uses Part A and 
Part B Medicare administrative claims data from Medicare FFS 
beneficiaries hospitalized with an MS-DRG that identifies a 
gastrointestinal hemorrhage.
(D) Measure Calculation
    The measure sums the Medicare payment amounts for clinically 
related Part A and Part B services provided during the episode window 
and attributes them to the hospital at which the index hospital stay 
occurred. Medicare payments included in this episode-based measure are 
standardized and risk-adjusted. The period of performance is 1 year, 
beginning with CY 2016. Similar to the MSPB measure's construction, 
this measure is expressed as a risk-adjusted ratio, which allows for 
ease of comparison over time, without need to adjust for inflation or 
any potential changes in CMS payment policy. The numerator is the 
Episode Amount, calculated as the average of the ratios of each 
episode's observed costs to its expected costs multiplied by the 
national average observed episode cost. The denominator is the episode-
weighted median of all providers' Episode Amounts. A gastrointestinal 
hemorrhage episode begins 3 days prior to the initial (that is, index) 
admission and extends 30 days following the discharge from the index 
hospital stay.
(E) Cohort
    The measure cohort includes Medicare FFS beneficiaries hospitalized 
with an MS-DRG that indicates gastrointestinal hemorrhage. Additional 
details including the exclusion criteria are described in section 
VIII.A.7.b.(6) of the preamble of this final rule.
    We invited public comment on our proposal to adopt the 
Gastrointestinal Hemorrhage Clinical Episode-Based Payment measure for 
the FY 2018 payment determination and subsequent years.
    Comment: One commenter supported CMS' proposed inclusion of 
Gastrointestinal Hemorrhage as part of the Clinical Episode-Based 
Payment measures and agreed that post-discharge care costs drive 
variation in spending for this condition.
    Response: We thank the commenter for its support.
    Comment: One commenter opposed the proposed addition of the GI 
Hemorrhage Clinical Episode-Based Payment measure, noting that the many 
conditions and medical situations may cause GI hemorrhage, and that 
these different conditions and causes cannot be compared against each 
other. The commenter suggested that the measure be limited to a more 
specifically defined set of patients so that comparisons can be made.
    Response: We appreciate the commenter's opinion that GI hemorrhage 
is a broad category. Rather than limit the patient set, and 
consequently the number of beneficiaries whose care could be captured 
in the measure, we have broken the overall measure down into clinical 
subtypes, which allows comparison among clinically similar beneficiary 
groups. This allows meaningful comparison of patients who have similar 
conditions and causes for GI hemorrhage. The measure, as it was 
proposed, includes four clinical subtypes for the GI bleed episode 
measure: (1) Upper GI bleeds; (2) lower GI bleeds; (3) upper and lower 
GI bleeds; and (4) GI bleeds of unknown source. Specifications can be 
found in the ``Measure Methodology'' report link found in section 
VIII.A.7.b.(7)(B) of the preamble of this final rule.
    Furthermore, we believe that risk adjustment will account for other 
health and demographic factors that may impact a beneficiary's episode 
costs. Risk adjustment factors in age, 70 severity of illness measures, 
and comorbidities that may affect a GI hemorrhage episode: Diabetes, 
inflammatory bowel disease, hematological disorders, drug and alcohol 
dependence, liver cirrhosis, and intestinal obstruction/perforation, 
among others. The data showed that there was sufficient similarity in 
the experiences of these patients that episodes could be created. In 
selecting post-discharge services to group to the episode, clinicians 
focused on care that was directly related to the bleeding. Care was 
taken at this time to group only services that had a direct connection 
to the bleed that triggered the episode.
(5) Lumbar Spine Fusion/Refusion Clinical Episode-Based Payment Measure
(A) Background
    Inpatient hospital stays and associated services assessed by the 
Spinal Fusion/Refusion Clinical Episode-Based Payment measure have high 
costs with substantial variation. In CY 2012, Medicare FFS 
beneficiaries experienced about 69,000 spinal fusion/refusion episodes 
triggered by related inpatient stays.\167\ Payment-standardized, risk-
adjusted episode costs for these episodes (cost of the hospitalization 
plus the cost of clinically related services in the episode window) 
totaled more than $2.6 billion in 2012, with an average episode cost of 
approximately $38,000. There is substantial variation in spinal fusion/
refusion episode costs--ranging from approximately $28,000 at the 5th 
percentile to approximately $60,000 at the 95th--that is driven by 
variation in post-discharge costs clinically related to the inpatient 
hospitalization. These clinically related post-discharge costs are an 
indicator of the quality of care provided during the hospitalization.
---------------------------------------------------------------------------

    \167\ The number of episodes and associated costs are calculated 
using the methodology for developing hospital-based episode measures 
proposed by Acumen LLC and outlined in the supplemental 
documentation for the FY 2015 IPPS and LTCH Prospective Payment 
System Proposed Rule. Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html.
---------------------------------------------------------------------------

    The MAP conditionally supported this measure pending NQF review and 
endorsement. Some members raised concerns that patients with cancer 
should be excluded from this measure. Once the call for measures for 
the Cost and Resource Use project at NQF is announced, this measure 
will be submitted for endorsement. We note that this measure is titled 
``Spine Fusion/Refusion Clinical Episode-Based Payment measure'' in the 
MAP spreadsheet. In addition, the episode is risk-adjusted to account 
for differences in patient characteristics, including the presence of 
cancer in the patient's

[[Page 49669]]

history, which may affect costs but are outside of providers' control.
    We proposed this measure in the Hospital IQR Program under the 
exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as 
previously discussed in section VIII.A.7. of the preamble of this final 
rule. We considered other existing measures related to efficiency that 
have been endorsed by the NQF and we were unable to identify any NQF-
endorsed measures that assess spinal fusion/refusion. We also are not 
aware of any other measures that assess spinal fusion/refusion 
treatment efficiency, and found no other feasible and practical 
measures on this topic.
(B) Overview of Measure
    The Lumbar Spine Fusion/Refusion Clinical Episode-Based Payment 
measure includes the set of services provided to treat, manage, 
diagnose, and follow up on (including postacute care) a lumbar spine 
fusion/refusion-related hospital admission. The Lumbar Spine Fusion/
Refusion Clinical Episode-Based Payment measure, like the MSPB measure, 
assesses the cost of services initiated during an episode that spans 
the period immediately prior to, during, and following a beneficiary's 
hospital stay (the ``episode window''). In contrast to the MSPB 
measure, the Lumbar Spine Fusion/Refusion Clinical Episode-Based 
Payment measure includes Medicare payments for services during the 
episode window only if they are clinically related to the health 
condition that was treated during the index hospital stay.
(C) Data Sources
    The Lumbar Spine Fusion/Refusion Clinical Episode-Based Payment 
measure is an administrative claims-based measure. It uses Part A and 
Part B Medicare administrative claims data from Medicare FFS 
beneficiaries hospitalized with an MS-DRG and ICD-9-CM procedure code 
that identify a lumbar spine fusion/refusion.
(D) Measure Calculation
    The measure sums the Medicare payment amounts for clinically 
related Part A and Part B services provided during the episode window 
and attributes them to the hospital at which the index hospital stay 
occurred. Medicare payments included in this episode-based measure are 
standardized and risk-adjusted. The period of performance is 1 year, 
beginning with calendar year 2016. Similar to the MSPB measure's 
construction, this measure is expressed as a risk-adjusted ratio, which 
allows for ease of comparison over time, without need to adjust for 
inflation or any potential changes in CMS payment policy. The numerator 
is the Episode Amount, calculated as the average of the ratios of each 
episode's observed costs to its expected costs multiplied by the 
national average observed episode cost. The denominator is the episode-
weighted median of all providers' Episode Amounts. A lumbar spine 
fusion/refusion episode begins 3 days prior to the initial (that is, 
index) admission and extends 30 days following the discharge from the 
index hospital stay.
(E) Cohort
    The measure cohort includes Medicare FFS beneficiaries hospitalized 
with an MS-DRG and ICD-9 Procedure code that indicate lumbar spine 
fusion/refusion. Additional details including the exclusion criteria 
are described in section VIII.A.7.b.(6) of the preamble of this final 
rule.
    We invited public comment on our proposal to adopt the Lumbar Spine 
Fusion/Refusion Clinical Episode-Based Payment measure for the FY 2018 
payment determination and subsequent years.
    Comment: One commenter supported CMS' proposed inclusion of Lumbar 
Spine Fusion/Refusion as part of the Episode-based-payment measures and 
agreed that post-discharge care costs drive variation in spending for 
this condition.
    Response: We thank the commenter for its support.
    Comment: A few commenters opposed the proposal to include the 
Lumbar Spine Fusion/Refusion Clinical Episode-Based Payment measure, 
noting that refinements would be required, in order to account for 
patient variability and to ensure that surgeons are measured 
appropriately and also that stratification is needed to distinguish 
between elective surgery and emergency surgery, which is often more 
complex.
    Response: We appreciate the commenters' concerns and feedback from 
clinicians and specialty groups during this process. Upon further 
analysis, we agree that additional refinements, potentially including 
stratification or other specification to address differences in reasons 
for surgery (for example, elective vs. emergency), are needed for this 
measure to account for the variety of patient clinical presentations 
that could comprise the lumbar spine fusion/refusion measure and to 
ensure that hospitals are measured appropriately. Specifically, unlike 
the clinical subtypes in the Cellulitis and GI Hemorrhage Clinical 
Episode-Based Payment measures, we agree that the procedure codes 
included in each subtype of the proposed Lumbar Spine Fusion/Refusion 
Clinical Episode-Based Payment measure are too broad and do not 
adequately account for the heterogeneity present among the population 
of beneficiaries who experience episodes for the measure. We note that 
the measure as proposed would measure hospitals, not individual 
surgeons, in the context of the Hospital IQR Program.
    Therefore, in response to commenters' concerns regarding the 
heterogeneity of the Lumbar Spine Fusion/Refusion Clinical Episode-
Based Payment measure, we are not finalizing it for the Hospital IQR 
Program at this time. We will continue development of this measure, and 
if after further refinement and discussion with clinical experts we 
believe the measure should be included in the Hospital IQR Program, we 
would propose the measure again through future rulemaking.
    Comment: Some commenters expressed concern that the proposed Lumbar 
Spine Fusion/Refusion Clinical Episode-Based Payment measure may assess 
variations in cost that are caused by factors outside of providers' 
control, such as the quality of post-discharge care to which a patient 
has access. The commenters also expressed concern that the measure may 
incentivize providers to avoid certain post-discharge costs, such as 
those associated with imaging, and that the lower costs achieved may 
not reflect quality.
    Response: This measure, like the other Clinical Episode-Based 
Payment measures, is payment-standardized and risk-adjusted to remove 
differences in Medicare payment policy and patient health status that 
can affect episode costs but are outside the control of the provider 
managing the episode. Payments are standardized to eliminate geographic 
differences and special program payments unrelated to resource use, 
such as disproportionate share hospital (DSH) payments. Payment 
standardization assigns a standardized allowed amount for each service 
to facilitate comparison across providers. Outliers in cost are also 
subject to clinical review to further understand these cases.
    Currently, the risk adjustment used for these measures is the same 
as that of the NQF-endorsed MSPB measure (NQF #2158). Therefore, 
providers and hospitals that treat patients with greater complexity 
will be accounted for through payment standardization and risk 
adjustment.
    As the commenters noted, the quality of post-discharge care can 
affect the

[[Page 49670]]

hospital's performance on the measure; therefore, hospitals involved in 
the provision of high-quality inpatient care as well as appropriate 
discharge planning and post-discharge care coordination would be 
expected to perform well on this measure. We believe that inclusion of 
other costs, such as those for post-discharge care is imperative to 
incentivizing improved care coordination and care transitions. We 
disagree that such costs are outside of the hospitals' control. While 
the quality of post-discharge care may affect the measure, we believe 
that hospitals are in a position to influence the post-discharge 
experience and outcomes, which in turn impact costs, for the patients 
they serve.
    With regard to the comments that the measure might incentivize 
hospitals to avoid needed post-discharge care and that lower cost does 
not necessarily indicate better quality, we note that this measure was 
proposed as one measure within the Hospital IQR Program, which includes 
numerous measures spanning various aspects of hospital quality. In 
addition to our belief that hospitals are interested in providing the 
best and most appropriate care for the Medicare beneficiaries they 
serve, cost measures are balanced by a wide array of quality measures. 
We do not believe that a hospital would avoid providing needed care 
(and forego the associated Medicare payments for such services), in the 
interest of improving performance on one payment measure. Rather, we 
believe that Clinical Episode-Based Payment measures incentivize 
hospitals to look for opportunities to gain efficiencies, avoid 
unnecessary services, which represent poor quality, and avoid 
unnecessary re-hospitalizations.
    However, as discussed above in response to comments concerning the 
heterogeneity of the universe included in the Lumbar Spine Fusion/
Refusion Clinical Episode-Based Payment measure, we are not finalizing 
it for the FY 2018 payment determination and subsequent years for the 
Hospital IQR Program as proposed.
(6) Inclusion and Exclusion Criteria
    A full list of the MS-DRG codes used to identify beneficiaries 
included in the final cohort for each of the proposed episode-based 
payment measures can be found in the ``FY 2016 IPPS NPRM Episode 
Supplemental Documentation'' report in the ``Downloads'' section at: 
``NPRM Episode Supplemental Documentation'' report at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html.
    The exclusion methodology applied to each of these measures is the 
same as the one used to calculate the previously adopted NQF-endorsed 
MSPB measure (NQF #2158) described in the FY 2012 IPPS/LTCH PPS final 
rule (76 FR 51626) and available in the ``MSPB Measure Information 
Form'' at: http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228772057350. Episodes for beneficiaries that meet any of the following 
criteria are excluded from the measure:
     Lack of continuous enrollment in Medicare Parts A and B 
from 90 days prior to index admission through the end of the episode 
with Medicare as the primary payer.
     Death date during episode window.
     Enrollment in Medicare Advantage during the episode 
window.
    In addition, claims that meet any of the following criteria do not 
trigger, or open, an episode:
     Claims with data coding errors, including missing date of 
birth or death dates preceding the date of the trigger event.
     Claims with payment <= 0.
     Acute inpatient stays that involved a transfer.
     Claims from a non-IPPS or non-subsection (d) hospital.
    Claims that meet the following criterion will not be included in an 
episode:
     Claims with payment <= 0.
(7) Standardization and Risk-Adjustment
(A) Standardization
    Standardization, or payment standardization, is the process of 
adjusting the allowed charge for a Medicare service to facilitate 
comparisons of resource use across geographic areas. Medicare payments 
included in these proposed episode-based measures would be standardized 
according to the standardization methodology previously finalized for 
the Hospital IQR Program MSPB measure in the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51626) and used for all of the payment measures 
included in the Value-Based Payment Modifier Program. The methodology 
removes geographic payment differences, such as wage index and 
geographic practice cost index, incentive payment adjustments, and 
other add-on payments that support broader Medicare program goals, such 
as add-on payments for indirect graduate medical education (IME) and 
add-ons for serving a disproportionate share of uninsured patients 
(DSH).
(B) Risk Adjustment
    Risk adjustment uses patient claims history to account for case-mix 
variation and other factors. The steps used to calculate risk-adjusted 
payments align with the NQF-endorsed MSPB measure (NQF #2158) method as 
specified in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51624 through 
51626). Specifications for the risk-adjustment employed in the proposed 
episode-based payment measures are included in the ``FY 2015 IPPS NPRM 
Episode Supplemental Documentation'' report, Section 4, titled 
``Calculating the Hospital-Based Episode Measure,'' which can be found 
in the ``FY 2016 IPPS NPRM Episode Supplemental Documentation'' report 
at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html.
    We invited public comment on our proposals.
    Comment: Some commenters suggested that the risk adjustment of 
these measures is not sufficient and recommended a risk adjustment 
model that is validated and tested before measure implementation. One 
commenter further suggested that the risk adjustment model cannot be 
sufficiently determined from claims data.
    Response: We disagree with the comment that Medicare claims data is 
insufficient for the purpose for risk adjustment. Using the diagnosis 
codes billed on Medicare claims, each episode's costs are risk adjusted 
to account for differences in patient characteristics (such as the 
presence of certain comorbidities) that may affect costs. With regard 
to the comment that the risk adjustment methodology is insufficient, or 
that it has not been tested and validated, we disagree. The risk 
adjustment construct used is the same as the NQF-endorsed MSPB 
measure's risk adjustment model (NQF #2158). The MSPB model has been 
validated, tested, and NQF endorsed. We refer readers to http://www.qualityforum.org/QPS/2158 for more information on the MSPB's risk 
adjustment model.
    Comment: One commenter questioned whether the proposed measures 
would accurately reflect health disparities, which could adversely 
impact care.
    Response: Each episode's costs are risk adjusted to account for 
differences in patient characteristics (such as the presence of certain 
pre-existing conditions) that may affect costs. This is to ensure that 
hospitals are not penalized for serving populations that are sicker or 
have higher incidences of

[[Page 49671]]

chronic disease. The risk adjustment method used is the same as that 
used for the NQF-endorsed MSPB measure (NQF #2158). The MSPB measure 
description, including risk adjustment information, may be found in the 
measure information form located on the NQF's Web site at: http://www.qualityforum.org/QPS/2158.
    We received a number of comments on the proposed measures in 
general. The following comments apply to all four of the proposed 
episode-based payment measures.
    Comment: Many commenters opposed the addition of the Clinical 
Episode-Based Payment measures until they are NQF-endorsed, noting that 
the lack of endorsement poses questions about their reliability, 
validity, and feasibility. Some commenters specifically noted that 
these measures should not be publicly reported until they are NQF-
endorsed. One commenter expressed concern that there will be 
substantial variability in hospitals' ability to report statistically 
reliable information on all of the proposed measures, given variation 
in volume.
    Response: We do not agree that these measures should not be 
publicly reported until they are NQF-endorsed. We work closely with the 
NQF on issues related to measure endorsement but, as stated in previous 
rulemaking (for example, 79 FR 50222), we believe that consensus among 
affected parties also can be reflected by other means, including 
consensus achieved during the measure development process, consensus 
shown through broad acceptance and use of measures, and consensus 
through public comment. Under the authority of section 
1886(b)(3)(B)(viii)(IX) of the Act, we may specify a measure that is 
not endorsed by NQF as long as due consideration is given to measures 
currently endorsed by the NQF or any other consensus organizations 
identified by the Secretary. We reviewed the NQF-endorsed measures, and 
we were unable to identify any other NQF-endorsed measures that are 
condition-specific episode based cost measures. We also are not aware 
of any other condition-specific episode based cost measures that have 
been endorsed or adopted by a consensus organization other than NQF.
    The measures have been conditionally supported by the MAP, and the 
measures will be submitted to the NQF when the NQF opens a call for 
submission for episode-based measures. We think that these measures 
serve an important purpose and fill a gap in available resource use 
data. Public reporting will help consumers identify hospitals involved 
in the provision of efficient care for these conditions and procedures. 
In addition, public reporting is an important tool to incentivize 
changes in behavior and encourage hospitals to look for opportunities 
for improved efficiency. Further, we believe that publicly displaying 
measure performance data allows us to provide the desired transparency 
to consumers and stakeholders.
    In response to commenters' concerns about validity and feasibility 
of the Clinical Episode-Based Payment measures, the measures follow the 
general construction of the previously adopted, NQF-endorsed, Hospital 
IQR Program measure, Payment-Standardized Medicare Spending per 
Beneficiary (MSPB) (NQF #2158), described in the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51626). Similar to the MSPB measure, the Clinical 
Episode-Based Payment measures are constructed using Medicare Parts A 
and B claims data. As in the MSPB measure, these episode-based payment 
measures group Parts A and B payment for three days prior to hospital 
admission to 30 days post-discharge and utilize a risk adjustment model 
that includes patient characteristics along with other factors (for 
example, attributes of inpatient stays) similar to the MSPB measure. 
The successful implementation of the MSPB measure provides evidence to 
the feasibility of the Clinical Episode-Based Payment measures.
    As we noted in the FY 2013 IPPS/LTCH PPS final rule, published 
research indicates that spending for an episode of care varies 
``greatly'' among hospitals (N Engl J Med. 2008; 359: 3-5) and measures 
for which there is a larger inter-hospital variability are more likely 
to be reliable (77 FR 53588 through 53589). The condition-specific cost 
measures we proposed were selected, in part, because they represent 
common conditions with evidence of large variation in payments. In 
addition to the positive correlation between high variability and 
measure reliability, the selection of measures reflecting common 
conditions and procedures with large variation in cost encourages 
hospitals to work to provide higher value care where there is the most 
opportunity for improvement. This will allow the greatest number of 
patients to benefit from improvements, and will ensure the largest 
sample sizes to ensure reliability. Episodes were also chosen based on 
the ability of the initial hospital care provided for a condition or 
procedure to influence near-term patient outcomes. This selection 
criterion helps to ensure measure validity, because there is less 
chance that differences are due to chance, but rather, they are more 
likely to be due to the actions taken by the hospital. The proposed 
measures were fully tested and reviewed by physicians from a variety of 
specialties to ensure clinical validity. Data on episode cost, 
frequency, and variation in costs from measure testing, which reflect 
the validity of the measures are included in the ``Measure 
Methodology'' report for proposed episodic payment measures, available 
at: http://www.qualitynet.org  Hospital-Inpatient 
 Claims-Based Measures  Proposed episodic payment 
measures  Measure Methodology.
    These measures are constructed using Medicare administrative claims 
data, which have been shown to be a reliable data element for measure 
construction. The NQF has found other resource use measures that are 
based on Medicare claims data to be reliable and valid. As one example, 
for the all-cause readmission measure (NQF #1789), ``reliability and 
validity [at the data element level and at the measured score level] 
was generally received as adequate by the steering committee'' (NQF, 
Feb. 2012: Patient Outcomes All Cause Readmissions Expedited Review 
Pre-voting Call Transcript), available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=70455.
    Further, in a memorandum to the NQF Board of Directors, the NQF's 
Senior Vice President for Performance Measures report noted that the 
majority of NQF committee members stated that the Hospital-wide All 
Cause Readmission Measure was highly reliable (Burstin, June 2012: 
Appeal of All Cause Hospital-wide All Cause Readmission Measure), 
available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=71272.
    Although we believe the measures to be valid and reliable, in 
response to comments, we will post a measure reliability analysis and 
propose in future rulemaking a minimum number of cases for reporting to 
ensure reliability of publicly-reported data, prior to public reporting 
of these measures.
    Comment: Some commenters noted the value of seeing these claims-
based cost measures and suggested that CMS provide confidential 
individual hospital reports in order for hospitals to better understand 
the data and potentially determine interventions to improve processes 
of care.
    Response: We appreciate the general support for moving toward 
efficiency measures, and we acknowledge that

[[Page 49672]]

hospitals would benefit from the opportunity to review their results 
and develop a deeper understanding of the measures before the measures 
are publicly reported.
    In response to comments, we are postponing implementation and we 
are finalizing these three measures for the FY 2019 payment 
determination and subsequent years (CY 2017 performance period and 
subsequent years), instead of for the FY 2018 payment determination and 
subsequent years (CY 2016 performance period and subsequent years) as 
proposed, in order to allow hospitals to gain experience with the 
measures through confidential feedback reports. During the interim FY 
2018 payment determination (CY 2016 performance period) and prior to 
inclusion for public reporting, we will provide hospitals with 
confidential hospital-specific feedback reports and supplemental files 
containing performance data on the three Clinical Episode-Based Payment 
measures we are finalizing. We currently provide confidential hospital-
specific feedback reports and supplemental files for the MSPB measure, 
and we intend to create similar reports and supplemental files for the 
three Clinical Episode-Based Payment measures. We believe that the 
confidential hospital-specific feedback reports and supplemental files 
will provide hospitals with valuable data to facilitate improvement in 
the efficiency of the care they provide.
    Comment: Many commenters raised concerns about reporting a measure 
that reflects the factors that may be outside of the hospital's 
control, including care performed in multiple settings and the clinical 
preferences of physicians. In addition, the commenters noted that the 
measure may not account for the national variation in the mix of 
services and degree of integration in health care delivery. One 
commenter specifically recommended that adoption of these measures be 
delayed until physicians and all post-acute care settings are assessed 
using similar measures. Some commenters opposed the inclusion of the 
four clinical episode-based measures to the Hospital IQR Program. 
Specifically, these commenters believed that these measures would be 
better suited for Accountable Care Organizations or bundled payment 
programs, where they may be comparably applied across all of the 
relevant care settings.
    Response: We appreciate the comments and seek to encourage 
increased care coordination across providers. We disagree that Medicare 
payments for services received after discharge from a hospital are 
outside of a hospital's control. We addressed similar comments 
regarding the MSPB measure (NQF #2158), which is endorsed by the NQF, 
in the FY 2012 IPPS/LTCH PPS final rule and reiterated those comments 
in the FY 2013 IPPS/LTCH PPS final rule (76 FR 51623 through 51624 and 
77 FR 53586 through 53587, respectively). We continue to believe, as 
stated in those rules, that hospitals providing quality inpatient care, 
conducting appropriate discharge planning, and working with providers 
and suppliers on appropriate follow-up care will realize efficiencies 
and perform well, because the Medicare beneficiaries they serve will 
have a reduced need for excessive post-discharge services.
    With regard to the comment that the measures do not account for the 
degree of health system integration, the aforementioned opportunities 
for hospitals to exert control over post discharge expenditure and 
efficiency exists, regardless of the degree of integration of a health 
system, and in cases where systems are not well-integrated, there may 
be an even greater opportunity for redesign of care processes to 
achieve high performance on these measures. We are even more confident 
now that hospitals can exert influence over post-discharge expenditures 
in the case of the proposed episode-based payment measures, because the 
services within the episodes are only those that are clinically-related 
to the reason for admission.
    To ensure that it would be appropriate to attribute the Medicare 
payments included in these measures to a discharging hospital, one of 
the selection criteria for episode development was the degree to which 
the clinical experts consulted agree that standardized Medicare 
payments for services provided during the episode can be linked to the 
care provided during the hospitalization. Hospital-based providers 
exert influence on referrals to post-acute care and service 
utilization, thus linking hospitalization with near-term outcomes. 
Measuring national variation in service utilization for these episodes 
would facilitate the identification of the clinical practices and 
arrangements that have best outcomes and efficiency. In addition, we 
have selected condition-specific cost measures for common conditions 
with evidence of large variation in payments to encourage higher value 
care where there is the most opportunity for improvement, the greatest 
number of patients to benefit from improvements, and the largest sample 
size to ensure reliability.
    In response to the comment that the measures do not adequately 
address the variation in the mix of patients for whom Medicare 
expenditures are captured in the proposed measures, we note that the 
episodes within the measures are risk-adjusted, to account for the age 
and severity of illness of the beneficiary. This risk adjustment 
methodology is the same as that used for the NQF-endorsed MSPB measure 
(NQF #2158) and acknowledges the differences in a given hospital's case 
mix, so that their performance can be compared to a national average.
    Furthermore, while we agree with the commenters' views regarding 
the value in aligning resource use measures across settings, we 
disagree that the reporting of these important Medicare payment 
measures is not appropriate for hospital-level reporting or that they 
would be more appropriate in an Accountable Care Organization or 
bundled payments structure.
    With regard to the comment that the measures should be delayed 
until physicians and post-acute care settings are addressed, we note 
that we currently have physician-based analogues of the measures in the 
Physician Feedback Program. While post-acute care measurement programs 
are under development, we will take the commenter's suggestion that 
similar measures should be incorporated into them under consideration. 
We do not believe that it would be appropriate to delay the public 
reporting of this valuable and actionable payment information until 
such time as any similar, post-acute care measures are implemented. As 
noted above, these measures were developed in response to hospital 
stakeholders' feedback that we should develop a more robust and 
clinically cohesive measure set for hospitals. Data for these measures 
were reported in the 2012 Supplemental Quality and Resource Use Reports 
(QRURs), which are confidential feedback reports for physicians and 
group practices, and will be reported again in the 2014 Supplemental 
QRURs (79 FR 40515). More information can be found at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeedbackProgram/Episode-Costs-and-Medicare-Episode-Grouper.html. Including these Clinical Episode-Based Payment measures 
in the hospital setting provides physicians with information they need 
to understand their role in driving the costs of episodes captured in 
Medicare payment measures. Physicians and groups of physicians receive 
data to help them more effectively target resources to realize 
efficiencies in the

[[Page 49673]]

care they provide their patients. This understanding of actionable data 
will facilitate coordination between physicians and hospitals to 
optimize the efficiency of the care they provide to Medicare 
beneficiaries and other patients they serve. In addition, we will also 
explore the potential use of these types of measures within the 
Medicare Shared Savings Program in the future.
    Comment: Several commenters opposed the proposal of the four 
Clinical Episode-Based Payment measures because of concern over the use 
of the measures without corresponding measures of quality. One 
commenter noted that the measures themselves assess only volume and do 
not adequately consider the quality or appropriateness of the care 
provided.
    Response: While we agree that observation of cost alongside quality 
is an important concept, we believe that resource use information 
provides useful information for consumers and other stakeholders as 
they seek to make informed decisions about facilities involved in the 
provision of efficient care, even in the absence of a corresponding 
quality measure.
    These measures will be displayed on Hospital Compare along with 
other quality metrics. We note that, for public reporting purposes, the 
measures would provide valuable information regarding the cost of care 
for a particular condition or procedure, which is a reflection of the 
efficiency of that care.
    Comment: Some commenters expressed concern with the Clinical 
Episode-Based Payment measures because they do not provide 
beneficiaries with information on their own financial obligations.
    Response: We appreciate the suggestion that we should evaluate 
beneficiary expenditures and will consider that for future reporting. 
The proposed measures, like the MSPB measure (NQF #2158) are calculated 
using Medicare allowed amounts. We believe that inclusion of Medicare 
allowed amounts, which include both Medicare payments and 
beneficiaries' deductible and coinsurance, is the most appropriate and 
understandable approach at this time. Beneficiary expenditures are 
dependent on a number of aspects, including their deductibles, copay, 
and secondary insurers; so evaluating beneficiary expenditures at this 
time would be more confusing than utilizing Medicare allowed amounts, 
which are standardized to allow for comparison across hospitals 
nationwide.
    Comment: One commenter expressed concern that these measures make 
it difficult to monitor and improve performance concurrently.
    Response: We believe the commenter is suggesting that improving 
performance on the measures while concurrently improving quality would 
be difficult, and we disagree. We believe that improvement in care 
quality, care coordination, and discharge planning will be reflected in 
improved performance on these measures; so that hospitals will 
concurrently improve the care provided to the beneficiaries they serve 
and their performance on these measures. We believe that public 
reporting of quality, including resource use measures, is an important 
tool for quality improvement. The Clinical Episode-Based Payment 
measures are claims-based and therefore, require no additional 
reporting on behalf of providers.
    Comment: One commenter expressed concern that the Clinical Episode-
Based Payment measures overlap with the Medicare Spending per Patient 
measure.
    Response: We developed the proposed condition-specific measures, as 
intended and stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53585), in response to commenters' suggestions that CMS undertake 
development of a more robust efficiency measure set. Commenters had 
also suggested that we include only services related to the reason for 
admission in the MSPB measure, and we responded that determinations of 
clinical relatedness could be subjective and that inclusion of a broad 
range of services would best incentivize care coordination (76 FR 
51621). As a result, we developed these Clinical Episode-Based Payment 
measures that include only services that are clinically related to the 
reason for admission. For each Clinical Episode-Based Payment measure, 
a panel of clinicians determined which services, when occurring in the 
30 days post-discharge, could be considered clinically associated with 
the episode. Therefore, we believe that the condition-specific measures 
provide additional and more targeted information about patient care. 
These condition-specific measures will allow patients and payers to 
make more fully informed comparisons of hospitals' performance. 
Including condition-specific cost measures alongside the total cost 
MSPB measure will also provide hospitals with actionable feedback that 
will better equip them to implement targeted improvements in comparison 
to an overall cost measure alone.
    Comment: One commenter advised CMS to follow the advice of the 
appropriate stakeholders or specialties to refine or replace the 
Clinical Episode-Based Payment measures.
    Response: We appreciate the commenter's concerns and the valuable 
feedback from clinicians and specialty groups during this process. We 
have worked closely with clinicians and contractors experienced in 
health services research and payment policy to define and develop the 
Clinical Episode-Based Payment measures to allow patients and payers to 
make more fully informed comparisons of hospitals' performance. We also 
note that the MAP conditionally supported these measures pending NQF 
endorsement. Accordingly, we intend to submit the measures for NQF 
endorsement when a call for episode-based payment measures is opened.
    Comment: One commenter supported a movement towards the use of 
outcome measures over process-of-care measures, but noted their 
preference for a broad-all condition cost measure over the proposed 
condition-specific episode-based payment cost measures. Specifically, 
the commenter noted the proposed condition-specific cost measures would 
have smaller numbers of hospital-specific observations than an all-
condition measure, which result in more random variation without 
providing additional useful information. The commenter supported the 
presentation of condition-specific cost measures, but did not support 
the use of the condition-specific cost measures for inclusion in 
determining financial incentives.
    Response: We appreciate the commenter's preference for outcome 
measures rather than process measures. Using outcome measures, such as 
rehospitalization rates, is important, but we believe that the 
condition-specific measures (Clinical Episode-Based Payment measures) 
provide additional and more targeted information about care. Unlike the 
Medicare Spending Per Beneficiary measure (NQF #2158), the condition-
specific cost measures only include costs from services/procedures 
related to the condition. These condition-specific measures will allow 
patients and payers to make more fully informed comparisons of 
hospitals' performance. Including condition-specific cost measures will 
also provide hospitals with actionable feedback that will better equip 
them to implement targeted improvements versus an overall cost measure 
alone. As noted in previous comment responses, we developed these 
measures in response to commenters' suggestions that we undertake 
development of a more robust efficiency measure set (77 FR 53585).

[[Page 49674]]

    Comment: One commenter recommended that CMS work to improve the 
predictive power of the existing MSPB, instead of adopting these 
measures.
    Response: Using total cost measures, such as the MSPB measure, is 
important, but we believe that the condition-specific measures in 
conjunction with the MSPB measure provide additional and more targeted 
information about care. Unlike the MSPB measure, the condition-specific 
cost measures only include costs from services/procedures related to 
the condition. These condition-specific Clinical Episode-Based Payment 
measures will allow patients and payers to make more fully informed 
comparisons of hospitals' performance. Including condition-specific 
cost measures will also provide hospitals with actionable feedback that 
will better equip them to implement targeted improvements as compared 
to an overall cost measure alone. As noted in the response to previous 
comments, we developed these measures, as stated and planned in the FY 
2013 IPPS/LTCH PPS final rule, in response to commenters' suggestions 
that we undertake development of a more robust efficiency measure set 
(77 FR 53585).
    Comment: A few commenters supported the proposal to include 
condition-specific episodes of care measures, noting that the measures 
align with the National Quality Strategy and address conditions that 
are drivers of cost for the Medicare program. In addition, commenters 
noted that the addition of these measures will promote better 
coordination of care.
    Response: We thank the commenters for their support and agree that 
condition-specific episode measures address an area of need and will 
promote better care coordination.
    After consideration of the public comments we received, we are 
finalizing a modification of our proposals for the episode-base payment 
measures. We are finalizing three of the four proposed measures (the 
Kidney/Urinary Tract Infection Clinical Episode-Based Payment measure, 
the Cellulitis Clinical Episode-Based Payment measure, and the 
Gastrointestinal Hemorrhage Clinical Episode-Based Payment measure). We 
are not finalizing the Lumbar Spine Fusion/Refusion Clinical Episode-
Based Payment measure.
    In addition, we are postponing implementation and finalizing these 
three measures for the FY 2019 payment determination and subsequent 
years (CY 2017 performance period and subsequent years), instead of the 
FY 2018 payment determination and subsequent years (CY 2016 performance 
period and subsequent years) as proposed.
    Furthermore, we will provide hospitals with confidential hospital-
specific feedback reports containing performance data on these three 
measures during the interim FY 2018 payment determination (CY 2016 
performance period) prior to inclusion for public reporting. Since we 
are not finalizing the Lumbar Spine Fusion/Refusion Clinical Episode-
Based Payment measure, it will not be included in the confidential 
hospital-specific feedback reports.
c. Hospital-Level, Risk-Standardized Payment Associated with a 90-Day 
Episode-of-Care for Elective Primary Total Hip Arthroplasty (THA) and/
or Total Knee Arthroplasty (TKA)
(1) Background
    Between 2009 and 2012, there were 337,419 total hip arthroplasty 
(THA) procedures and 750,569 total knee arthroplasty (TKA) procedures 
for Medicare FFS patients 65 years and older.\168\ More than one-third 
of the US population 65 years and older suffers from 
osteoarthritis,\169\ a disabling condition for which elective THA/TKAs 
are most commonly performed. Estimates place the annual insurer cost of 
osteoarthritis in the United States at $149 billion, with Medicare 
payments to hospitals for THA/TKA exceeding $15 billion annually.\170\
---------------------------------------------------------------------------

    \168\ Suter L, Grady JL, Lin Z et al.: 2013 Measure Updates and 
Specifications: Elective Primary Total Hip Arthroplasty (THA) And/Or 
Total Knee Arthroplasty (TKA) All-Cause Unplanned 30-Day Risk-
Standardized Readmission Measure (Version 2.0). 2013. http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    \169\ Osteoarthritis. 2011; http://www.cdc.gov/arthritis/basics/osteoarthritis.html.
    \170\ Miller DC, Gust C, Dimick JB, Birkmeyer N, Skinner J, 
Birkmeyer JD.: Large variations in Medicare payments for surgery 
highlight savings potential from bundled payment programs. Health 
Aff (Millwood). Nov 2011;30(11):2107-2115.
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    There is evidence of variation in payments at hospitals for 
patients undergoing THA and/or TKA. The mean 90-day risk-standardized 
payment among Medicare FFS patients aged 65 or older with a qualifying 
elective primary THA/TKA procedure in 2010-2012 was $23,248, and ranged 
from $16,421 to $35,123 across 2,614 hospitals.\171\ However, high or 
low payments to hospitals are difficult to interpret in isolation. Some 
high payment hospitals may have better clinical outcomes when compared 
with low payment hospitals while other high payment hospitals may not 
have better outcomes. Thus, CMS believes that this payment measure will 
provide complementary information to other THA/TKA quality measures in 
the Hospital IQR Program.
---------------------------------------------------------------------------

    \171\ Kim N, Ott LS, Lin Z et al.: Hospital-Level, Risk-
Standardized Payment Associated with a 90-Day Episode-of-Care for 
Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee 
Arthroplasty (TKA) (Version 1.0). 2014. Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    Quality measures for THA/TKA, such as: (1) Hospital-level risk-
standardized complication rate (RSCR) following elective primary total 
hip arthroplasty (THA) and/or total knee arthroplasty (TKA) (NQF #1550) 
(77 FR 53515 through 53518), and (2) Hospital-level risk-standardized 
readmission rate (RSRR) following elective primary total hip 
arthroplasty (THA) and/or total knee arthroplasty (TKA) (NQF #1551) (77 
FR 53519 through 53521), are already adopted in the Hospital IQR 
Program and publicly reported, making THA/TKA an ideal procedure for 
which to assess payments for Medicare patients and relative hospital 
value. Including this proposed measure in the Hospital IQR Program and 
publicly reporting it on Hospital Compare would provide stakeholders 
with additional information about a hospital's cost of care for THA/TKA 
that will complement information about a hospital's quality of care. By 
including payments for 90 days after admission, this hospital-level 
resource use measure can capture the full spectrum of care and 
encourage collaboration and shared responsibility for patients' health 
after their procedures.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24572 through 
24574), we proposed to include this non-NQF-endorsed measure in the 
Hospital IQR Program under the exception authority in section 
1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section 
VIII.A.7. of the preamble of this final rule. Although the proposed 
measure is not currently NQF-endorsed, we considered available measures 
that have been endorsed by the NQF, and were unable to identify any 
measures that assess hospital risk-standardized payment associated with 
a 90-day episode-of-care for elective primary THA/TKA. We also are not 
aware of any other 90-day episode-of-care THA/TKA measures that have 
been endorsed or adopted by a consensus organization, and found no 
other feasible and practical measures on this topic.
    The MAP conditionally supported this measure on December 10, 2014 
pending a timely review by the NQF Cost and Resource Use Standing 
Committee. The MAP recommended

[[Page 49675]]

harmonizing and determining the most parsimonious approach to measuring 
the costs of hip and knee replacements to minimize the burden and 
confusion of competing methodologies.\172\ Once the call for measures 
for the Cost and Resource Use project at NQF is announced, we will 
submit this measure for endorsement. In the meantime, we will consider 
ways to take these MAP recommendations into account.
---------------------------------------------------------------------------

    \172\ National Quality Forum. The report is available at: http://www.qualityforum.org/Publications/2015/01/Process_and_Approach_for_MAP_Pre-Rulemaking_Deliberations_2015.aspx 
and the ``Spreadsheet of MAP 2015 Final Recommendations'' is 
available at: http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

(2) Overview of Measure and Rationale for Examining Payments for a 90-
Day Episode-of-Care
    The THA/TKA payment measure assesses hospital risk-standardized 
payment associated with a 90-day episode-of-care for elective primary 
THA/TKA for any hospital participating in the Hospital IQR Program.
    When considering payments for Medicare patients, we focused on a 
90-day episode-of-care triggered by admission for several key reasons. 
First, THA and TKA procedures require ongoing post-discharge care. 
Second, the 90-day preset window encourages hospitals to optimize post-
discharge care. Third, mechanical complications and wound or joint 
infections may present after 30 days and rates of these complications 
remain elevated for at least 90 days. Fourth, the 90-day post-admission 
timeframe is consistent with CMS' THA/TKA complication measure, which 
captures specific complications up to 90 days after admission. 
Furthermore, we obtained input from a national Technical Expert Panel 
(TEP) on the most appropriate window for the episode-of-care. Based on 
TEP feedback, we chose a measure follow-up period of 90 days that 
includes all payments for the initial 30 days of the episode, and all 
payments in a predefined set of care settings and services for days 31 
through 90.
    We refer readers to the measure methodology report and measure risk 
adjustment statistical model on our Measure Methodology page, under the 
``Downloads'' section of the Web page. We refer readers to the ``Hip 
and Knee Arthroplasty Payment'' zip file on our Web site at: http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(3) Data Sources
    The proposed Hospital-Level, Risk-Standardized Payment Associated 
with a 90-Day Episode-of-Care for Elective Primary THA and/or TKA 
measure uses Part A and Part B Medicare administrative claims data that 
contain payments for Medicare FFS beneficiaries who were hospitalized 
and underwent an elective THA/TKA. This measure will use 3 years of 
data.
(4) Outcome
    The primary outcome of this measure is the hospital-level risk-
standardized payment for an elective primary THA/TKA episode-of-care. 
This measure captures payments for Medicare patients across multiple 
care settings, services, and supplies (inpatient, outpatient, skilled 
nursing facility, home health, hospice, physician/clinical laboratory/
ambulance services, and durable medical equipment, prosthetics/
orthotics, and supplies). This measure includes patient copayments as 
well as payments from coinsurance. While the approach to 
standardization in calculating payments over the episode is very 
similar to the previously adopted Hospital IQR Program measure, 
Payment-Standardized Medicare Spending Per Beneficiary (MSPB) as 
described in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51626), the 
THA/TKA measure has a different cohort and risk-model. For more 
information on how MSPB is calculated, we refer readers to the measure 
development reports found on the QualityNet Web site at http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228772057350.
    To isolate payment variation that reflects practice patterns rather 
than CMS payment adjustments, this measure excludes policy and 
geography payment adjustments unrelated to clinical care decisions. We 
achieve this by ``stripping'' or ``standardizing'' payments for each 
care setting. Stripping refers to removing geographic differences and 
policy adjustments in payment rates for individual services from the 
total payment for that service. Standardizing refers to averaging 
payments across geographic areas for those services where geographic 
differences in payment cannot be stripped. Stripping and standardizing 
the payment amounts allows for a fair comparison across hospitals based 
solely on payments for decisions related to clinical care of THA/TKA.
    By risk standardizing the payment measure, we are able to adjust 
for case-mix at any given hospital and compare a specific hospital's 
risk-standardized payment (RSP) to an average hospital with a similar 
case-mix. We define our analytic timeframe as beginning with the index 
admission for an elective primary THA/TKA to 90 days post-admission. 
The measurement includes all payments for the first 30 days after 
admission and only certain payments based on a pre-defined set of care 
settings and services for days 31-90.
(5) Cohort
    The measure includes Medicare FFS patients aged 65 or older 
admitted for elective primary THA and/or TKA, and calculates payments 
made on behalf of these patients (including payments made by CMS, 
patients, and other insurers) over a 90-day episode-of-care beginning 
with the index admission. The measure cohort aligns with another 
previously adopted Hospital IQR Program measure--90-day hospital-level 
risk-standardized complication rate (RSCR) following elective primary 
THA and/or TKA (NQF #1550) (77 FR 53516 through 53518). Consistent with 
this previously adopted measure, the proposed measure includes 
hospitalizations identified by a procedure code of either THA or TKA, 
as classified by the ICD-9-CM codes 81.51 and 81.54, respectively. The 
measure includes only those hospitalizations from short-stay acute care 
hospitals in the index cohort and restricts the cohort to patients 
enrolled in FFS Medicare Parts A and B (with no Medicare Advantage 
coverage).
(6) Inclusion and Exclusion Criteria
    This proposed measure includes hospitalizations for patients 65 
years and older at the time of index admission. An index admission/
hospitalization is the initial admission for a qualifying elective 
primary THA/TKA that triggers the 90-day episode-of-care for this 
payment measure. An index admission is the hospitalization to which the 
RSP outcome is attributed and includes index admissions for patients 
having a qualifying elective primary THA/TKA procedure. The measure 
excludes the following admissions from the measure cohort: (1) 
Admissions for patients without at least 90 days of post-admission 
enrollment in FFS Medicare Parts A and B because this is necessary to 
identify the outcome (payments) in the dataset over the analytic 
period; (2) admissions for patients discharged against medical advice 
(AMA) because hospitals had limited opportunity to implement high 
quality care; (3) admissions for patients transferred to federal 
hospitals because we do not have claims data for these

[[Page 49676]]

hospitals, so including these patients would cause payments to be 
underestimated; (4) admissions for patients with more than two THA/TKA 
procedure codes during the index hospitalization because, although 
clinically possible, it is highly unlikely that patients would receive 
more than two elective THA/TKA procedures in one hospitalization, and 
this may reflect a coding error; (5) admissions that could not be 
matched to admissions in the THA/TKA complication measure because, as 
part of our data processing, we matched our index THA/TKA admissions to 
the THA/TKA complication measure cohort to obtain the risk-adjustment 
variables; and (6) admissions without a DRG weight and the provider 
received no payment because, without either DRG weight or payment data, 
we cannot calculate a payment for the patient's index admission.
(7) Risk Adjustment
    The measure adjusts for differences across hospitals in how 
payments are affected by patient comorbidities relative to patients 
cared for by other hospitals. We refer readers to the measure risk 
adjustment statistical model on our Measure Methodology Web page, under 
the ``Downloads'' section of the Web page. Please see the ``Hip and 
Knee Arthroplasty Payment'' zip file on our Web site at: http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(8) Calculating the Risk-Standardized Payment (RSP)
    The measure is calculated using a hierarchical generalized linear 
model with a log link and an inverse Gaussian distribution, which is a 
widely accepted statistical method that enables fair evaluation of 
relative hospital performance by taking into account patient risk 
factors as well as the number of patients that a hospital treats. This 
statistical model accounts for the structure of the data (patients 
clustered within hospitals) and calculates: (1) How much variation in 
hospital payment overall is accounted for by patients' individual risk 
factors (such as age and other medical conditions); and (2) how much 
variation is accounted for by hospital-specific performance. This 
approach appropriately models a positive, continuous, right-skewed 
outcome like payment and also accounts for the types of patients a 
hospital treats (that is, hospital case mix), the number of patients it 
treats, and the quality of care it provides. This hierarchical 
generalized linear model is an appropriate statistical approach to 
measuring quality based on patient outcomes when the patients are 
clustered within hospitals and sample sizes vary across hospitals. 
Clustered patients are within the same hospital, and the quality of 
care of the hospital affects all patients, so the outcomes for each 
hospital's patients are not fully independent (that is, completely 
unrelated) as is assumed by many statistical models. As noted above, 
the measure methodology defines hospital case mix based on the clinical 
diagnoses provided in the hospital claims for their patients' inpatient 
and outpatient visits for the 12 months prior to the THA/TKA 
hospitalization as well as select conditions indicated by secondary 
diagnosis codes on index admission. This methodology specifically does 
not, however, account for diagnoses present in the index admission that 
may indicate complications of care rather than patient comorbidities.
    The RSP is calculated as the ratio of predicted payments to 
expected payments and then the ratio is multiplied by the national 
unadjusted average payment for an episode-of-care. The ratio is greater 
than one for hospitals that have higher payments than would be expected 
for an average hospital with similar cases and less than one if the 
hospital has lower payments than would be expected for an average 
hospital with similar cases. This approach is analogous to a ratio of 
``observed'' or ``crude'' rate to an ``expected'' or ``risk-adjusted'' 
rate used in other similar types of statistical analyses. The RSP is a 
point estimate--the best estimate of a hospital's payment based on the 
hospital's case-mix.
    To calculate the measure result for the Hospital IQR Program, we 
computed an interval estimate, which is similar to the concept of a 
confidence interval, to characterize the level of uncertainty around 
the point estimate. We use the point estimate and interval estimate to 
determine hospital performance (for example, higher than expected, as 
expected, or lower than expected). The interval estimate indicates that 
the true value of the payment ratio lies between the lower limit and 
the upper limit of the interval. For more detailed information on the 
calculation methodology, we refer readers to our Measure Methodology 
Web page, under the ``Downloads'' section. We refer readers to the 
``Hip and Knee Arthroplasty Payment'' zip file on our Web site at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    We invited public comment on our proposal to adopt the Hospital-
Level, Risk-Standardized Payment Associated with a 90-Day Episode-of-
Care for Elective Primary THA and/or TKA measure for the FY 2018 
payment determination and subsequent years.
    Comment: One commenter noted its appreciation that the proposed 
measure has a corresponding quality measure (THA/TKA Complications) in 
the Hospital IQR Program unlike previously developed episode-of-care 
payment measures and noted that this could help mitigate the potential 
for cost to be prioritized over quality improvements.
    Response: We thank this commenter for its support of this measure 
and the corresponding THA/TKA complications measure. We note that we 
have developed three other episode-of-care payment measures for acute 
myocardial infarction (AMI), heart failure (HF), and pneumonia (PN), 
all of which also have a corresponding condition-specific mortality 
measure.
    The THA/TKA episode-of-care payment measure's results are intended 
to reflect differences in payments for patients over a 90-day period 
that are influenced by hospital care decisions. However, these results 
alone do not reflect the quality of care provided by hospitals. The 
payment measure's results are more meaningful when presented in the 
context of other outcome measures to facilitate profiling hospital 
value (payments and quality). Accordingly, we aligned key 
specifications of the payment measure with those of the corresponding 
complication measure. We plan to report the results of the payment 
measure on Hospital Compare along with its corresponding complication 
measure results.
    Comment: One commenter noted its appreciation that the proposed 
measure is limited to elective procedures.
    Response: We appreciate this commenter's support for measurement of 
elective total hip and knee arthroplasty procedures.
    Comment: Several commenters noted that they will not support the 
proposed measure until it is NQF-endorsed; but that they would support 
the measure once it receives NQF endorsement. One commenter recommended 
that this measure may be appropriate for a robust trial period to 
inform the NQF's decision to endorse the measure.
    Response: We proposed to include this non-NQF-endorsed measure 
under the Hospital IQR Program exception authority in section 
1886(b)(3)(B)(IX)(bb) of the Act. This

[[Page 49677]]

provision provides that, in the case of a specified area or medical 
topic determined appropriate by the Secretary for which a feasible and 
practical measure has not been endorsed by the entity with a contract 
under section 1890(a) of the Act, the Secretary may specify a measure 
that is not so endorsed as long as due consideration is given to 
measures that have been endorsed or adopted by a consensus organization 
identified by the Secretary.
    We considered available measures that have been endorsed or adopted 
by the NQF. We also are not aware of any other similar measures that 
have been endorsed or adopted by a consensus organization, and found no 
other feasible and practical measures on this topic. We believe it is 
imperative to adopt this measure as it aims to address common elective 
procedures among Medicare beneficiaries with substantial variability in 
payments due to different practice patterns. In addition, the measure 
aligns with our priority objectives and the National Quality Strategy 
to transform the national healthcare system by measuring and rewarding 
affordable, quality care. This measure provides transparency on the 
payments made for Medicare beneficiaries undergoing THA/TKA. Hospitals 
receive detailed information on how they compare with other 
institutions regarding the amount and venues of resources expended on 
patients. Therefore, the measure provides insight to hospitals that is 
not otherwise possible. Given that hospitals have experience with 
similar payment measure methodology, such as the measures of AMI, HF 
and PN payment that are reported on Hospital Compare, we do not believe 
a trial period is warranted.
    The MAP conditionally supported this measure on December 10, 2014 
pending a timely review by the NQF Cost and Resource Use Standing 
Committee. Although the measure is not currently NQF-endorsed, it is 
pending submission to NQF for initial endorsement and will be brought 
to the entity once an appropriate project is called.
    Comment: Several commenters supported the efforts of CMS to assess 
quality of care being delivered to THA/TKA patients. One commenter 
endorsed initiatives to encourage both high-quality THA/TKA care and 
collaboration among providers to promote efficiencies, and expressed 
that the THA/TKA episode-of-care payment measure may promote efficient 
patient care management.
    Response: We thank commenters for their support of the THA/TKA 
episode-of-care payment measure methodology and inclusion in the 
Hospital IQR Program. Further, we thank the commenters for their 
support of our initiative to assess the quality of care delivered to 
THA/TKA patients.
    Comment: Some commenters questioned the reliability, validity and 
feasibility of the measure. Specifically, the commenters questioned the 
validity of the THA/TKA payment measure, and expressed that there are 
concerns within the provider community about the validity of the 
payment determination model. The commenters highlighted concerns with 
the breadth of costs incorporated into the measure.
    Response: We thank the commenters for their input. We developed 
this measure in consultation with national guidelines for publicly 
reported outcome measures, outside experts, and the public; we believe 
that the measure meets all validity, reliability, and feasibility 
requirements.
    We ensure the measure reliability, in part, because this measure 
uses variables from claims data submitted by hospitals for payment, 
data from Medicare fee schedules, data from final rules for Medicare 
prospective payment systems and payment policies, and CMS-published 
wage index data. Our final rules dictate payment adjustments and fees 
for services for each year across care settings. By incorporating these 
publicly available final rules into our payment calculation, we ensure 
our payment calculations are reliably estimated for that year. In 
constructing the measure, we aimed to utilize only those data elements 
from the claims data that have both face validity and reliability. 
Moreover, we assess the measure reliability as part of the development 
process and found very strong reliability for this measure when 
comparing the results for hospitals measured with two different random 
samples.
    In addition, during development of the THA/TKA payment measure, we 
convened a national TEP. We reviewed the cohort, outcome and risk-
adjustment approach with the TEP as well as public comments on the 
measure. We asked the TEP to evaluate the face validity of the measure 
and the consensus of the TEP favored the face validity of the measure. 
Finally, the measure is consistent with the technical approach to 
outcomes measurement set forth in NQF guidance for outcomes 
measures,\173\ CMS Measure Management System (MMS) guidance,\174\ and 
the guidance articulated in the American Heart Association scientific 
statement, ``Standards for Statistical Models Used for Public Reporting 
of Health Outcomes.'' \175\ Regarding the validity of the payment 
determination model, please note that we applied the same approach to 
determining payments for THA/TKA payment measure as was used in the 
NQF-endorsed episode-of-care payment measures for acute myocardial 
infarction, heart failure, and pneumonia. The payment outcome is 
determined by using CMS claims and for actual payments which are then 
adjusted to identify comparable resource utilization (for example, 
stripping out wage adjustments), this is consistent with the manner 
that payments are determined for other CMS measures such as the 
Medicare Spending per Beneficiary measure.
---------------------------------------------------------------------------

    \173\ Measure Evaluation Criteria. 2011; http://www.qualityforum.org/docs/measure_evaluation_criteria.aspx. Accessed 
September 26, 2012.
    \174\ Measures Management System Overview. 2012; http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/index.html?redirect=/MMS/19_MeasuresManagementSystemBlueprint.asp. Accessed September 27, 
2012.
    \175\ Krumholz H, Brindis R, Brush J, et al. Standards for 
Statistical Models Used for Public Reporting of Health Outcomes: An 
American Heart Association Scientific Statement from the Quality of 
Care and Outcomes Research Interdisciplinary Writing Group: 
Cosponsored by the Council on Epidemiology and Prevention and the 
Stroke Council. Endorsed by the American College of Cardiology 
Foundation. Circulation. Jan 24 2006;113(3):456-462.
---------------------------------------------------------------------------

    Regarding the breadth of costs assessed in the THA/TKA payment 
measure, we believe this measure gives stakeholders the opportunity to 
gain insight into a cascade of medical events triggered by THA/TKA 
hospitalization and the payments associated with those events. The 
measure sums payments for Medicare patients, including index admission 
as well as post-discharge payments for: readmission or other post-
discharge inpatient care, skilled nursing facilities, outpatient 
providers, home health agencies, hospice care, physician/clinical 
laboratory/ambulance services, and durable medical equipment, 
prosthetics/orthotics, and supplies. From days 0-30, the measure 
includes all payments for claims made in this time period. From days 
31-90, the measure includes only payments related to THA/TKA. The 
results show differences in the patterns of post-discharge care and 
associated payments for Medicare patients across a continuum of care 
beginning with a hospitalization for THA/TKA and following patients 90 
days after admission. It is important to include this span of payment 
information to appropriately examine the patterns of post-discharge 
care. For full details, we

[[Page 49678]]

refer readers to the Hospital-Level, Risk-Standardized Payment 
Associated with a 90-Day Episode of Care for Elective Primary Total Hip 
Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (Version 1.0) 
2014 Measure Methodology Report located in the Hip and Knee 
Arthroplasty Payment zip file (http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html).
    Comment: Some commenters expressed support for aspects of the THA/
TKA payment measure specifications but recommended refinements to the 
proposed measure's risk-adjustment model. Specifically, the commenters 
noted the measure should be refined to risk adjust for prior use of 
health services, admissions sources, and administrative data on support 
systems and demographic data. Another commenter raised concerns with 
the measure's clinical risk adjustment specific to the scope and 
adequacy of the clinical risk adjustments variables.
    Response: We appreciate the commenters' support and suggestions to 
consider prior use of health services, admission source, support 
systems, and demographic data in the THA/TKA payment measure risk-
adjustment model. We note that the THA/TKA payment measure utilizes 
administrative claims data that do not include some of this information 
such as support systems (such as living with a spouse). Moreover, 
outcomes measures that are designed to highlight opportunities for more 
efficient care within a community generally do not include risk 
adjustment for factors such as the patient's admission source or prior 
use of health services because such factors may be the result of the 
patterns of care in the local health care system that the measure aims 
to illuminate. For instance, in a community with high rates of use of 
post-acute care services, more patients may come to the hospital from 
similar settings such as skilled nursing care in the pre-admission 
period. To incorporate prior use of skilled nursing care into the 
measures risk adjustment, could ``risk adjust'' away the high use of 
such services in the area in the measure. We note that the payment 
measure is intended to provide transparency into the variation of 
patterns of care that can be used to drive efficiency. Higher payments 
are not necessarily worse than lower payments.
    We also note that the THA/TKA episode-of-care payment measure does 
include risk adjustment for 56 administrative claims-based variables to 
account for differences in patient case mix that could lead to 
differences in payments, including patient comorbidities. The measure 
includes risk variables that assess patient frailty, such as protein-
calorie malnutrition, metastatic cancer, dementia, and age, and thus 
likely does capture the clinical risk factors most concerning to 
clinicians. In addition, the measure includes risk adjustment for 
demographic variables, including age and gender. For full details on 
the measure's clinical variables included in the risk adjustment, we 
refer readers to Table 5 of the Hospital-Level, Risk-Standardized 
Payment Associated with a 90-Day Episode of Care for Elective Primary 
Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) 
(Version 1.0) 2014 Measure Methodology Report (http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html).
    Comment: Some commenters urged CMS to comply with the MAP's 
recommendation of harmonizing and determining the most parsimonious 
approach to measure the cost of hip and knee replacements. Furthermore, 
the commenters noted the need to minimize the burden and confusion of 
competing methodologies.
    Response: While the ``MAP conditionally supported this measure 
pending a timely review of these measures by the NQF Cost and Resource 
Use Standing Committee to consider harmonization issues and determine 
the most parsimonious approach to measuring the costs of hip and knee 
replacements to minimize the burden and confusion of competing 
methodologies,'' \176\ the Hospital IQR Program did not propose 
adopting other hip or knee replacement episode-of-care payment measures 
at this time. We do not agree that there are harmonization issues among 
competing measures for these procedures as it relates to this program. 
The measure approach is currently harmonized with the Hospital IQR 
Program AMI, HF, and PN payment measures that are publicly reported on 
Hospital Compare. As recommended by the MAP, we will work with NQF Cost 
and Resource Use Standing Committee to consider harmonization issues 
further when this measure is brought to NQF. In reference to the 
commenters' concerns about burden, this is a claims-based measure; 
therefore, since hospitals do not have to separately submit or report 
any additional data to CMS, there is no burden on hospitals for data 
collection or calculation of the THA/TKA payment measure.
---------------------------------------------------------------------------

    \176\ ``Spreadsheet of MAP 2015 Final Recommendations'' 
available at: http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

    Key specifications of the THA/TKA payment measure have been 
harmonized and are aligned with the corresponding THA/TKA complications 
measure methodology.
    Comment: Several commenters opposed the measure, noting it is 
reflective of post-discharge costs as well as the actions of multiple 
health care entities, which are beyond the discharging hospital's 
control. The commenters stated that the measure is not actionable for 
hospitals, because the outcome includes costs that happen outside of 
the inpatient setting. One commenter further added that having a 90-day 
outcome timeframe is not reasonable as the hospital cannot affect 
Medicare program expenditures for this long period of time after the 
patient is discharged.
    Response: We appreciate the commenters' views. When considering 
payments to hospitals, we attributed payments for an episode-of-care to 
the hospital since the episode is triggered by admission to an 
inpatient hospitalization. We focused on a 90-day episode-of-care for 
several key reasons. First, THA and TKA procedures require ongoing 
post-discharge care. Second, a fixed 90-day timeframe incentivizes 
hospitals to optimize post-discharge care. Third, mechanical 
complications and wound or joint infections may present after 30 days 
and rates of these complications remain elevated for at least 90 days. 
Fourth, the 90-day post-admission timeframe is consistent with CMS' 
THA/TKA complication measure, which captures specific complications up 
to 90 days after admission. Finally, a 90-day window was consistent 
with the timeframe recommended by members of our TEP.
    The objective of this episode-of-care payment measure is to 
encourage efficiencies gained by well-coordinated care across a 
patient's experience of total hip/knee arthroplasty. Hospitalizations 
represent a brief period of care that requires ongoing management post-
discharge and hospitals are often directly responsible for scheduling 
post-discharge follow-up. This measure includes only primary elective 
THA/TKA. Therefore, providers have an opportunity to plan for both the 
acute and post-acute care their patients will receive including follow-
up visits, choice of rehabilitation facility or home health services, 
as well as necessary durable medical equipment. Hospital quality also 
influences the likelihood of costly prolonged hospital stay or returns 
to the hospital in the post-discharge

[[Page 49679]]

period. Therefore, hospital care and decisions made at the admitting 
hospital affect not only the hospitalization payments, but also 
payments for care in the post-discharge period. We note that, to 
mitigate such concerns, only those payments that are considered 
directly related to the hip or knee replacement are included during the 
31-90 day period. A full description of how related payments are 
determined can be found in the associated technical report at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    Comment: One commenter expressed concern about the accuracy of the 
administrative data sets used to develop the proposed measure.
    Response: We thank the commenter for its concerns. For this 
measure, we have confidence in the ability to identify the cohort 
(patients with elective hip or knee replacement) using claims data as 
this measure uses the same cohort as the THA/TKA complication measure. 
The outcome of this measure is an assessment of payments made over the 
episode-of-care, which claims data are ideally suited for assessing. 
Finally, we have demonstrated validity of claims-based measures for 
profiling hospitals' performance historically for a number of 
previously developed measures, including a medical record validation of 
the hospital-level risk-standardized complication rate (RSCR) following 
elective primary THA/TKA. Specifically, we have validated the adequacy 
of risk-adjustment of claims models by building comparable models using 
medical record data for risk adjustment for heart failure patients, AMI 
patients, PN patients, stroke patients and CABG patients. In all of 
these cases, when both models were applied to the same patient 
population, the hospital risk-standardized mortality and readmission 
rates estimated using the claims-based risk-adjustment models had a 
high level of agreement with the results based on the medical record 
model, thus supporting the use of the claims-based models for public 
reporting. In addition, we validated the THA/TKA complication measure 
outcome definition through a medical record review, which produced a 99 
percent agreement between the current claims-based definition of 
complications and medical record data.\177\
---------------------------------------------------------------------------

    \177\ Grosso LM, Curtis JP, Lin Z, et al. Hospital-level Risk-
Standardized Complication Rate Following Elective Primary Total Hip 
Arthroplasty (THA) And/Or Total Knee Arthroplasty (TKA): Measure 
Methodology Report. June 2012 2012.
---------------------------------------------------------------------------

    Comment: Some commenters expressed concern that the proposed 
measure does not add value for Medicare beneficiaries, because it 
doesn't assess quality of care or give beneficiaries a sense of their 
own financial obligation. The commenters also noted that the proposed 
measure does not add utility to the THA/TKA readmission and 
complication measures. One commenter supported CMS providing the 
resource use data to hospitals, but using a mechanism other than the 
Hospital IQR Program.
    Response: We disagree with commenters and believe that the THA/TKA 
episode-of-care payment measure adds value for Medicare beneficiaries 
and is appropriate for the Hospital IQR Program.
    We believe that even though this measure does not only reflect 
beneficiaries' own financial obligation, it still provides valuable 
information. This measure provides transparency on the payments made 
for Medicare beneficiaries undergoing THA/TKA. The THA/TKA episode-of-
care payment measure's results are intended to reflect differences in 
payments for patients over a 90-day period that are influenced by 
hospital care decisions. Consumers will be able to examine the payment 
measure results to determine if the payments for the 90 day episode-of-
care following a hip or knee replacement at a given hospital are higher 
than would be expected at an average hospital. This measure includes 
payments made by Medicare, other insurers, as well as patients 
themselves. We believe this transparency will provide information about 
variation in costs of care for THA/TKA that can inform patient 
decisions for this primary, elective procedure.
    Furthermore, we believe this measure will be beneficial to 
patients, and is more meaningful, when presented in the context of 
other outcome measures to facilitate profiling hospital value (payments 
and quality); and so its inclusion in the Hospital IQR Program is 
appropriate and beneficial. We aligned key specifications of the 
payment measure with those of the corresponding complication measure 
already adopted in the Hospital IQR Program. We plan to report the 
results of the payment measure on Hospital Compare along with its 
corresponding complication measure results, thus expanding the utility 
of the readmission and complication measures by providing insight on 
payment and quality concurrently.
    Comment: One commenter supported the THA/TKA payment measure's 90-
day outcome timeframe and stated that capturing and sharing data on the 
full spectrum of care after a surgical procedure will encourage 
collaboration and shared accountability across the spectrum of 
clinicians, institutions and providers that serve patients in these 
care settings and this should be the expectation.
    Response: We appreciate the commenter's support for assessing a 90-
day outcome timeframe for the THA/TKA payment measure and agree that 
the measure will encourage collaboration and shared accountability for 
Medicare fee-for-service beneficiaries across the continuum of care 
beginning with a hospitalization for THA/TKA and following patients 90 
days after admission.
    Comment: A few commenters expressed the importance of having 
supportive educational materials for hospitals to learn the THA/TKA 
payment measure specifications. The commenters explained that 
implementing the THA/TKA payment measure will require sharing of 
granular resource use data in a manner that enables hospitals to 
identify opportunities to optimize clinical pathways.
    Response: We appreciate the commenter's recommendation to provide 
hospitals with robust education materials for the Hospital-Level, Risk-
Standardized Payment Associated with the 90-Day Episode of Care for 
Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee 
Arthroplasty (TKA) measure. We are committed to supporting stakeholders 
in their understanding of the measure specifications and will provide 
hospitals with the appropriate supporting resources. We note the 
measure technical report is currently available to access, and we refer 
readers to: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    In addition, as already established in the Hospital IQR Program, 
hospitals have the opportunity to review its data before they are made 
public (79 FR 50203). During this preview period prior to public 
reporting, we will send hospitals hospital-specific reports (HSRs) that 
will provide patient-level data, as well as State and national results. 
This will give hospitals an opportunity to review granular resource use 
data for the THA/TKA payment measure.
    Comment: One commenter stated that CMS should ensure there is 
consensus among stakeholders about the THA/TKA payment measure prior to 
the measure's finalization and adoption into the Hospital IQR Program.

[[Page 49680]]

    Response: We appreciate the commenter's recommendation to ensure 
that stakeholders reach consensus on the THA/TKA payment measure prior 
to public reporting. As stated in previous rulemaking (74 FR 43861), we 
believe that consensus among affected parties also can be reflected by 
several means, including consensus achieved during the measure 
development process (which includes MAP input), consensus shown through 
broad acceptance and use of measures, via NQF endorsement, and 
consensus through public comment. This measure has been evaluated by a 
national TEP and has been subject to a public comment period held 
during the measure development period where stakeholders could comment 
on the technical specifications on the measure. Several commenters 
expressed strong support of the development of this measure and CMS' 
efforts to improve efficiency and incentivize high quality care for 
THA/TKA patients across a continuum of care. We did not make changes to 
the technical specifications of the measure due to comments received 
during the measure development public comment period, but we will take 
the comments into consideration during the annual measure reevaluation 
process.
    The MAP conditionally supported this measure on December 10, 2014 
pending a timely review by the NQF Cost and Resource Use Standing 
Committee. Although the measure is not currently NQF endorsed, it is 
pending submission to NQF for initial endorsement and will be brought 
to the entity once an appropriate project is called.
    After consideration of the public comments we received, we are 
finalizing the Hospital Level, Risk-Standardized Payment Associated 
with a 90-Day Episode-of-Care for Elective Primary THA and/or TKA 
measure for the FY 2018 payment determination and subsequent years as 
proposed.
d. Excess Days in Acute Care After Hospitalization for Acute Myocardial 
Infarction
(1) Background
    Acute myocardial infarction (AMI) is a priority area for outcomes 
measurement because it is a common condition associated with 
considerable morbidity, mortality, and healthcare spending. We note 
that AMI was the tenth most common principal discharge diagnosis among 
patients with Medicare in 2012.\178\ AMI also accounts for a large 
fraction of hospitalization costs, and it was the sixth most expensive 
condition billed to Medicare in 2011.\179\
---------------------------------------------------------------------------

    \178\ Agency for Healthcare Research and Quality (AHRQ). 
Healthcare Cost and Utilization Project (HCUP) Available at: http://hcupnet.ahrq.gov/.
    \179\ Torio CM, Andrews RM.: National Inpatient Hospital Costs: 
The Most Expensive Conditions by Payer, 2011. HCUP Statistical Brief 
#160. 2013; http://www.hcup-us.ahrq.gov/reports/statbriefs/sb160.jsp.
---------------------------------------------------------------------------

    Some of the costs for AMI can be attributed to high acute care 
utilization for post-discharge AMI patients in the form of 
readmissions, observation stays, and ED visits. We note that patients 
admitted for AMI have disproportionately high readmission rates, and 
that readmission rates following discharge for AMI are highly variable 
across hospitals in the United States.180 181 For the 
previously adopted Hospital IQR Program measure, Hospital 30-Day All-
Cause Risk-Standardized Readmission Rate (RSRR) following Acute 
Myocardial Infarction (AMI) Hospitalization (NQF #0505) (CY 2009 OPPS/
ASC final rule with comment period; 73 FR 68780 through 68781) 
(hereinafter referred to as READM-30-AMI), publicly reported 30-day 
risk-standardized readmission rates for AMI ranged from 17.5 percent to 
30.3 percent for the time period between July 2011 and June 2012.\182\ 
However, patients are not only at risk of requiring readmission in the 
post-discharge period. ED visits represent a significant proportion of 
post-discharge acute care utilization. Two recent studies conducted in 
patients of all ages have shown that 9.5 percent of patients return to 
the ED within 30 days of hospital discharge and that about 12 percent 
of these patients are discharged from the ED and are not captured by 
the previously adopted Hospital IQR Program READM-30-AMI 
measure.183 184
---------------------------------------------------------------------------

    \180\ Krumholz HM, Merrill AR, Schone EM, et al.: Patterns of 
hospital performance in acute myocardial infarction and heart 
failure 30-day mortality and readmission. Circulation. 
Cardiovascular Quality & Outcomes. Sep 2009;2(5):407-413.
    \181\ Bernheim SM, Grady JN, Lin Z, et al.: National patterns of 
risk-standardized mortality and readmission for acute myocardial 
infarction and heart failure. Update on publicly reported outcomes 
measures based on the 2010 release. Circulation. Cardiovascular 
Quality & Outcomes. Sep 2010;3(5):459-467.
    \182\ Centers for Medicare and Medicaid Services. Medicare 
Hospital Quality Chartbook Performance Report on Outcome Measures 
September 2013. September 2013; Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/-Medicare-Hospital-Quality-Chartbook-2013.pdf.
    \183\ Rising KL, White LF, Fernandez WG, Boutwell AE.: Emergency 
Department Visits After Hospital Discharge: A Missing Part of the 
Equation. Annals of Emergency Medicine. 2013(0).
    \184\ Vashi AA, Fox JP, Carr BG, et al.: Use of hospital-based 
acute care among patients recently discharged from the hospital. 
JAMA: The journal of the American Medical Association. Jan 23 
2013;309(4):364-371.
---------------------------------------------------------------------------

    In addition, over the past decade, the use of observation stays has 
rapidly increased. Specifically, between 2001 and 2008, the use of 
observation services increased nearly three-fold,\185\ and significant 
variation has been demonstrated in the use of observation services for 
conditions such as chest pain.\186\ These rising rates of observation 
stays among Medicare beneficiaries have gained the attention of 
patients, providers, and policymakers.\187\ For example, a report from 
OIG noted that in 2012, Medicare beneficiaries had 1.5 million 
observation stays.\188\ Many of these observation stays lasted longer 
than the intended one day. This OIG report also noted the potential 
relationship between hospital use of observation stays as an 
alternative to short-stay inpatient hospitalizations as a response to 
changing hospital payment incentives.\189\
---------------------------------------------------------------------------

    \185\ Venkatesh AK GB, Gibson Chambers JJ, Baugh CW, Bohan JS, 
Schuur JD.: Use of Observation Care in US Emergency Departments, 
2001 to 2008. PLoS One. September 2011;6(9):e24326.
    \186\ Schuur JD, Baugh CW, Hess EP, Hilton JA, Pines JM, Asplin 
BR.: Critical pathways for post-emergency outpatient diagnosis and 
treatment: Tools to improve the value of emergency care. Academic 
Emergency Medicine. Jun 2011;18(6):e52-63.
    \187\ Feng Z, Wright B, Mor V.: Sharp rise in Medicare enrollees 
being held in hospitals for observation raises concerns about causes 
and consequences. Health Affairs. Jun 2012;31(6):1251-1259.
    \188\ Wright S.: Hospitals' Use of Observation Stays and Short 
Inpatient Stays for Medicare Beneficiaries, OEI-02-12-00040. 
Washington, DC: Department of Health and Human Services: Office of 
Inspector General July 29, 2013.
    \189\ Wright S.: Hospitals' Use of Observation Stays and Short 
Inpatient Stays for Medicare Beneficiaries, OEI-02-12-00040. 
Washington, DC: Department of Health and Human Services: Office of 
Inspector General July 29, 2013.
---------------------------------------------------------------------------

    Thus, in the context of the previously adopted and publicly 
reported READM-30-AMI measure, the increasing use of ED visits and 
observation stays has raised concerns that the READM-30-AMI measure 
does not capture the full range of unplanned acute care in the post-
discharge period. In particular, there exists concern that high use of 
observation stays could in some cases replace readmissions, and 
hospitals with high rates of observation stays in the post-discharge 
period may therefore have low readmission rates that do not accurately 
reflect the quality of care.\190\
---------------------------------------------------------------------------

    \190\ Carlson J.: Faulty Gauge? Readmissions are down, but 
observational-status patients are up and that could skew Medicare 
numbers. Modern Healthcare. June 8, 2013 2013.
---------------------------------------------------------------------------

    In response to these concerns, CMS improved on a previously 
existing non-Hospital IQR Program measure entitled ``30-Day Post-
Hospital AMI Discharge Care Transition Composite'' (NQF

[[Page 49681]]

#0698). The improved measure (now called Excess Days in Acute Care 
after Hospitalization for Acute Myocardial Infarction) is a risk-
adjusted outcome measure for AMI that incorporates the full range of 
acute care use that patients may experience post-discharge: Hospital 
readmissions, observation stays, and ED visits.
    The measure assesses all-cause acute care utilization for post-
discharge AMI patients for several reasons. First, from the patient 
perspective, acute care utilization for any cause is undesirable. It is 
costly, exposes patients to additional risks of medical care, 
interferes with work and family care, and imposes significant burden on 
caregivers. Second, limiting the measure to inpatient utilization may 
make it susceptible to gaming. Finally, it is often hard to exclude 
quality concerns and accountability based on the documented cause of a 
hospital visit. Therefore, this measure includes all-cause utilization.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24574 through 
24576), we proposed to include this improved measure under the 
exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as 
previously discussed in section VIII.A.7. of the preamble of this final 
rule. We considered existing measures related to care transitions that 
have been endorsed by the NQF. Existing process measures capture many 
important domains of care transitions such as education, medication 
reconciliation and follow-up, but all require chart review and manual 
abstraction. Existing outcome measures are focused entirely on 
readmissions or complications and do not include observation stays or 
ED visits. We also are not aware of any other measures that assess the 
quality of transitional care by measuring 30-day risk-standardized days 
in acute care (hospital readmissions, observation stays, and ED visits) 
following hospitalization for AMI that have been endorsed or adopted by 
a consensus organization, and found no other feasible and practical 
measures on this topic.
    The MAP conditionally supported this measure on the condition that 
this measure is reviewed by NQF and endorsed. We refer readers to the 
Spreadsheet of MAP 2015 Final Recommendations available at: http://www.qualityforum.org/map/, and note that in the document, this measure 
is entitled ``Hospital 30-day, all-cause, unplanned risk-standardized 
days in acute care following acute myocardial infarction (AMI) 
hospitalization.'' In particular, MAP members noted that the measure 
should be considered for SDS adjustment in the upcoming NQF trial 
period, reviewed for the empirical and conceptual relationship between 
SDS factors and risk-standardized days following acute care, and 
endorsed with appropriate consideration of SDS factors as determined by 
NQF standing committees. Some MAP members noted this measure could help 
address concerns about the growing use of observation stays. We note 
that this measure will be submitted to NQF with appropriate 
consideration for SDS, if required, for endorsement proceedings once an 
appropriate measure endorsement project has a call for measures.
(2) Overview of Measure
    This Excess Days in Acute Care after Hospitalization for AMI 
measure is a risk-standardized outcome measure that compares the number 
of days that patients are predicted to spend in acute care across the 
full spectrum of possible acute care events (hospital readmissions, 
observation stays, and ED visits) after discharge from a hospital for 
AMI, compared to the days expected based on their degree of illness.
(3) Data Sources
    The proposed measure is administrative claims-based and will use 3 
years of data. It uses Part A and Part B Medicare administrative claims 
data from Medicare FFS beneficiaries hospitalized for AMI.
(4) Outcome
    The outcome of the measure is the excess number of days patients 
spend in acute care (hospital readmissions, observation stays, and ED 
visits) per 100 discharges during the first 30 days after discharge 
from the hospital, relative to the number spent by the same patients 
discharged from an average hospital. The measure defines days in acute 
care as days spent: (1) In an ED, (2) admitted to observation status, 
or (3) admitted as an unplanned readmission for any cause within 30 
days from the date of discharge from the index AMI hospitalization. 
Readmission days are calculated as the discharge date minus the 
admission date. Admissions that extend beyond the 30-day follow-up 
period are truncated on day 30. Observation days are calculated by the 
hours in observation, rounded up to the nearest half day. On the advice 
of our TEP, an ED treat-and-release visit is counted as one half day. 
ED visits are not counted as a full day because the majority of treat-
and-release visits last fewer than 12 hours.
    ``Planned'' readmissions are those planned by providers for 
anticipated medical treatment or procedures that must be provided in 
the inpatient setting. This measure excludes planned readmissions using 
the planned readmission algorithm previously developed for the READM-
30-AMI measure. A more detailed discussion of exclusions follows below.
    The measure counts all use of acute care occurring in the 30-day 
post-discharge period. For example, if a patient returns to the ED 
three times, the measure counts each ED visit as a half-day. Similarly, 
if a patient has two hospitalizations within 30 days, the days spent in 
each are counted. We take this approach to capture the full patient 
experience of need for acute care in the post-discharge period.
(5) Cohort
    We defined the eligible cohort using the same criteria as the 
existing Hospital IQR Program measure, READM-30-AMI, except that this 
proposed measure does not include patients admitted to Veterans 
Administration hospitals. That is, the cohort includes Medicare FFS 
patients aged 65 years or older: (1) With a principal discharge 
diagnosis of AMI; (2) enrolled in Part A and Part B Medicare for the 12 
months prior to the date of admission, and enrolled in Part A during 
the index admission; (3) who were discharged from a non-Federal acute 
care hospital; (4) who were not transferred to another acute care 
facility; and (5) were alive at discharge. We defined the cohorts using 
the following ICD-9-CM diagnosis codes identified in inpatient claims 
data:
     410.00 (Acute myocardial infarction of anterolateral wall, 
episode of care unspecified);
     410.01 (Acute myocardial infarction of anterolateral wall, 
initial episode of care);
     410.10 (Acute myocardial infarction of other anterior 
wall, episode of care unspecified);
     410.11 (Acute myocardial infarction of other anterior 
wall, initial episode of care);
     410.20 (Acute myocardial infarction of inferolateral wall, 
episode of care unspecified);
     410.21 (Acute myocardial infarction of inferolateral wall, 
initial episode of care);
     410.30 (Acute myocardial infarction of inferoposterior 
wall, episode of care unspecified);
     410.31 (Acute myocardial infarction of inferoposterior 
wall, initial episode of care);
     410.40 (Acute myocardial infarction of other inferior 
wall, episode of care unspecified);

[[Page 49682]]

     410.41 (Acute myocardial infarction of other inferior 
wall, initial episode of care);
     410.50 (Acute myocardial infarction of other lateral wall, 
episode of care unspecified);
     410.51 (Acute myocardial infarction of other lateral wall, 
initial episode of care);
     410.60 (True posterior wall infarction, episode of care 
unspecified);
     410.61 (True posterior wall infarction, initial episode of 
care);
     410.70 (Subendocardial infarction, episode of care 
unspecified);
     410.71 (Subendocardial infarction, initial episode of 
care);
     410.80 (Acute myocardial infarction of other specified 
sites, episode of care unspecified);
     410.81 (Acute myocardial infarction of other specified 
sites, initial episode of care);
     410.90 (Acute myocardial infarction of unspecified site, 
episode of care unspecified);
     410.91 (Acute myocardial infarction of unspecified site, 
initial episode of care).
(6) Exclusion Criteria
    The measure excludes the following admissions from the measure 
cohort: (1) Hospitalizations without at least 30 days of post-discharge 
enrollment in Part A and Part B FFS Medicare because the 30-day outcome 
cannot be assessed in this group since claims data are used to 
determine whether a patient was readmitted, was placed under 
observation, or visited the ED; (2) discharged against medical advice 
(AMA) because providers did not have the opportunity to deliver full 
care and prepare the patient for discharge; (3) hospitalizations for 
patients admitted and discharged on the same day (and not transferred 
or deceased) because these patients likely did not suffer clinically 
significant AMI; and (4) hospitalizations for patients with an index 
admission within 30 days of a previous index admission because 
additional AMI admissions within 30 days are part of the outcome, and 
we choose not to count a single admission both as an index admission 
and a readmission for another index admission.
(7) Risk-Adjustment
    The measure adjusts for variables that are clinically relevant and 
have strong relationships with the outcome. The measure seeks to adjust 
for case-mix differences among hospitals based on the clinical status 
of the patient at the time of the index admission. Accordingly, only 
comorbidities that convey information about the patient at that time or 
in the 12 months prior, and not complications that arise during the 
course of the index hospitalization, are included in the risk 
adjustment. The measure does not adjust for patients' admission source 
or their discharge disposition (for example, skilled nursing facility) 
because these factors are associated with the structure of the 
healthcare system, not solely patients' clinical comorbidities. 
Regional differences in the availability of post-acute care providers 
and practice patterns might exert undue influence on model results. In 
addition, these data fields are not audited and are not as reliable as 
diagnosis codes.
    The outcome is risk adjusted using a two-part random effects model. 
This statistical model, often referred to as a ``hurdle'' model, 
accounts for the structure of the data (patients clustered within 
hospitals) and the observed distribution of the outcome. Specifically, 
it models the number of acute care days for each patient as: (a) A 
probability that they have a non-zero number of days; and (b) a number 
of days, given that this number is non-zero. The first part is 
specified as a logit model, and the second part is specified as a 
Poisson model, with both parts having the same risk-adjustment 
variables and each part having a random effect. This is an accepted 
statistical method that explicitly estimates how much of the variation 
in acute care days is accounted for by patient risk factors, how much 
by the hospital where the patient is treated, and how much is explained 
by neither. This model is used to calculate the predicted (including 
random effects) and expected (assuming random effects are zero) number 
of days for each patient, and the average difference between these for 
each hospital is used to construct the risk-standardized Excess Acute 
Care Days.
(8) Calculating Excess Acute Care Days (EACD)
    The EACD is calculated as the difference between the average of the 
predicted number of days spent in acute care for patients discharged 
from each hospital and the average number of days that would have been 
expected if those patients had been cared for at an average hospital, 
and then the difference is multiplied by 100 so that EACD represents 
EACD per 100 discharges. We multiply the final measure by 100 to be 
consistent with the reporting of the existing READM-30-AMI measure. A 
positive result indicates that patients spend more days in acute care 
post-discharge than expected; a negative result indicates that patients 
spend fewer days in acute care than expected.
    We invited public comment on our proposal to adopt the Excess Days 
in Acute Care after Hospitalization for Acute Myocardial Infarction 
measure for the FY 2018 payment determination and subsequent years.
    Because comments received apply to both the Excess Days in Acute 
Care after Hospitalization for Acute Myocardial Infarction measure and 
Excess Days in Acute Care after Hospitalization for Heart Failure 
measure, we discuss comments and our final policies for both measures 
at the end of section VIII.A.7.e.(8) of the preamble of this final 
rule.
e. Excess Days in Acute Care After Hospitalization for Heart Failure
(1) Background
    Heart failure is a priority area for outcomes measurement because 
it is a common condition associated with considerable morbidity, 
mortality, and healthcare spending. Heart failure was the second most 
common principal discharge diagnosis among patients with Medicare in 
2012.\191\ Heart failure also accounts for a large fraction of 
hospitalization costs, and it was the third most expensive condition 
billed to Medicare in 2011.\192\
---------------------------------------------------------------------------

    \191\ Agency for Healthcare Research and Quality (AHRQ). 
Healthcare Cost and Utilization Project (HCUP) Available at: http://hcupnet.ahrq.gov/.
    \192\ Torio CM, Andrews RM. National Inpatient Hospital Costs: 
The Most Expensive Conditions by Payer, 2011. HCUP Statistical Brief 
#160. 2013; Available at: http://www.hcup-us.ahrq.gov/reports/statbriefs/sb160.jsp.
---------------------------------------------------------------------------

    Some of the costs for heart failure can be attributed to high acute 
care utilization for post-discharge heart failure patients in the form 
of readmissions, observation stays, and ED visits. Patients admitted 
for heart failure have disproportionately high readmission rates. 
Readmission rates following discharge for heart failure are highly 
variable across hospitals in the United States.193 194 For 
the previously adopted Hospital IQR Program measure, Hospital 30-Day 
All-Cause Risk-Standardized Readmission Rate (RSRR) following Heart 
Failure Hospitalization (NQF #0330) (READM-30-HF) (73 FR

[[Page 49683]]

46806 through 48610), publicly reported 30-day risk-standardized 
readmission rates for heart failure ranged from 17.5 percent to 30.3 
percent for the time period between July 2011 and June 2012.\195\ 
However, patients are not only at risk of requiring readmission in the 
post-discharge period. ED visits represent a significant proportion of 
post-discharge acute care utilization. Two recent studies conducted in 
patients of all ages have shown that 9.5 percent of patients return to 
the ED within 30 days of hospital discharge and that about 12 percent 
of these patients are discharged from the ED and are not captured by 
the previously adopted Hospital IQR Program READM-30-HF 
measure.196 197 Patients returning to the ED after heart 
failure hospitalization most commonly return for heart failure 
recurrence and chest pain.\198\
---------------------------------------------------------------------------

    \193\ Krumholz HM, Merrill AR, Schone EM, et al.: Patterns of 
hospital performance in acute myocardial infarction and heart 
failure 30-day mortality and readmission. Circulation. 
Cardiovascular Quality & Outcomes. Sep 2009;2(5):407-413.
    \194\ Bernheim SM, Grady JN, Lin Z, et al.: National patterns of 
risk-standardized mortality and readmission for acute myocardial 
infarction and heart failure. Update on publicly reported outcomes 
measures based on the 2010 release. Circulation. Cardiovascular 
Quality & Outcomes. Sep 2010;3(5):459-467.
    \195\ Centers for Medicare and Medicaid Services. Medicare 
Hospital Quality Chartbook Performance Report on Outcome Measures 
September 2013. September 2013; Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/-Medicare-Hospital-Quality-Chartbook-2013.pdf.
    \196\ Rising KL, White LF, Fernandez WG, Boutwell AE.: Emergency 
Department Visits After Hospital Discharge: A Missing Part of the 
Equation. Annals of Emergency Medicine. 2013(0).
    \197\ Vashi AA, Fox JP, Carr BG, et al.: Use of hospital-based 
acute care among patients recently discharged from the hospital. 
JAMA: The journal of the American Medical Association. Jan 23 
2013;309(4):364-371.
    \198\ Vashi AA, Fox JP, Carr BG, et al.: Use of hospital-based 
acute care among patients recently discharged from the hospital. 
JAMA: The journal of the American Medical Association. Jan 23 
2013;309(4):364-371.
---------------------------------------------------------------------------

    In addition, over the past decade, the use of observation stays has 
rapidly increased. Specifically, between 2001 and 2008, the use of 
observation services increased nearly three-fold,\199\ and significant 
variation has been demonstrated in the use of observation services for 
conditions such as chest pain.\200\ These rising rates of observation 
stays among Medicare beneficiaries have gained the attention of 
patients, providers, and policymakers.201 202 203 For 
example, a report from the OIG noted that in 2012, Medicare 
beneficiaries had 1.5 million observation stays.\204\ Many of these 
observation stays lasted longer than the intended one day. The OIG 
report also noted the potential relationship between hospital use of 
observation stays as an alternative to short-stay inpatient 
hospitalizations as a response to changing hospital payment incentives.
---------------------------------------------------------------------------

    \199\ Venkatesh AK GB, Gibson Chambers JJ, Baugh CW, Bohan JS, 
Schuur JD.: Use of Observation Care in US Emergency Departments, 
2001 to 2008. PLoS One. September 2011;6(9):e24326.
    \200\ Schuur JD, Baugh CW, Hess EP, Hilton JA, Pines JM, Asplin 
BR.: Critical pathways for post-emergency outpatient diagnosis and 
treatment: Tools to improve the value of emergency care. Academic 
Emergency Medicine. Jun 2011;18(6):e52-63.
    \201\ Rising KL, White LF, Fernandez WG, Boutwell AE.: Emergency 
Department Visits After Hospital Discharge: A Missing Part of the 
Equation. Annals of Emergency Medicine. 2013(0).
    \202\ Vashi AA, Fox JP, Carr BG, et al.: Use of hospital-based 
acute care among patients recently discharged from the hospital. 
JAMA: The journal of the American Medical Association. Jan 23 
2013;309(4):364-371.
    \203\ Feng Z, Wright B, Mor V.: Sharp rise in Medicare enrollees 
being held in hospitals for observation raises concerns about causes 
and consequences. Health Affairs. Jun 2012;31(6):1251-1259.
    \204\ Wright S.: Hospitals' Use of Observation Stays and Short 
Inpatient Stays for Medicare Beneficiaries, OEI-02-12-00040. 
Washington, DC: Department of Health and Human Services: Office of 
Inspector General July 29, 2013.
---------------------------------------------------------------------------

    Thus, in the context of the currently adopted and publicly reported 
Hospital IQR Program READM-30-HF measure, the increasing use of ED 
visits and observation stays has raised concerns that the READM-30-HF 
measure does not capture the full range of unplanned acute care in the 
post-discharge period. In particular, there exists concern that high 
use of observation stays could in some cases replace readmissions, and 
hospitals with high rates of observation stays in the post-discharge 
period may therefore have low readmission rates that do not accurately 
reflect the quality of care.\205\
---------------------------------------------------------------------------

    \205\ Carlson J.: Faulty Gauge? Readmissions are down, but 
observational-status patients are up and that could skew Medicare 
numbers. Modern Healthcare. June 8, 2013 2013.
---------------------------------------------------------------------------

    In response to these concerns, we improved on an existing non-
Hospital IQR Program measure entitled ``30-Day Post-Hospital HF 
Discharge Care Transition Composite'' (NQF #0699). The improved measure 
(now called Excess Days in Acute Care after Hospitalization for Heart 
Failure) is a risk-adjusted outcome measure for heart failure that 
incorporates the full range of acute care use that patients may 
experience post-discharge: Hospital readmissions, observation stays, 
and ED visits.
    The measure assesses all-cause acute care utilization for post-
discharge heart failure patients for several reasons. First, from the 
patient perspective, acute care utilization for any cause is 
undesirable. It is costly, exposes patients to additional risks of 
medical care, interferes with work and family care, and imposes 
significant burden on caregivers. Second, limiting the measure to 
inpatient utilization may make it susceptible to gaming. Finally, it is 
often hard to exclude quality concerns and accountability based on the 
documented cause of a hospital visit. Therefore, this measure includes 
all-cause utilization.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24576 through 
234779), we proposed this improved measure in the Hospital IQR Program 
under the exception authority in section 1886(b)(3)(B)(IX)(bb) of the 
Act as previously discussed in section VIII.A.7. of the preamble of 
this final rule. We considered other existing measures related to care 
transitions that have been endorsed by the NQF. Existing process 
measures capture many important domains of care transitions such as 
education, medication reconciliation and follow-up, but all require 
chart review and manual abstraction. Existing outcome measures are 
focused entirely on readmissions or complications and do not include 
observation stays or ED visits. We also are not aware of any other 
measures that assess the quality of transitional care by measuring 30-
day risk-standardized days in acute care (hospital readmissions, 
observation stays and ED visits) following hospitalization for heart 
failure that have been endorsed or adopted by a consensus organization, 
and found no other feasible and practical measures on this topic.
    The MAP conditionally supported this measure on the condition that 
it is reviewed by NQF and endorsed, as detailed in the ``Spreadsheet of 
MAP 2015 Final Recommendations'' available at: http://www.qualityforum.org/map/. We note that this measure was entitled 
``Hospital 30-day, all-cause, unplanned risk-standardized days in acute 
care following heart failure hospitalization,'' in the MAP Spreadsheet. 
In particular, MAP members noted that the measure should be considered 
for SDS adjustment in the upcoming NQF trial period, reviewed for the 
empirical and conceptual relationship between SDS factors and risk-
standardized days following acute care, and endorsed with appropriate 
consideration of SDS factors as determined by NQF standing committees. 
Some MAP members noted this measure could help address concerns about 
the growing use of observation stays. We note that this measure will be 
submitted to NQF with appropriate consideration for SDS, if required, 
for endorsement proceedings once an appropriate measure endorsement 
project has a call for measures.
(2) Overview of Measure
    This Excess Days in Acute Care after Hospitalization for Heart 
Failure measure is a risk-standardized outcome measure that compares 
the number of days that patients are predicted to spend in acute care 
across the full spectrum of possible acute care events (hospital

[[Page 49684]]

readmissions, observation stays, and ED visits) after discharge from a 
hospital for heart failure, compared to the days expected at an average 
hospital, based on their degree of illness.
(3) Data Sources
    The proposed measure is administrative claims-based and will use 3 
years of data. It uses Part A and Part B Medicare administrative claims 
data from Medicare FFS beneficiaries hospitalized for heart failure.
(4) Outcome
    The outcome of the measure is the excess number of days patients 
spend in acute care (hospital readmissions, observation stays, and ED 
visits) per 100 discharges during the first 30 days after discharge 
from the hospital, relative to the number spent by the same patients 
discharged from an average hospital. The measure defines days in acute 
care as days spent: (1) In an ED; (2) admitted to observation status; 
or (3) admitted as an unplanned readmission for any cause within 30 
days from the date of discharge from the index heart failure 
hospitalization. Readmission days are calculated as the discharge date 
minus the admission date. Admissions that extend beyond the 30-day 
follow-up period are truncated on day 30. Observation days are 
calculated by the hours in observation, rounded up to the nearest half 
day. On the advice of our TEP, an ED treat-and-release visit is counted 
as one half day. ED visits are not counted as a full day because the 
majority of treat-and-release visits last fewer than 12 hours.
    ``Planned'' readmissions are those planned by providers for 
anticipated medical treatment or procedures that must be provided in 
the inpatient setting. This measure excludes planned readmissions using 
the planned readmission algorithm (78 FR 50786 through 50787), a set of 
criteria for classifying readmissions that are likely to be planned 
among the general Medicare population using Medicare claims data, 
previously developed for Hospital IQR Program 30-day readmission 
measures, including the previously adopted READM-30-HF measure.
    The measure counts all use of acute care occurring in the 30-day 
post-discharge period. For example, if a patient returns to the ED 
three times, the measure counts each ED visit as a half-day. Similarly, 
if a patient has two hospitalizations within 30 days, the days spent in 
each are counted. We take this approach to capture the full patient 
experience of need for acute care in the post-discharge period.
(5) Cohort
    We defined the eligible cohort using the same criteria as the 
previously adopted Hospital IQR Program READM-30-HF measure (73 FR 
46806 through 48610). The READM-30-HF cohort criteria are included in a 
report posted on our Measure Methodology Web page, under the 
``Downloads'' section in the ``AMI, HF, PN, COPD, and Stroke 
Readmission Updates'' zip file on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. This measure differs 
from the READM-30-HF measure cohort in that this measure does not 
include patients admitted to Veterans Administration hospitals. That 
is, the cohort includes Medicare FFS patients aged 65 years or older: 
(1) With a principal discharge diagnosis of heart failure; (2) enrolled 
in Part A and Part B Medicare for the 12 months prior to the date of 
admission, and enrolled in Part A during the index admission; (3) who 
were discharged from a non-Federal acute care hospital; (4) who were 
not transferred to another acute care facility; and (5) were alive at 
discharge. We defined the cohorts using the following ICD-9-CM 
diagnosis codes identified in inpatient claims data:
     402.01 (Malignant hypertensive heart disease with heart 
failure);
     402.11 (Benign hypertensive heart disease with heart 
failure);
     402.91 (Unspecified hypertensive heart disease with heart 
failure);
     404.01 (Hypertensive heart and chronic kidney disease, 
malignant, with heart failure and with chronic kidney disease stage I 
through stage IV, or unspecified);
     404.03 (Hypertensive heart and chronic kidney disease, 
malignant, with heart failure and with chronic kidney disease stage V 
or end stage renal disease);
     04.11 (Hypertensive heart and chronic kidney disease, 
benign, with heart failure and with chronic kidney disease stage I 
through stage IV, or unspecified);
     404.13 (Hypertensive heart and chronic kidney disease, 
benign, with heart failure and chronic kidney disease stage V or end 
stage renal disease);
     404.91 (Hypertensive heart and chronic kidney disease, 
unspecified, with heart failure and with chronic kidney disease stage I 
through stage IV, or unspecified);
     404.93 (Hypertensive heart and chronic kidney disease, 
unspecified, with heart failure and chronic kidney disease stage V or 
end stage renal disease);
     428.0 (Congestive heart failure, unspecified);
     428.1 (Left heart failure);
     428.20 (Systolic heart failure, unspecified);
     428.21 (Acute systolic heart failure);
     428.22 (Chronic systolic heart failure);
     428.23 (Acute on chronic systolic heart failure);
     428.30 (Diastolic heart failure, unspecified);
     428.31 (Acute diastolic heart failure);
     428.32 (Chronic diastolic heart failure);
     428.33 (Acute on chronic diastolic heart failure)
     428.40 (Combined systolic and diastolic heart failure, 
unspecified);
     428.41 (Acute combined systolic and diastolic heart 
failure);
     428.42 (Chronic combined systolic and diastolic heart 
failure);
     428.43 (Acute on chronic combined systolic and diastolic 
heart failure);
     428.9 (Heart failure, unspecified).
(6) Exclusion Criteria
    The measure excludes the following admissions from the measure 
cohort: (1) Hospitalizations without at least 30 days of post-discharge 
enrollment in Part A and Part B FFS Medicare because the 30-day outcome 
cannot be assessed in this group because claims data are used to 
determine whether a patient was readmitted, was placed under 
observation, or visited the ED; (2) discharged against medical advice 
(AMA) because providers did not have the opportunity to deliver full 
care and prepare the patient for discharge; and (3) hospitalizations 
for patients with an index admission within 30 days of a previous index 
admission because additional heart failure admissions within 30 days 
are part of the outcome, and we choose not to count a single admission 
both as an index admission and a readmission for another index 
admission.
(7) Risk-Adjustment
    The measure adjusts for variables that are clinically relevant and 
have strong relationships with the outcome. The measure seeks to adjust 
for case-mix differences among hospitals based on the clinical status 
of the patient at the time of the index admission. Accordingly, only 
comorbidities that convey information about the patient at that time or 
in the 12 months prior, and not complications that arise during the 
course of the index hospitalization, are included in the risk 
adjustment. The measure does not adjust for patients' admission source 
or their discharge

[[Page 49685]]

disposition (for example, skilled nursing facility) because these 
factors are associated with the structure of the health care system, 
not solely patients' clinical comorbidities. Regional differences in 
the availability of post-acute care providers and practice patterns 
might exert undue influence on model results. In addition, these data 
fields are not audited and are not as reliable as diagnosis codes.
    The outcome is risk adjusted using a two-part random effects model. 
This statistical model, often referred to as a ``hurdle'' model, 
accounts for the structure of the data (patients clustered within 
hospitals) and the observed distribution of the outcome. Specifically, 
it models the number of acute care days for each patient as: (a) A 
probability that they have a non-zero number of days and (b) a number 
of days, given that this number is non-zero. The first part is 
specified as a logit model, and the second part is specified as a 
Poisson model, with both parts having the same risk-adjustment 
variables and each part having a random effect. This is an accepted 
statistical method that explicitly estimates how much of the variation 
in acute care days is accounted for by patient risk factors, how much 
by the hospital where the patient is treated, and how much is explained 
by neither. This model is used to calculate the predicted (including 
random effects) and expected (assuming random effects are zero) number 
of days for each patient, and the average difference between these for 
each hospital is used to construct the risk-standardized Excess Acute 
Care Days.
(8) Calculating Excess Acute Care Days (EACD)
    The EACD is calculated as the difference between the average of the 
predicted number of days spent in acute care for patients discharged 
from each hospital and the average number of days that would have been 
expected if those patients had been cared for at an average hospital, 
and then the difference is multiplied by 100 so that EACD represents 
EACD per 100 discharges. We multiply the final measure by 100 to be 
consistent with the reporting of the existing READM-30-HF measure. A 
positive result indicates that patients spend more days in acute care 
post-discharge than expected; a negative result indicates that patients 
spend fewer days in acute care than expected.
    We invited public comment on our proposals to adopt both the Excess 
Days in Acute Care (EDAC) after Hospitalization for Heart Failure 
measure and the Excess Days in Acute Care (EDAC) after Hospitalization 
for Acute Myocardial Infarction measure (hereinafter, collectively 
referred to as the EDAC measures) for the FY 2018 payment determination 
and subsequent years.
    Comment: One commenter supported the EDAC measures. The commenter 
believed that for some conditions, like AMI and HF, the increase in ED 
visits and observations stays raises the concern that readmission 
measures are not fully capturing the range of unplanned care post-
discharge. The commenter noted that an all-cause acute care utilization 
measure is beneficial to patients as any cause for acute care is 
undesirable and exposure to medical care has risks. The commenter 
believed that the proposed measures also address the unintended 
consequence of shifting patients outside of inpatient care.
    Response: We thank the commenter for its support.
    Comment: Several commenters opposed the proposed addition of the 
EDAC measures, noting that the measures include a cohort of patients 
with multiple risk levels. The commenters also noted that the measures 
do not make adjustments for mortality and suggest that risks of death 
be included in this measure. Finally, the commenters expressed their 
concerns that large academic medical centers will be penalized because 
of the generally underserved populations that they serve and therefore, 
believed that there was a greater need for specific risk adjustment 
factors.
    Response: We appreciate the commenters' concern that the measures 
include patients with a wide range of severity or multiple risk levels. 
The EDAC measures' cohorts were reviewed by clinical experts and a TEP 
and were subject to a separate public comment period prior to the 
proposed rule. Stakeholders agreed with harmonizing the cohorts and 
risk-adjustment models of the EDAC measures with those of the 
readmission measures for heart failure and AMI. As a result, we believe 
these are clinically coherent cohorts.
    Although the cohorts may contain patients with different disease 
severity, and therefore, different levels of risk, these measures are 
risk-adjusted to account for the fact that hospitals may have a 
different mix of patients with differing disease severity. For more 
details about the risk-adjustment methodology, we refer readers to the 
measures' methodology reports on our Measure Methodology Web page, 
under the ``Downloads'' section of the Web page. Please see the ``AMI 
Excess Days in Acute Care'' and ``HF Excess Days in Acute Care'' zip 
files on our Web site at: http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. However, we will continue to monitor how hospital 
performance may be influenced by hospital type.
    Regarding adjusting for mortality, although death is not included 
as an outcome in the EDAC measures, the risk of death is accounted for 
within the EDAC measures. The EDAC measures only assess whether 
patients return to acute care during post-discharge days in which a 
patient is alive and therefore, at risk of returning to acute care in 
the ``denominator.'' Because some patients do not survive 30 days, not 
all patients are at the same risk for an acute event for the same 
amount of time. Therefore, we calculated exposure time as the number of 
days each patient survives after discharge, which is incorporated as 
part of the outcome. Moreover, to ensure that mortality rates are 
considered, we also report separate measures of 30-day mortality for 
AMI and heart failure within the Hospital IQR Program.
    Comment: One commenter asked for definitions of various ``Discharge 
Disposition'' designations, including Group Home (and how it differs 
from Disposition Home) and Assisted Living Facility. In addition, the 
commenter requested additional information on the definition of a 
State-designated Assisted Living Facility and how to determine if a 
facility is a disposition home or an intermediate care facility. 
Finally, the commenter requested clarification on which discharge 
disposition is to be used when a patient leaves against medical advice 
and either goes to another acute care hospital on the same day, in a 
few days, or it is unknown where the patient goes.
    Response: The EDAC measures only use discharge disposition to 
identify patients who die during their hospitalization, or leave 
against medical advice. Patients whose discharge dispositions indicate 
that they left against medical advice are not included in them measure 
regardless of whether they go to another acute care hospital on the 
same day, in a few days, or it is unknown where the patient goes. 
Discharge disposition codes are not used to identify any other cases 
for exclusion from the measures or in the risk adjustment. We do not 
examine discharge disposition in the group home, assisted living 
facility, and intermediate care facility settings for this measure. We 
only examine returns to acute care settings and short-term acute care 
hospitals as well as if there are observation stays and emergency room 
visits.

[[Page 49686]]

    Comment: Some commenters expressed concern that the measures may 
result in unintended consequences, including incentivizing hospitals to 
transition patients too quickly. Another commenter expressed concern 
that the proposed measures could create an incentive for hospitals to 
withhold specific types of medications that reduce mortality and 
hospitalization in the long term but may destabilize and necessitate 
more urgent care for patients in the short-term.
    Response: We appreciate the concern about potential unintended 
consequences of the EDAC measures. Although we believe it is unlikely 
that hospitals would be motivated by the measures to transition 
patients having higher-risk HF or AMI diagnoses too quickly, we will 
consider ways to monitor for shifts in their care. We also believe it 
is unlikely that hospitals would withhold necessary medications from 
their patients as a result of publicly reporting these measures. We 
recognize that some hospital returns are unavoidable. However, others 
may result from poor quality of care, overutilization of care or 
inadequate transitional care. Improving the number of excess days in 
acute care is the joint responsibility of hospitals and other 
clinicians. Actions taken by hospital staff while preparing to 
transition the patient to outpatient status can minimize a patient's 
risk for adverse outcomes, as can collaboration and communication 
between the inpatient and outpatient providers within a community. 
Measuring excess days in acute care will support existing incentives to 
invest in interventions to improve hospital care, better assess the 
readiness of patients for discharge, and facilitate transitions to 
outpatient status.
    Comment: A few commenters opposed the proposal to adopt the EDAC 
measures because they believe that hospitals are already penalized for 
extended stays through the cap on payments regardless of Length of Stay 
(LOS). The commenters also noted that there are external factors that 
influence length of stay, including issues placing patients, 
restrictions on ordering respiratory services, and appeals on discharge 
plans. One commenter stated that it did not believe that LOS is a valid 
proxy for resource use.
    Response: The EDAC measures are not intended to penalize hospitals 
for extended stays and we recognize that some factors are partially 
outside of a hospital's control, such as delays in placement as noted 
by the commenter. These measures are intended to help patients and 
providers understand variation among hospitals in the days that are 
spent by patients in acute care settings following a discharge for AMI 
and HF. The measures provide a broader perspective on post-discharge 
events than the current readmission measures and are intended to 
incentivize improvements in care transitions from the hospital so that 
patients are less likely to return to the acute setting. The measures 
examine both the utilization of services (that is, whether or not a 
patient returned to the hospital for an ED visit, observation stay, or 
readmission) as well as the amount of time in those acute care settings 
in the 30-day period following discharge from the hospital.
    The measures are not intended as resource use measures, but do 
count the days in acute care. This reason for the use of a day count is 
two-fold: Longer stays may reflect that patients are returning with 
greater severity of illness and also because it reflects the experience 
of patients; the longer the stay, the greater the direct impact on the 
patients in terms of lost days of work or caregiving, cost, and risk of 
complications.
    Comment: A few commenters noted that these episodes each reflect 
different approaches to patient-centered care and should not be 
combined into a single number, especially because the ``2-midnight'' 
policy and MSBP measure already monitor these indicators. The 
commenters expressed serious reservations regarding the EDAC measures. 
One commenter believed that the proposed excess days measures would add 
to an existing overlap where hospitals are already penalized for excess 
readmissions and all of the costs that would be included in the new 
EDAC measures would already be captured by the Medicare Spending per 
Beneficiary (MSPB) measure.
    Several commenters were concerned that the inclusion of observation 
patients in the new excess acute care day measures masks the root 
causes of the increased use of observation stays which the commenter 
contended is the Recovery Audit Contractor process and the ``2-
midnight'' policy. For this reason, the commenters encouraged CMS to 
further refine the RAC program as well as refine the assignment of 
patient status to ensure readmission measurement accuracy.
    Response: The ``2-midnight'' policy provides guidance as to when an 
inpatient admission is appropriate for payment under Medicare Part A, 
but does not help beneficiaries to select providers or understand post-
discharge acute care use. Although the MSPB measure may capture similar 
events, it provides a very different perspective based on the Medicare 
payments for such events. MSPB is focused on Medicare payments whereas 
the proposed EDAC measures are focused on excess days. The EDAC 
measures are intended to provide patients and providers a perspective 
on variation among hospitals in the number of days spent in acute care 
during the 30-day post-discharge period as compared to what would be 
expected at an average hospital. The EDAC measures capture a range of 
post-discharge outcomes that are important to patients.
    The EDAC measures are not being finalized for use in a pay-for-
performance program, only for use in the pay-for-reporting Hospital IQR 
Program. Although these measures and the readmission measures all count 
readmission, the EDAC measures provide patients a more comprehensive 
and patient-centered perspective on the 30-day post-discharge 
experience. The Medicare spending measure (that is, MSPB measure) 
assess the payments made for care providing insight into costs, but do 
not directly assess the days that patients spend in an acute care 
setting following hospital discharge. For the Hospital IQR Program, 
hospitals would submit Medicare administrative claims for calculation 
of the EDAC measures, and regardless of the outcome of that data, 
hospitals would receive credit for submitting the information under the 
Program. Therefore, we do not believe hospitals would be ``penalized'' 
as they are not being asked to submit additional information and 
payment will not be adjusted based on results of these measures.
    We understand that commenters have concerns about the interaction 
between Medicare payment policy regarding admissions spanning two 
midnights and the EDAC measures. However, the EDAC measures aim to 
capture all post-discharge acute care days, regardless of whether they 
are considered outpatient or inpatient. Therefore, the ``2-midnight'' 
policy or any changes to such policy will not influence the outcome of 
these measures, as all post-discharge days in acute care are captured 
whether they are billed as outpatient or inpatient days.
    In the CY 2013 OPPS/ASC proposed rule (77 FR 45155 through 45157) 
and final rule with comment period (77 FR 68426 through 68433), we 
expressed concern about recent increases in the length of time that 
Medicare beneficiaries spend as hospital outpatients receiving 
observation services. Subsequently, in the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50906 through 50954), we addressed several of these 
concerns through changes in

[[Page 49687]]

Medicare's policies regarding payment of hospital inpatient services 
under Part B, as well as the appropriateness of Part A payment for 
short hospital stays (that is, the ``2-midnight'' policy). In so doing, 
we clarified that Part A payment is appropriate for admissions where 
the medical record supports the admitting physician's determination 
that the beneficiary either requires care at a hospital expected to 
transcend at least 2 midnights or that the stay will involve a 
procedure designated by the OPPS Inpatient-Only list as an inpatient-
only procedure (or meets some other CMS designated exception). The ``2-
midnight'' policy is a payment policy and does not limit or direct 
medical decision making.
    At the same time, we imposed a moratorium on Recovery Auditor 
reviews related to patient status, which has been extended to impact 
dates of service spanning October 1, 2013 through September 30, 2015. 
In our CY 2016 OPPS/ASC proposed rule (80 FR 39350), we announced our 
plans to limit future Recovery Audit reviews surrounding patient status 
to providers with high denial rates, as determined through patient 
reviews conducted by CMS Quality Improvement Organizations, related to 
Part A payment policies for inpatient admission. In addition, Recovery 
Auditor patient status reviews will be performed under an abbreviated 
look-back period, if the provider bills the claim within 3 months of 
the date of service, to provide increased opportunities for denied Part 
A claims to receive inpatient Part B payment. We believe such ongoing 
and future initiatives address the commenters' concerns regarding 
extended observation.
    Comment: Many commenters opposed the addition of the EDAC measures. 
One commenter acknowledged CMS' rationale for adoption to prevent 
hospitals keeping patients in observation units or the ED to avoid them 
being counted in the 30-day readmission measure, but argued that there 
are other factors that could account for the observed variability that 
cannot be captured in claims data and will not be considered in 
calculating or risk[hyphen]adjusting. The commenters noted that 
hospitals serving a disproportionate share of disadvantaged patients 
may face higher readmission rates or excess days due to conditions 
beyond the hospitals' control.
    Response: The goal of these measures is not to prevent hospitals 
from keeping patients in the ED or observation units; it is to help 
patients and providers understand variation among hospitals in the days 
that are spent by patients in acute care settings following a discharge 
for AMI and HF. The measures provide a broader perspective on post-
discharge events than the current readmission measures and are intended 
to incentivize improvements in care transitions from the hospital so 
that patients are less likely to return to the acute setting.
    Although the measures cannot capture all reasons for variability 
among hospitals, the EDAC measures incorporate risk adjustment using 
claims data to account for patient factors that could account for the 
observed variability. The measures use claims-based risk adjusters that 
are clinically relevant and have strong relationships with the outcome 
as has been done in other claims-based outcome measures in the Hospital 
IQR Program. This approach was supported by the TEP. As part of regular 
measure reevaluation, we monitor ongoing hospital performance to 
evaluate if certain hospitals are negatively affected by the measures.
    Comment: Some commenters recommended that CMS not adopt the EDAC 
measures, noting that the publicly displayed measure data may not be 
useful to beneficiaries and that it is unclear if performance on the 
measure indicates better outcomes. One commenter opposed the proposed 
adoption of the EDAC measures because these measures combine day counts 
for readmissions, observation stays, and ED visits.
    Response: We agree that the EDAC measures alone will not provide a 
complete picture of quality on all outcomes for a given hospital. 
However, we disagree that data from this measure would not be useful to 
beneficiaries. We believe that it is important to provide more 
information so that the public can look at results in conjunction with 
those of other quality measures, such as the readmission and mortality 
measures, to gain a more comprehensive view of the quality of care at a 
hospital. Our discussions with patients and the TEP, as well as 
published literature, indicate that acute care utilization after 
discharge (that is, return to the ED, observation stay, and 
readmission), for any reason, is disruptive to patients and caregivers, 
costly to the healthcare system, and puts patients at additional risk 
of hospital-acquired infections and complications. These measures are 
meant to provide patients with a more complete picture of potential 
post-discharge acute care use as they make choices for their care.
    Regarding whether better performance indicates better outcomes, we 
disagree that it is unclear whether performance on the measure 
indicates better outcomes. We are confident that for most patients, 
remaining home or remaining in a non-acute setting rather than 
returning to the hospital indicates a better outcome. Although some 
hospital returns are unavoidable, others may result from poor quality 
of care, overutilization of care or inadequate transitional care. 
Transitional care includes effective discharge planning, transfer of 
information at the time of discharge, patient assessment and education, 
and coordination-of-care and monitoring in the post-discharge period. 
When appropriate care transition processes are in place (for example, a 
patient is discharged to a suitable location, communication occurs 
between clinicians, medications are correctly reconciled, timely 
follow-up is arranged), fewer patients return to an acute care setting, 
either for an ED visit, observation stay, or hospital readmission 
during the 30 days post-discharge. Numerous studies have found an 
association between quality of inpatient or transitional care and early 
(typically 30-day) readmission rates 
206 207 208 209 210 211 212 213 214 and ED visits 
215 216 217 218 219 for a wide range of

[[Page 49688]]

conditions including AMI and heart failure.
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Affairs Cooperative Studies in Health Services Group on Primary Care 
and Hospital Readmissions. Journal of General Internal Medicine. 
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    \208\ Benbassat J, Taragin M. Hospital readmissions as a measure 
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potentially avoidable hospital readmission rate as a routine 
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2006;44(11):972-981.
    \211\ Hernandez AF, Greiner MA, Fonarow GC, et al. Relationship 
between early physician follow-up and 30-day readmission among 
Medicare beneficiaries hospitalized for heart failure. JAMA: the 
journal of the American Medical Association. May 5 
2010;303(17):1716-1722.
    \212\ Courtney EDJ, Ankrett S, McCollum PT. 28-Day emergency 
surgical re-admission rates as a clinical indicator of performance. 
Ann R Coll Surg Engl. Mar 2003;85(2):75-78.
    \213\ Hernandez AF, Greiner MA, Fonarow GC, et al. Relationship 
between early physician follow-up and 30-day readmission among 
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    \214\ Ashton CM, Del Junco DJ, Souchek J, Wray NP, Mansyur CL. 
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    Regarding the commenters concern about combining the count of days 
for readmissions, observations stays or ED visits, we note that all 
acute care utilization is not equal in its disruption, cost or risk to 
patients. Longer returns to the hospital are more disruptive and impart 
greater risk to patients, and often represent greater severity of 
illness on return. This is why the EDAC measures' outcomes are 
expressed in days. We believe from a patient perspective it is the 
count of total days that is most meaningful and representative of the 
disruption. This is also why we combine day counts for each type of 
event and do not separately report rates of each type of event. This is 
also valuable for hospitals, because a hospital with a high number of 
ED visits may still be able to achieve a low number of total days in 
acute care by actively coordinating care from the ED and avoiding 
rehospitalizations. The measure combines these three visit types based 
on the concept that the rate of each type of event is not as relevant 
to patients as the total days that they spend in acute care settings.
    Comment: Many commenters opposed the proposal to adopt the EDAC 
measures, because they believed that these measures should be NQF-
endorsed before being proposed for the Hospital IQR Program.
    Response: We proposed to include these non-NQF-endorsed measures 
under the Hospital IQR Program exception authority in section 
1886(b)(3)(B)(IX)(bb) of the Act. Although the proposed measures are 
not currently NQF-endorsed, we considered available measures that have 
been endorsed or adopted by the NQF. We also are not aware of any other 
similar measures that have been endorsed or adopted by a consensus 
organization, and found no other feasible and practical measures on 
this topic.
    We note that the EDAC measures will be submitted to NQF with 
appropriate consideration for SDS, if required, for endorsement 
proceedings once an appropriate measure endorsement project has a call 
for measures. We believe it is important to move forward with these 
measures in this program because they fill an important measurement 
gap. These measures address measurement gaps by including a range of 
outcomes that are important to patients (that is, readmissions, ED 
visits, and observation stays), by capturing the total amount of time 
patients spend in acute care, and by accounting for time at risk of an 
event (that is, survival time). We anticipate that the measures will 
support hospital efforts to further optimize quality of care, 
particularly the quality of transitional care, by providing a more 
comprehensive picture of post-discharge events. The measures will also 
provide more detailed information to consumers on what to expect 
following discharge. These measures also addresses the NQS priority of 
care coordination. The MAP conditionally supported these measures. Some 
MAP members noted these measures could help address concerns about the 
growing use of observation stays.
    Comment: Some commenters opposed the proposed inclusion of the EDAC 
measures. One commenter noted that the proposed measures would include 
emergency department visits and observation stays, yet there is no 
consistent evidence to suggest that either is being substituted for 
readmissions by hospitals. One commenter noted that the proposed EDAC 
measures suggest that CMS is dismissive of the importance of hospital-
level care and has reservations with the use of observation services to 
avoid a readmissions policy.
    Response: The commenters suggested that the EDAC measures may have 
been developed out of concern for the use of observation stays in lieu 
of readmission without evidence that either are being substituted for 
readmissions. However, we did not develop these measures to primarily 
capture substitutions for readmissions; we developed these measures to 
provide a broad perspective on post-discharge events. The measures are 
intended to incentivize improvements in care transitions from the 
hospital so that patients are less likely to return to the acute 
setting unnecessarily.
    We do not dismiss the importance of hospital-level care and support 
hospitals using the level of care most appropriate for each particular 
patient's condition. Some returns to the acute care setting are 
necessary and the goal is not to avoid all post-discharge acute care 
service utilization. However, acute care utilization after discharge 
(that is, return to the ED, observation stay, and readmission), for any 
reason, is disruptive to patients and caregivers, costly to the 
healthcare system, and puts patients at additional risk of hospital-
acquired infections and complications. When appropriate care transition 
processes are in place (for example, a patient is discharged to a 
suitable location, communication occurs between clinicians, medications 
are correctly reconciled, timely follow-up is arranged), fewer patients 
return to an acute care setting, whether for an ED visit, observation 
stay, or hospital readmission during the 30 days post-discharge. 
Numerous studies, which we cited in response to other comments, have 
found an association between quality of inpatient or transitional care 
and early (typically 30-day) readmission rates, and ED visits for a 
wide range of conditions including AMI and heart failure.
    Comment: One commenter expressed concern that physicians, not 
hospitals, dictate discharge date.
    Response: It is often true that physicians determine the discharge 
date for patients. However, the EDAC measures are intended to support 
broad efforts by both physicians and hospitals to improve the 
transitions of care from acute care at the time of discharge to reduce 
the likelihood of patients' needing to quickly return to the acute care 
setting. Hospitals can work with physicians to reduce the likelihood of 
unnecessary returns to the hospital in the immediate post-discharge 
period. The EDAC measures are not intended to penalize hospitals for 
extended stays. The measures are intended to help patients and 
providers understand variation among hospitals in the days that are 
spent by patients in acute care settings following a discharge for AMI 
and HF.
    Comment: One commenter opposed the proposed inclusion of the EDAC 
measures and noted that the measures are unduly burdensome to inpatient 
and outpatient providers as well as CMS.
    Response: For the EDAC measures, there is no data collection burden 
for inpatient or outpatient providers because we calculate the measures 
using administrative claims data. Our hope is that the information 
provided to hospitals through these measures will help inpatient and 
outpatient providers better understand the trajectory of care

[[Page 49689]]

for patients that have been discharged from their facility, including 
acute care visits to other sites, and will assist in targeting quality 
improvement activities aimed at improving transitions of care.
    Comment: One commenter acknowledged the responsibility of the 
hospital in managing the patient through the transitions of care, but 
expressed concerns that patient anonymity and freedom of choice in the 
pursuit of post-acute care are factors to be concerned about.
    Response: We agree with the commenter and recognize that patients' 
choices will influence post-acute patterns of care. Patients choose 
where to receive post-discharge care, and some patients may elect to 
seek care in the acute care setting, for example, going to the 
emergency department rather than an outpatient physician office. 
However, as the commenter mentioned, there are actions hospitals can 
take to decrease the likelihood that patients will feel a need to seek 
acute care in the days following discharge. Actions taken by hospital 
staff while preparing to transition the patient to outpatient status 
can minimize a patient's risk for adverse outcomes, as can 
collaboration and communication between the inpatient and outpatient 
providers within a community. Measuring excess days in acute care will 
support existing incentives to invest in interventions to improve 
hospital care, better assess the readiness of patients for discharge, 
and facilitate transitions to outpatient status.
    We do not believe this measure will limit patient anonymity in any 
fashion. We also note that the measure does not pose additional risks 
to patient confidentiality because the measure is based on claims data 
already collected.
    Comment: Some commenters had significant reservations about 
composite measures and patients' ability to understand them, as well as 
providers' ability to take meaningful actions that would have an impact 
on patient outcomes.
    Response: We have developed the EDAC measures to try to provide 
important patient-centered information. We clarify that although care 
in multiple different settings is included in the outcome, the EDAC 
measures are not composite measures, meaning that they do not include 
distinct measures that are combined. Instead, each of the EDAC measures 
is a single outcome measure that is meant to be conceptually 
straightforward. The measures indicate how many more (or fewer) days 
patients from a particular hospital spend in acute care following 
discharge than would be expected at an average hospital. Our hope is 
that beneficiaries will find this helps to provide a more complete 
picture of post-discharge outcomes. We will aim to present results of 
these measures in a straightforward manner on Hospital Compare for 
consumers to more easily understand. In addition, we disagree that 
providers do not have the ability to take meaningful actions that would 
have an impact on patient outcomes as a result of these measures. We 
believe that these measures, which evaluate excess days in acute care, 
will support existing hospital incentives to further invest in 
interventions to improve hospital care, better assess the readiness of 
patients for discharge, and facilitate transitions to outpatient 
status.
    Comment: Some commenters opposed the proposal to adopt the EDAC 
measures and stated that the measures ignore external factors, outside 
of a hospital's or clinician's control, and conflate the correlation 
between fewer post-discharge encounters and higher quality care. The 
commenters recommended that CMS work to fine-tune the proposed measures 
and consider moving away from all-cause measures to reflect the fact 
that certain readmissions specific to the initial encounter can be 
managed better than others.
    Response: We recognize that some hospital returns are unavoidable 
and outside of a clinician or hospital's control. However, as 
previously noted, other returns may result from poor quality of care, 
overutilization of care or inadequate transitional care. Transitional 
care includes effective discharge planning, transfer of information at 
the time of discharge, patient assessment and education, and 
coordination of care and monitoring in the post-discharge period. When 
appropriate care transition processes are in place (for example, 
patient is discharged to a suitable location, communication occurs 
between clinicians, medications are correctly reconciled, timely 
follow-up is arranged, etc.), fewer patients return to an acute care 
setting, either for an ED visit, observation stay, or hospital 
readmission during the 30 days post-discharge. Numerous studies, which 
we cited in response to other comments, have found an association 
between quality of inpatient or transitional care and early returns to 
the hospital.
    We will continue to fine-tune the measure as we do with all 
measures, through the process of annual measure reevaluation. However, 
we measure all-cause acute care utilization for several reasons. First, 
from the patient perspective, acute care utilization for any cause is 
undesirable. Second, limiting the measures to acute care utilization 
for HF exacerbation and AMI may make them susceptible to gaming. 
Moreover, it is often hard to exclude quality concerns and 
accountability based on the documented cause of a hospital visit. 
Measuring all-cause acute care utilization encourages hospitals to 
evaluate the full range of factors that increase the risk of a 
patient's return to the acute care setting.
    Comment: One commenter opposed the proposed adoption of the 
proposed EDAC measures, noting the lack of transparency in their 
development.
    Response: We do not agree that we developed these measures with a 
lack of transparency. We developed the measures in accordance with 
established measure development guidelines, and through assessment by 
external groups, a public comment period prior to the proposed rule, 
and a TEP of national experts and stakeholder organizations. In 
addition, the proposed measures were included on a publicly available 
document entitled ``List of Measures Under Consideration for December 
1, 2014'' \220\ in compliance with section 1890A(a)(2) of the Act, and 
they were reviewed by the MAP as discussed in its MAP Pre-Rulemaking 
Report and Spreadsheet of MAP 2015 Final Recommendations.\221\ The MAP 
conditionally supported the EDAC measures. We have also posted the 
measures' methodology reports on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    \220\ Measure Applications Partnership: List of Measures Under 
Consideration (MUC) for December 1, 2014. Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78318.
    \221\ National Quality Forum ``Process and Approach for MAP Pre-
Rulemaking Deliberations 2015'' available at: http://www.qualityforum.org/Publications/2015/01/Process_and_Approach_for_MAP_Pre-Rulemaking_Deliberations_2015.aspx 
and ``Spreadsheet of MAP 2015 Final Recommendations'' available at: 
http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

    Comment: One commenter expressed concern with the decision to 
equate the costs and intensity in observation and emergency department 
care with that of inpatient care when they are treated differently for 
payment purposes. The commenter specifically disagreed with counting ED 
visits as half days, because the majority of ED visits last much less 
time than that.
    Response: We appreciate the commenter's concern about equating the 
cost and intensity of observation and ED care with that of inpatient 
care. Acute care utilization after discharge (that is,

[[Page 49690]]

return to the ED, observation stay, and readmission), for any reason, 
is disruptive to patients and caregivers, costly to the healthcare 
system, and puts patients at additional risk of hospital-acquired 
infections and complications. We agree that all acute care utilization 
is not, however, equal in its disruption, cost, or risk to patients. 
Prolonged intensive care is worse from a patient perspective than a 
brief ED visit. That is why we elected to report each of the EDAC 
measures as a count of days: Events lasting longer with more cost and 
disruption (such as readmissions) therefore, naturally weigh more than 
brief events (such as ED visits) in the overall day count.
    We appreciate the commenter's feedback on considering ED treat-and-
release visits as half a day. The average length of stay for a treat-
and-release patient from the ED is approximately four hours. Thus, we 
received feedback from the TEP advising that we consider a treat-and-
release ED visit to be equivalent to one half day. A shorter length of 
stay may not capture the full burden on the patient to return to the 
hospital (for example, travel time and lost work time).
    Comment: One commenter supported CMS' proposed EDAC measures, and 
concurred with the rationale. However, the commenter believed that 
leaving these proposed measures separate from the Hospital Readmissions 
Reduction Program would allow hospitals to ``game'' the Hospital 
Readmissions Reduction Program measures by reclassifying patients as 
observation stays and ED visits.
    Response: We thank the commenter for the support. While we 
acknowledge the commenter's concern that attempts to improve EDAC 
measures might result in distortions in the Hospital Readmissions 
Reduction Program, we remind the commenter that the specific conditions 
for which readmissions are measured are only a small fraction of those 
subject to EDAC. We will continue to monitor trends to determine if 
there is systematic shifting and diversion of care (76 FR 51663) and 
will take appropriate action to minimize unintended consequences.
    After consideration of the public comments we received, we are 
finalizing both the Excess Days in Acute Care after Hospitalization for 
Acute Myocardial Infarction and Excess Days in Acute Care after 
Hospitalization for Heart Failure measures for the FY 2018 payment 
determination and subsequent years as proposed.
f. Summary of Previously Adopted and Newly Adopted Hospital IQR Program 
Measure Set for the FY 2018 and FY 2019 Payment Determinations and 
Subsequent Years
    The table below outlines the Hospital IQR Program measure set for 
the FY 2018 and FY 2019 payment determinations and subsequent years and 
includes both previously adopted measures and measures adopted in this 
final rule. We note that in past rules, we have included separate 
charts for each FY; however, here, we are combining the chart for the 
FY 2018 payment determination and subsequent years with that of the FY 
2019 payment determination and subsequent years. We identify those 
measures that begin to be included in the program starting with the FY 
2019 payment determination with a . In addition, all 
measures finalized for removal in this rule are not included in this 
chart.

 Hospital IQR Program Measures for the FY 2018 Payment Determination and
                            Subsequent Years
------------------------------------------------------------------------
          Short name                  Measure name            NQF No.
------------------------------------------------------------------------
                                  NHSN
------------------------------------------------------------------------
CLABSI.......................  National Healthcare                  0139
                                Safety Network (NHSN)
                                Central Line-Associated
                                Bloodstream Infection
                                (CLABSI) Outcome Measure.
Colon and Abdominal            American College of
 Hysterectomy SSI.              Surgeons--Centers for
                                Disease Control and
                                Prevention (ACS-CDC)
                                Harmonized Procedure
                                Specific Surgical Site
                                Infection (SSI) Outcome
                                Measure.
                                 Colon
                                Procedures.
                                 Hysterectomy               0753
                                Procedures.
CAUTI........................  National Healthcare                  0138
                                Safety Network (NHSN)
                                Catheter-associated
                                Urinary Tract Infection
                                (CAUTI) Outcome Measure.
MRSA Bacteremia..............  National Healthcare                  1716
                                Safety Network (NHSN)
                                Facility-wide Inpatient
                                Hospital-onset
                                Methicillin-resistant
                                Staphylococcus aureus
                                (MRSA) Bacteremia
                                Outcome Measure.
CDI..........................  National Healthcare                  1717
                                Safety Network (NHSN)
                                Facility-wide Inpatient
                                Hospital-onset
                                Clostridium difficile
                                Infection (CDI) Outcome
                                Measure.
HCP..........................  Influenza Vaccination                0431
                                Coverage Among
                                Healthcare Personnel.
------------------------------------------------------------------------
                            Chart-abstracted
------------------------------------------------------------------------
ED-1*........................  Median Time from ED                  0495
                                Arrival to ED Departure
                                for Admitted ED Patients.
ED-2 *.......................  Admit Decision Time to ED            0497
                                Departure Time for
                                Admitted Patients.
Imm-2........................  Influenza Immunization...            1659
PC-01*.......................  Elective Delivery                    0469
                                (Collected in aggregate,
                                submitted via Web-based
                                tool or electronic
                                clinical quality
                                measure).
Sepsis.......................  Severe Sepsis and Septic             0500
                                Shock: Management Bundle
                                (Composite Measure).
STK-04 *.....................  Thrombolytic Therapy.....            0437
VTE-5 *......................  Venous Thromboembolism                N/A
                                Discharge Instructions.
VTE-6 *......................  Incidence of Potentially              N/A
                                Preventable Venous
                                Thromboembolism.
------------------------------------------------------------------------
                                 Claims
------------------------------------------------------------------------
MORT-30-AMI..................  Hospital 30-Day, All-                0230
                                Cause, Risk-Standardized
                                Mortality Rate (RSMR)
                                Following Acute
                                Myocardial Infarction
                                (AMI) Hospitalization.
MORT-30-HF...................  Hospital 30-Day, All-                0229
                                Cause, Risk-Standardized
                                Mortality Rate (RSMR)
                                Following Heart Failure
                                (HF) Hospitalization.
MORT-30-PN...................  Hospital 30-Day, All-                0468
                                Cause, Risk-Standardized
                                Mortality Rate Following
                                Pneumonia
                                Hospitalization.

[[Page 49691]]

 
MORT-30-COPD.................  Hospital 30-Day, All-                1893
                                Cause, Risk-Standardized
                                Mortality Rate (RSMR)
                                Following Chronic
                                Obstructive Pulmonary
                                Disease (COPD)
                                Hospitalization.
STK Mortality................  Stroke 30-day Mortality               N/A
                                Rate.
CABG Mortality...............  Hospital 30-Day, All-                2558
                                Cause, Risk-Standardized
                                Mortality Rate (RSMR)
                                Following Coronary
                                Artery Bypass Graft
                                (CABG) Surgery.
READM-30-AMI.................  Hospital 30-Day All-Cause            0505
                                Risk-Standardized
                                Readmission Rate (RSRR)
                                Following Acute
                                Myocardial Infarction
                                (AMI) Hospitalization.
READM-30-HF..................  Hospital 30-Day, All-                0330
                                Cause, Risk-Standardized
                                Readmission Rate (RSRR)
                                Following Heart Failure
                                (HF) Hospitalization.
READM-30-PN..................  Hospital 30-Day, All-                0506
                                Cause, Risk-Standardized
                                Readmission Rate (RSRR)
                                Following Pneumonia
                                Hospitalization.
READM-30-THA/TKA.............  Hospital-Level 30-Day,               1551
                                All-Cause Risk-
                                Standardized Readmission
                                Rate (RSRR) Following
                                Elective Primary Total
                                Hip Arthroplasty (THA)
                                and/or Total Knee
                                Arthroplasty (TKA).
READM-30-HWR.................  Hospital-Wide All-Cause              1789
                                Unplanned Readmission
                                Measure (HWR).
COPD READMIT.................  Hospital 30-Day, All-                1891
                                Cause, Risk-Standardized
                                Readmission Rate (RSRR)
                                Following Chronic
                                Obstructive Pulmonary
                                Disease (COPD)
                                Hospitalization.
STK READMIT..................  30-Day Risk Standardized              N/A
                                Readmission Rate
                                Following Stroke
                                Hospitalization.
CABG READMIT.................  Hospital 30-Day, All-                2515
                                Cause, Unplanned, Risk-
                                Standardized Readmission
                                Rate (RSRR) Following
                                Coronary Artery Bypass
                                Graft (CABG) Surgery.
MSPB.........................  Payment-Standardized                 2158
                                Medicare Spending Per
                                Beneficiary (MSPB).
AMI Payment..................  Hospital-Level, Risk-                2431
                                Standardized Payment
                                Associated with a 30-Day
                                Episode-of-Care for
                                Acute Myocardial
                                Infarction (AMI).
HF Payment...................  Hospital-Level, Risk-                2436
                                Standardized Payment
                                Associated with a 30-Day
                                Episode-of-Care For
                                Heart Failure (HF).
PN Payment...................  Hospital-Level, Risk-                2579
                                Standardized Payment
                                Associated with a 30-day
                                Episode-of-Care For
                                Pneumonia.
Hip/knee complications.......  Hospital-Level Risk-                 1550
                                Standardized
                                Complication Rate (RSCR)
                                Following Elective
                                Primary Total Hip
                                Arthroplasty (THA) and/
                                or Total Knee
                                Arthroplasty (TKA).
PSI 4 (PSI/NSI)..............  Death among Surgical                 0351
                                Inpatients with Serious,
                                Treatable Complications.
PSI 90.......................  Patient Safety for                   0531
                                Selected Indicators
                                (Composite Measure).
THA/TKA Payment **...........  Hospital[hyphen]Level,                N/A
                                Risk[hyphen]Standardized
                                Payment Associated with
                                an Episode-of-Care for
                                Primary Elective Total
                                Hip Arthroplasty and/or
                                Total Knee Arthroplasty.
AMI Excess Days **...........  Excess Days in Acute Care             N/A
                                after Hospitalization
                                for Acute Myocardial
                                Infarction.
HF Excess Days **............  Excess Days in Acute Care             N/A
                                after Hospitalization
                                for Heart Failure.
------------------------------------------------------------------------
         Electronic Clinical Quality Measure (select at least 4)
------------------------------------------------------------------------
AMI-2........................  Aspirin Prescribed at                 N/A
                                Discharge for AMI.
AMI-7a.......................  Fibrinolytic Therapy                 0164
                                Received Within 30
                                Minutes of Hospital
                                Arrival.
AMI-8a.......................  Primary PCI Received                 0163
                                Within 90 Minutes of
                                Hospital Arrival.
AMI-10.......................  Statin Prescribed at                  N/A
                                Discharge.
CAC-3........................  Home Management Plan of               N/A
                                Care Document Given to
                                Patient/Caregiver.
ED-1 *.......................  Median Time from ED                  0495
                                Arrival to ED Departure
                                for Admitted ED Patients.
ED-2 *.......................  Admit Decision Time to ED            0497
                                Departure Time for
                                Admitted Patients.
EHDI-1a......................  Hearing Screening Prior              1354
                                to Hospital Discharge.
HTN..........................  Healthy Term Newborn.....            0716
PC-01 *......................  Elective Delivery                    0469
                                (Collected in aggregate,
                                submitted via Web-based
                                tool or electronic
                                clinical quality
                                measure).
PC-05........................  Exclusive Breast Milk                0480
                                Feeding and the Subset
                                Measure PC-05a Exclusive
                                Breast Milk Feeding
                                Considering Mother's
                                Choice.
PN-6.........................  Initial Antibiotic                   0147
                                Selection for Community-
                                Acquired Pneumonia (CAP)
                                in Immunocompetent
                                Patients.
SCIP-Inf-1a..................  Prophylactic Antibiotic              0527
                                Received Within One Hour
                                Prior to Surgical
                                Incision.
SCIP-Inf-2a..................  Prophylactic Antibiotic              0528
                                Selection for Surgical
                                Patients.
SCIP-Inf-9...................  Urinary catheter Removed              N/A
                                on Postoperative Day 1
                                (POD 1) or Postoperative
                                Day 2 (POD 2) with Day
                                of Surgery Being Day
                                Zero.
STK-02.......................  Discharged on                        0435
                                Antithrombotic Therapy.
STK-03.......................  Anticoagulation Therapy              0436
                                for Atrial Fibrillation/
                                Flutter.
STK-04 *.....................  Thrombolytic Therapy.....            0437
STK-05.......................  Antithrombotic Therapy by            0438
                                the End of Hospital Day
                                Two.
STK-06.......................  Discharged on Statin                 0439
                                Medication.
STK-08.......................  Stroke Education.........             N/A
STK-10.......................  Assessed for                         0441
                                Rehabilitation.
VTE-1........................  Venous Thromboembolism               0371
                                Prophylaxis.
VTE-2........................  Intensive Care Unit                  0372
                                Venous Thromboembolism
                                Prophylaxis.
VTE-3........................  Venous Thromboembolism               0373
                                Patients with
                                Anticoagulation Overlap
                                Therapy.
VTE-4........................  Venous Thromboembolism                N/A
                                Patients Receiving
                                Unfractionated Heparin
                                with Dosages/Platelet
                                Count Monitoring by
                                Protocol or Nomogram.
VTE-5 *......................  Venous Thromboembolism                N/A
                                Discharge Instructions.
VTE-6 *......................  Incidence of Potentially              N/A
                                Preventable Venous
                                Thromboembolism.
------------------------------------------------------------------------

[[Page 49692]]

 
                             Patient Survey
------------------------------------------------------------------------
HCAHPS.......................  HCAHPS + 3-Item Care                 0166
                                Transition Measure (CTM-            0228
                                3).
------------------------------------------------------------------------
                               Structural
------------------------------------------------------------------------
Patient Safety Culture **....  Hospital Survey on                    N/A
                                Patient Safety Culture.
Registry for Nursing           Participation in a                    N/A
 Sensitive Care.                Systematic Clinical
                                Database Registry for
                                Nursing Sensitive Care.
Registry for General Surgery.  Participation in a                    N/A
                                Systematic Clinical
                                Database Registry for
                                Registry for General
                                Surgery.
Safe Surgery Checklist.......  Safe Surgery Checklist                N/A
                                Use.
------------------------------------------------------------------------
* Measure is listed twice, as both chart-abstracted and electronic
  clinical quality measure.
** Measures we are adopting beginning with FY 2018 and for subsequent
  years.


    Hospital IQR Program Additional Measures for the FY 2019 Payment
                   Determination and Subsequent Years
------------------------------------------------------------------------
          Short name                  Measure name            NQF No.
------------------------------------------------------------------------
                                 Claims
------------------------------------------------------------------------
Kidney/UTI Payment...........  Kidney/Urinary Tract                  N/A
                                Infection Clinical
                                Episode-Based Payment
                                measure.
Cellulitis Payment...........  Cellulitis Clinical                   N/A
                                Episode-Based Payment
                                measure.
GI Payment...................  Gastrointestinal                      N/A
                                Hemorrhage Clinical
                                Episode[dash]Based
                                Payment measure.
------------------------------------------------------------------------

8. Electronic Clinical Quality Measures
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24581 through 
245820), we clarified our policy for one previously adopted voluntarily 
reported electronic clinical quality measure for the FY 2017 payment 
determination. Specifically, we clarified our requirements for the 
submission of STK-01 for CY 2015/FY 2017 payment determination. In 
addition, we proposed to expand our electronic clinical quality measure 
policy in order to make reporting of electronic clinical quality 
measures required for the FY 2018 payment determination and subsequent 
years.
a. Previously Adopted Voluntarily Reported Electronic Clinical Quality 
Measures for the FY 2017 Payment Determination
    For a discussion of our previously finalized electronic clinical 
quality measures and policies, we refer readers to the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50811 through 50819), and the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50241 through 50253; 50256 through 50259; 
and 50273 through 50276).
b. Clarification for the Venous Thromboembolism (VTE) Prophylaxis 
(STK--01) Measure (NQF #0434)
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24581), we 
proposed to clarify reporting requirements for the Venous 
Thromboembolism (VTE) Prophylaxis (STK--01) Measure (NQF #0434). In the 
FY 2016 IPPS/LTCH PPS final rule (78 FR 50808), we stated that 
hospitals need not report the STK-01 measure as part of the STK measure 
set if reporting electronically, because no electronic specification 
existed for STK-01. In other words, hospitals that successfully submit 
STK-02, STK-03, STK-04, STK-05, STK-06, STK-08, and STK-10 as 
electronic clinical quality measures are not required to also chart-
abstract and submit STK-01 in order to meet Hospital IQR Program 
requirements for the FY 2016 payment determination. However, hospitals 
that do not submit the specified electronic clinical quality measures 
must continue to chart-abstract and submit STK-01 as previously 
required. To review the details in the 2014 IPPS/LTCH PPS final rule, 
we refer readers to our Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY-2014-IPPS-Final-Rule-Home-Page-Items/FY-2014-IPPS-Final-Rule-CMS-1599-F-Regulations.html.
    We proposed to clarify that this policy continues for the CY 2015/
FY 2017 payment determination. Hospitals that chose to submit the STK-
02, STK-03, STK-04, STK-05, STK-06, STK-08, and STK-10 as electronic 
clinical quality measures are not required to also chart-abstract and 
submit STK-01 in order to meet Hospital IQR Program requirements for 
the FY 2017 payment determination. However, hospitals that do not 
submit the specified electronic clinical quality measures must continue 
to chart-abstract and submit STK-01 as previously required. We note 
that STK-01 is proposed for removal for CY 2016/FY 2018 payment 
determination and refer readers to section VIII.A.3.b. of the preamble 
of this final rule for more details.
    We invited public comment on this proposal.
    Comment: One commenter supported the idea that hospitals that 
successfully submit STK-02, STK-03, STK-04, STK-05, STK-06, STK-08, and 
STK-10 as electronic clinical quality measures would not be required to 
also chart-abstract and submit STK-01 in order to meet the Hospital IQR 
Program requirements for the FY 2016 payment determination.
    Response: We thank the commenter for its support.
    Comment: One commenter expressed concern that the STK measure set 
lacks NQF endorsement.
    Response: We disagree with the commenter because STK-08 is the only 
STK measure that has lost endorsement.\222\ STK 02, STK-03, STK-04, 
STK-05, STK-06, and STK-10 are still currently endorsed. The stroke 
measures are stewarded by The Joint Commission, and to our knowledge, 
The Joint Commission is not planning to resubmit STK-08 for re-
endorsement. Despite the fact that STK-08 has lost endorsement, we 
still believe it should remain in the Hospital IQR Program at

[[Page 49693]]

the present time to promote alignment with the EHR Incentive Program.
---------------------------------------------------------------------------

    \222\ ``Neurology Endorsement Maintenance--Phase I Technical 
Report,'' pages 72-73, available at: http://www.qualityforum.org/Publications/2012/12/Neurology_Endorsement_Maintenance_-_Phase_I_Technical_Report.aspx.
---------------------------------------------------------------------------

    Comment: A few commenters recommended that both CMS and TJC 
consider proposing the STK-01 measure as an electronic clinical quality 
measure because they believed this form will allow CMS to retain the 
measure for voluntary reporting.
    Response: We thank the commenters for their suggestion and will 
consider it in future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our clarification that the policy regarding STK-01 continue 
for the CY 2015/FY 2017 payment determination. Hospitals that chose to 
submit the STK-02, STK-03, STK-04, STK-05, STK-06, STK-08, and STK-10 
as electronic clinical quality measures are not required to also chart-
abstract and submit STK-01 in order to meet Hospital IQR Program 
requirements for the FY 2017 payment determination. However, hospitals 
that do not submit the specified electronic clinical quality measures 
must continue to chart-abstract and submit STK-01 as previously 
required.
c. Requirements for Hospitals To Report Electronic Clinical Quality 
Measures for the FY 2018 Payment Determination and Subsequent Years
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24581 through 
24582). We proposed to expand our electronic clinical quality measure 
policy in order to make reporting of electronic clinical quality 
measures required, rather than voluntary, under the Hospital IQR 
Program. Specifically, we proposed that, beginning in CY 2016/FY 2018 
payment determination and subsequent years, we will require hospitals 
to select and submit 16 electronic clinical quality measures covering 
three NQS domains from the 28 available electronic clinical quality 
measures. For the FY 2018 payment determination and subsequent years, 
we proposed that hospitals must submit Q3 and Q4 data for 16 measures 
chosen by a hospital and reported as electronic clinical quality 
measures. For example, for the FY 2018 payment determination, hospitals 
would be required to submit Q3 and Q4 CY 2016 data for 16 measures of 
their choice. This proposal is in alignment with the Medicare EHR 
Incentive Program, as discussed in section VIII.D.2.b. of the preamble 
of this final rule.
    Hospitals would not fail validation based on these data for CY 
2016/FY 2018 payment determination reporting because validation for 
electronic measures is currently under development. In the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50269 through 50273), we finalized a 
proposal to conduct a validation pilot test for electronically 
specified measures in FY 2015. The pilot is currently underway and 
therefore, the results are not yet available.
    We will delay publicly reporting electronic clinical quality 
measure data submitted by hospitals for CY 2016/FY 2018 payment 
determination in order to allow time for us to evaluate the 
effectiveness of electronically reported clinical quality measure data. 
In the meantime, measures reported via electronic clinical quality 
measure will be marked with a footnote on Hospital Compare noting that: 
(1) The hospital submitted data via EHR; (2) data are being processed 
and analyzed; and (3) CMS will eventually publicly report this data 
once CMS determines the data to be reliable and accurate.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50815 through 
50818), we adopted a policy under which we would only publicly report 
electronic clinical quality measure data under the Hospital IQR Program 
if we determined that the data are accurate enough to be reported. We 
believe that our current proposal to delay public reporting of 
electronic clinical quality measure data submitted by hospitals for CY 
2016/FY 2018 payment determination is also in line with our existing 
policies. In future rulemaking, we will continue to address our intent 
to ensure that measures meet the reliability and validity requirements 
set for public reporting and that the measures are accurate and 
understandable before measures are publicly reported on Hospital 
Compare.
    As shown in the table above entitled ``Hospital IQR Program 
Measures for the FY 2018 Payment Determination and Subsequent Years,'' 
6 measures (ED-1, ED-2, STK-04, VTE-5, VTE-6, and PC-01) may be 
reported either via chart-abstraction or as electronic clinical quality 
measures. For the FY 2018 payment determination and subsequent years, 
we proposed that hospitals may either report a full year of data (Q1 
through Q4) in accordance with the submission requirements for chart-
abstracted data, or electronically submit two quarters of data (Q3 and 
Q4) for each of these 6 measures. If hospitals chose to report these 6 
measures electronically, the measures could be used to count toward the 
Hospital IQR Program's 16 required electronic clinical quality 
measures. Hospitals choosing to report these 6 measures via chart-
abstraction would have to select other electronic measures to meet the 
requirement to report 16 electronic clinical quality measures. 
Additional detail on submitting electronic data for measures can be 
found in section VIII.A.10.d.(3) of the preamble of this final rule.
    We recognize that measure rates may not be comparable between 
measures reported via chart-abstraction and measures that are 
electronically specified. Collecting electronic measure data according 
to our proposal that hospitals must select and submit 16 electronic 
clinical quality measures will help us evaluate variations in data 
capture modes (chart-abstracted versus electronic clinical quality 
measures) in order to determine whether and what adjustments are 
necessary for the two different modes of collection. We refer readers 
to section VIII.A.3.b. of the preamble of this final rule, where we 
discuss CMS' belief that, although the intent of a measure is the same 
whether it is reported via chart-abstraction or electronically, the 
submission modes and measure rates are not the same.
    We also considered two alternative required electronic clinical 
quality measure reporting options. Alternative A would require 
hospitals to submit 10 of 28 quality measures: (1) VTE-1; (2) STK-02; 
(3) ED-1; (4) STK-05; (5) STK-06; (6) STK-10; (7) VTE-2; (8) STK-08; 
(9) ED-2; and (10) STK-03. Our data show that these measures are most 
frequently reported with non-zero values among hospitals attesting 
under 2014 Meaningful Use. In addition, all 10 of these measures have 
been included in the Hospital IQR Program measure set as voluntary 
electronic clinical quality measures since CY 2014/FY 2016 payment 
determination (79 FR 50209 through 50211). Alternative B would require 
hospitals to submit 10 of 28 quality measures of each hospital's 
choice. Both alternatives differ from our proposal only in the number 
and/or composition of the electronic clinical quality measures to be 
reported; that is, for both of these alternatives, the reporting 
periods and submission requirements would be the same as those proposed 
in the proposed rule.
    However, we determined not to pursue these alternative reporting 
options as we believe that requiring hospitals to report more measures 
electronically is in line with our goals to move towards electronic 
clinical quality measure reporting and to align with the EHR Incentive 
Program, which requires reporting on 16 clinical quality measures 
covering at least three domains.
    We believe that our proposals will ultimately decrease reporting 
burden to hospitals. Once capture is possible within EHR, the time and 
resources

[[Page 49694]]

needed to submit quality measures data are significantly less compared 
to manual abstraction. Electronic clinical quality measure collection 
does not require hospital staff time to find and pull paper medical 
records and manually review them to abstract data elements used in 
measure calculation. We acknowledge that there are initial costs, but 
believe that long-term benefits associated with electronic data capture 
outweigh those costs.
    We welcomed public comment on our proposal to require hospitals to 
select and submit 16 electronic clinical quality measures covering 
three NQS domains from the 28 available electronic clinical quality 
measures for eligible hospitals and CAHs for the FY 2018 payment 
determination and subsequent years. We refer readers to section 
VIII.A.10.d.(3) of the preamble of this final rule for details on 
reporting periods and submission deadlines for electronic clinical 
quality measures.
    Comment: Many commenters supported CMS' efforts to move towards 
electronic clinical quality measure reporting and to increase the 
number of required electronic clinical quality measures, noting the 
potential for electronic reporting to reduce provider burden, improve 
reporting efficiencies, and reduce measurement reporting costs.
    Response: We thank the commenters for their support.
    Comment: One commenter specifically supported the proposal to make 
reporting on a subset of 28 electronic clinical quality measures 
mandatory, but opposed CMS' proposal to allow hospitals to select among 
the 28 measures.
    Response: We thank the commenter for its support. In order to best 
facilitate electronic reporting during early implementation of the 
requirement, we believe that allowing hospitals the flexibility to 
select which of the 28 electronic clinical quality measures they wish 
to report is necessary at this time. We will consider whether to 
propose a specific set of electronic clinical quality measures in 
future rulemaking.
    Comment: Many commenters expressed concern that hospitals are not 
prepared to submit electronic clinical quality measures and some noted 
that even hospitals leading in EHR implementation face challenging 
vendor-level issues outside their control. Several commenters noted 
that electronic clinical quality measure reporting is difficult for 
hospitals due to the complexities involved in implementing EHRs. Some 
commenters noted that currently, data integration across hospitals' 
multiple information systems is lacking and many expressed concern that 
hospitals lack the resources to map the necessary data elements from 
the EHR to a QRDA format.
    As a result of these concerns, many commenters requested an 
extension in the roll-out of this requirement, in order to allow 
hospitals time to prepare to meet reporting requirements and to allow 
more time for mapping and testing of this reporting approach. Many 
commenters recommended that CMS continue its current policy of 
voluntary electronic submission. Many of these commenters expressed 
support for CMS' goal to move towards electronic reporting, but 
specifically requested that CMS delay a requirement for hospitals to 
report electronic clinical quality measures until CY 2018, in order to 
align with the EHR Incentive Program. Other commenters recommended that 
CMS require electronic clinical quality measure reporting no sooner 
than CY 2017. One commenter recommended that we allow dual submission 
of electronic data on a voluntary basis for the Hospital IQR and EHR 
Incentive Programs until FY 2020.
    Some commenters recommended that CMS require fewer than 16 
electronic clinical quality measures. Specifically, the commenters 
recommended that CMS require either 2 to 3, 5, or 10 electronic 
clinical quality measures.
    Response: We believe that requiring hospitals to report measures 
electronically is in line with our goals to move towards electronic 
clinical quality measure reporting and to align with the EHR Incentive 
Program. Furthermore, we believe that the CY 2016/FY 2018 payment 
determination is the appropriate time to require electronic clinical 
quality measure reporting because hospitals have had several years to 
report data electronically for the EHR Incentive Program and Hospital 
IQR Program (2 years of pilot reporting and 2 years of voluntary 
reporting), and because currently 95 percent of hospitals attest to 
successful electronic clinical quality measure reporting under the EHR 
Incentive Program.
    However, we recognize the challenges associated with electronic 
reporting and encourage hospitals to work with their vendors to achieve 
electronic capture and reporting despite mapping and integration 
issues. In response to comments, we are finalizing a modification of 
our proposals in order to reduce the effort for hospitals with vendor 
challenges. We believe that requiring a lesser number of eCQMs will 
reduce these burdens on hospitals because the burden associated with 
mapping issues, which is dependent on the number of measures required 
to be reported, were cited as a major concern among commenters. 
However, we anticipate increasing this number in future rules to 
propose the 16 measure requirement. We believe that a full year should 
be enough time for hospitals to address their mapping issues and that 
it is important to continue to make progress towards electronic 
reporting.
    Therefore, instead of requiring hospitals to report 16 of the 28 
electronic clinical quality measures for the CY 2016/FY 2018 payment 
determination as proposed, we will require hospitals to report a 
minimum of 4 of the 28 electronic clinical quality measures for CY 2016 
reporting. Suggestions from commenters ranged from 2 to 10 regarding 
the number of electronic clinical quality measures that should be 
required. We believe that requiring hospitals to report a minimum of 4 
electronic clinical quality measures is reasonable because it 
significantly reduces burden for hospitals from the 16 proposed, but 
still allows us to collect data derived from EHRs to further our plans 
for electronic data collection and validation. Specifically, requiring 
only 4 electronic clinical quality measures reduces hospitals' burden 
of reporting by 75 percent compared to the burden of submitting 16 
electronic clinical quality measures.
    Further, instead of requiring hospitals to report 2 quarters of 
data (Q3 and Q4) two months following the reporting period as proposed, 
we will require hospitals to report the 4 electronic clinical quality 
measures for only 1 quarter (either Q3 or Q4) of CY 2016/FY 2018 
payment determination, with a submission deadline of February 28, 2017. 
We believe this will allow more time for hospitals to overcome vendor 
issues, such as mapping and testing. Under this modified version of the 
proposals, no NQS domain distribution will be required.
    Comment: One commenter requested clarification on whether it needed 
to report 1 year of data for the PC-01 measure via chart abstraction 
for the Hospital VBP Program if they report 6-months of data for PC-01 
as an electronic clinical quality measure for the Hospital IQR Program.
    Response: Electronic clinical quality measure submissions are not a 
part of the Hospital VBP Program at this time. Therefore, all hospitals 
must submit PC-01 measure data based on chart abstraction for that 
program to be included in the scoring determination, irrespective of 
how hospitals submit data for the Hospital IQR Program.
    Comment: Some commenters requested clarification on the reporting

[[Page 49695]]

requirement for the eight chart-abstracted quality measures (ED-1, ED-
2, PC-01, STK-4, VTE-5, VTE-6, SEP-1, IMM-2) in the Hospital IQR 
Program for the FY 2018 payment determination, and specifically, 
whether these measures must be reported via chart-abstraction if a 
hospital does not submit these measures electronically. (CMS notes that 
six of these eight measures overlap as electronic clinical quality 
measures, and that both the chart-abstracted and electronic versions of 
these measures are included in the Hospital IQR Program measure set.) 
Other commenters specifically asked for clarification on the reporting 
requirements and submission deadlines for those six Hospital IQR 
Program measures that can be reported either as electronic clinical 
quality measures, or via chart-abstraction (ED-1, ED-2, PC-01, STK-4, 
VTE-5 and VTE-6). One commenter asked if all six of these measures need 
to be reported via chart-abstraction or electronically, as a group.
    Several commenters recommended allowing parallel reporting of 
chart-abstracted and electronically extracted measures during a 
transition period to ensure that eCQMs can be reported consistently, 
accurately and with a quality threshold. One commenter recommended that 
hospitals should be able to report the electronic clinical quality 
measures adopted under the Hospital IQR Program via chart-abstraction.
    Response: We refer readers to our prior response describing 
modifications to our proposed policies. With respect to the ED-1, ED-2, 
PC-01, STK-4, VTE-5, and VTE-6 measures, instead of giving hospitals 
the option to either report the electronic clinical quality measure or 
submit via chart-abstraction as proposed, we will instead continue to 
require hospitals to submit data for these measures via chart 
abstraction as previously required, and the results of which will be 
publicly displayed. However, hospitals may choose to submit electronic 
data on any of these six measures in addition to the chart-abstraction 
requirements to meet the requirement to report 4 of 28 electronic 
clinical quality measures. This allows for parallel reporting and 
continued public reporting for these important quality measures.
    We note that we do not agree that hospitals should be able to 
report all electronic measures via chart-abstraction instead, because 
such a policy would not further our goals to move towards electronic 
clinical quality measure reporting and align with the EHR Incentive 
Program. We also note that SEP-1, IMM-2, which are chart-abstracted 
measures in the Hospital IQR Program measure set, are required for 
reporting in order for hospitals to successfully meet program 
requirements.
    Comment: Some commenters expressed concern that electronic clinical 
quality measure reporting is difficult for small hospitals due to the 
complexities involved in implementing EHRs. In addition, some 
commenters specifically requested that CMS adopt a hardship exemption, 
similar to the one used for under the EHR Incentive Program, to 
consider allowing hospitals to receive an exemption from the electronic 
reporting requirements if a hardship is demonstrated. One commenter 
noted that failure to provide an exception process will unfairly expose 
hospitals to risk for payment penalties.
    Response: We believe that requiring hospitals to report measures 
electronically is in line with our goals to move towards electronic 
clinical quality measure reporting and to align with the EHR Incentive 
Program. We believe that the CY 2016/FY 2018 payment determination is 
the appropriate time to require electronic clinical quality measure 
reporting because hospitals have had several years to report data 
electronically for the EHR Incentive Program and Hospital IQR Program 
(2 years of pilot reporting and 2 years of voluntary reporting) and 
because currently 95 percent of hospitals attest to successful 
electronic clinical quality measure reporting under the EHR Incentive 
Program. In addition, requiring hospitals to report a minimum of 4 
electronic clinical quality measures significantly reduces burden for 
hospitals as compared to our proposal, while still allowing us to 
collect statistically meaningful data to further our plans for 
electronic data collection.
    However, we recognize the challenges associated with electronic 
reporting and encourage hospitals of all sizes to work with their 
vendors to achieve electronic capture and reporting. In response to 
comments and as stated above, we are finalizing a modification of our 
proposals in order to reduce the effort for hospitals with vendor 
challenges.
    In addition, we will continue to allow hospitals to apply the zero 
denominator and case threshold exceptions described in the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50323 through 50324). Furthermore, we 
are expanding our previously established Extraordinary Circumstances 
Extensions/Exemptions policy (79 FR 50277) to address commenters' 
suggestions. We are finalizing a policy, effective starting with the FY 
2018 payment determination, to allow hospitals to utilize the existing 
Extraordinary Circumstances Exemption (ECE) form to request an 
exemption from the Hospital IQR Program's electronic clinical quality 
measure reporting requirement for the applicable program year based on 
hardships preventing hospitals from electronically reporting. Such 
hardships could include, but are not limited to, infrastructure 
challenges (hospitals must demonstrate that they are in an area without 
sufficient internet access or face insurmountable barriers to obtaining 
infrastructure) or unforeseen circumstances, such as vendor issues 
outside of the hospital's control (including a vendor product losing 
certification). In addition, hospitals newly participating in the 
Hospital IQR Program, that are required to begin data submission under 
Hospital IQR Program procedural requirements at 42 CFR 412.140(c)(1), 
which describes submission and validation of Hospital IQR Program data, 
may also be considered undergoing hardship and can apply for an 
exemption. This expansion of our Extraordinary Circumstances 
Extensions/Exemptions policy is also discussed in section VIII.10.d.(3) 
of the preamble of this final rule.
    Comment: Many commenters raised concerns about the reliability, 
feasibility, and validity of electronic clinical quality measure data 
reporting, noting that electronic data may not be the same as chart-
abstracted data. A few commenters encouraged CMS to ensure the 
integrity of electronic clinical quality measures prior to requiring 
hospitals to report them. Some commenters recommended that CMS use the 
data reported for the EHR Incentive Program to provide insight on the 
feasibility, reliability and validity of eCQMs for future use in 
quality reporting programs. A few commenters also recommended that 
electronic clinical quality measure reporting remain voluntary until 
both providers and policymakers agree on the maturity of eCQM 
specifications and federal regulators test and validate the accuracy 
and completeness of electronic clinical quality measures.
    Response: We note that a validation pilot is currently under way 
and the results of that pilot are pending, as described in the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50269 through 50273). We are requiring 
electronic reporting before the results of the pilot, because we 
believe the CY 2016/FY 2018 payment determination is the appropriate 
timeframe for this policy because hospitals have already had several 
years to report data

[[Page 49696]]

electronically for the EHR Incentive Program and Hospital IQR Program 
(2 years of pilot reporting and 2 years of voluntary reporting), and 
because currently 95 percent of hospitals attest to successful 
electronic clinical quality measure reporting under the EHR Incentive 
Program. We intend to use the results of this pilot to inform future 
rulemaking.
    In addition, requiring eCQMs ensures that we will have data to 
address commenters' concerns regarding the comparability of electronic 
and chart-abstracted data. We also refer readers to section VIII.A.3.b. 
of the preamble of this final rule, where we discuss our position that, 
although the intent of a measure is the same whether it is reported via 
chart-abstraction or electronically, we recognize that the submission 
modes and measure rates are not the same.
    In regards to the suggestion that we utilize data reported for the 
EHR Incentive Program, we appreciate commenters' suggestions, but note 
that hospitals have the option to report eCQMs by attestation, and 95 
percent of hospitals chose to attest, under the EHR Incentive Program. 
Attestation data cannot inform measure validity.
    We do not agree that electronic clinical quality measure reporting 
should remain voluntary until both providers and policymakers agree on 
the maturity of eCQM specifications. We believe that electronic 
clinical quality measures have matured since their inception,\223\ and 
we will address any specific eCQMs in future rulemaking. Our 
established policies about removing or suspending measures (section 
VIII.A.3. of the preamble of this final rule) also apply to eCQMs.
---------------------------------------------------------------------------

    \223\ https://ecqi.healthit.gov/eh.
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    Comment: Some commenters opposed the proposal to require hospitals 
to report electronic clinical quality measures and indicated concern 
that the proposal does not address a national goal or objective in 
quality improvement. The commenters also believed that reliable and 
accurate performance data are a higher priority than advancing a 
particular measure submission approach.
    Response: We disagree that promoting quality measure reporting from 
EHRs fails to meet any goals or objectives in quality improvement. 
Quality measures available now, as well as those being developed for 
the future, are increasingly based on electronic clinical quality 
measure standards. In the future, we anticipate that most, if not all, 
quality measures will be based on data derived from EHRs. Furthermore, 
the move to electronic reporting is a national priority.\224\ In 
addition, as we have explained in previous rulemaking (79 FR 50245), 
our aim to align the Hospital IQR Program with the Medicare EHR 
Incentive Program is in part so that we can attempt to minimize 
reporting burden on hospitals and ease the transition to reporting of 
electronic clinical quality measures.
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    \224\ HHS Health Resources and Services Administration: http://www.hrsa.gov/healthit/meaningfuluse/MU%20Stage1%20CQM/index.html.
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    Reliable, accurate data and electronic reporting are all important 
priorities to us. We believe that, with the advancement of technology 
and the use of electronic measures, even more precise, accurate, and 
reliable data will be captured for analysis.
    Comment: Some commenters noted that CMS has not completed the 
validation pilot test for electronic measures, and recommended that CMS 
provide information on the number of hospitals that would fail to meet 
the Hospital IQR Program requirements because they cannot report data 
electronically.
    Response: We anticipate completing the Hospital IQR Program 
electronic clinical quality measure validation pilot in 2015. Our 
intent is to carefully assess results of the validation pilot once 
available and make recommendations regarding the reporting of 
electronic data accordingly. In the meantime, we have observed the 
successes of hospitals meeting the Meaningful Use requirements. While 
we cannot speculate on the number of hospitals that would fail Hospital 
IQR Program requirements, our data show that 95 percent of hospitals 
already attest to successful electronic clinical quality measure 
reporting under the EHR Incentive Program.
    Comment: Some commenters believed that the EHR Incentive Program is 
meant to drive electronic reporting and that requiring electronic data 
under the Hospital IQR Program could duplicate penalties to hospitals 
unable to meet Meaningful Use requirements. One commenter noted that 
the proposed electronic clinical quality measure policy is more 
aggressive than the requirements specified by either Stage 2 or Stage 3 
Meaningful Use. One commenter recommended that electronic reporting 
should not be mandated in the Hospital IQR Program before it is 
required for the Meaningful Use Program.
    Response: We believe that it is appropriate to require reporting 
from EHRs through the Hospital IQR Program because measures available 
now and those being developed for the future are increasingly based on 
electronic clinical quality measure standards. In addition, we disagree 
that the requirements for electronic reporting in the Hospital IQR 
Program duplicates penalties. In an effort to align with the EHR 
Incentive Program, we have specified that hospitals meeting electronic 
reporting requirements for the Hospital IQR Program will be considered 
to have successfully reported the electronic clinical quality measure 
requirement to the EHR Incentive Program as well. In addition, we note 
that our data show that 95 percent of hospitals already attest to 
successful electronic clinical quality measure reporting under the EHR 
Incentive Program and, accordingly, we do believe that the majority of 
hospitals will successfully report electronic clinical quality 
measures, meeting both the EHR Incentive Program and the Hospital IQR 
Program requirements. Finally, for hospitals that meet our criteria for 
hardship, we are expanding our Extraordinary Circumstances Extensions/
Exemptions policy as discussed above.
    Comment: One commenter recommended that there should be 
consideration given to hospitals that do not have 16 non-zeros to 
report.
    Response: We refer readers to our modified policy described above. 
We expect hospitals to make every effort to report at least 4 
electronic CQMs by February 28, 2017 since this is a Hospital IQR 
Program requirement. Hospitals that meet this requirement will be 
considered to have successfully reported. In addition, as is permitted 
under the EHR Incentive Program (79 FR 50323 through 50324), the zero 
denominator and case threshold exceptions apply to electronic reporting 
under the Hospital IQR Program (79 FR 50258). We also clarify here that 
we interpret ``non-zeros'' to be measures for which a hospital has at 
least one patient meeting the measure inclusion requirements.
    Comment: Some commenters indicated that the resources required to 
establish functionality to produce QRDA files are limited due to other 
high-priority initiatives, including implementation of ICD-10 in 
October 2015. In addition, some commenters noted the learning curve 
associated with the transition to ICD-10 may impact the quality of 
electronic data.
    Response: We note that while ICD-10 goes into effect October 1, 
2015, we are not requiring submission of electronic clinical quality 
measure data until February 28, 2017. We believe that this

[[Page 49697]]

provides hospitals with ample time to prepare to submit electronic 
data.
    Comment: One commenter recommended that the proposed electronic 
clinical quality measure requirement be delayed until the 2014 Edition 
EHR technology is made widely available to hospitals.
    Response: While there may be varying levels of accessibility as a 
result of a hospital's available resources, the 2014 Edition of CEHRT 
is currently already widely available to hospitals.\225\
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    \225\ 2014 CEHRT. Retrieved from: http://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/Downloads/CEHRT2014_FinalRule_QuickGuide.pdf.
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    Comment: Some commenters recommended that CMS adopt the 
recommendations for streamlining national quality measurement efforts 
outlined in the Institute of Medicine's Vital Signs report.
    Response: We thank the commenters for their recommendation and will 
consider this approach for future rulemaking. In addition, we refer 
readers to the Institute of Medicine's Vital Signs report for more 
information.\226\
---------------------------------------------------------------------------

    \226\ IOM: Vital Signs: Core Metrics for Health and Health Care 
Progress--See more at: http://iom.nationalacademies.org/Reports/2015/Vital-Signs-Core-Metrics.aspx#sthash.34FRrBZZ.pdf.
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    Comment: Several commenters encouraged CMS to engage stakeholders 
to develop a plan to transition to electronic reporting.
    Response: We thank the commenters for their recommendation and note 
that we engage with stakeholders throughout the year through monthly 
calls with associations, vendors, and hospitals. We are nearing our 
fourth annual eCQM kaizen event where selected subject matter experts 
gather to apply Lean principles \227\ to further the evolution of these 
measures. We are aware that our external stakeholders would like 
information on how the Lean methodology has been applied to the 
development of electronic clinical quality measures (eCQMs). Therefore, 
we are in the process of identifying a central Web site where the 
public can access information resulting from the events we have 
conducted with internal and external stakeholders. There will be an 
announcement on the eCQI Resource Center when this information is ready 
for viewing (https://ecqi.healthit.gov/).
---------------------------------------------------------------------------

    \227\ ASQ: Lean Six Sigma in Healthcare. Available at: http://asq.org/healthcaresixsigma/lean-six-sigma.html.
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    Comment: Some commenters suggested that electronic measures not be 
finalized until they have been endorsed by NQF.
    Response: We refer readers to our table of eCQMs in section 
VIII.A.7. of the preamble of this final rule, above, for which measures 
are currently considered endorsed as eCQMs. We refer to these eCQMs as 
``legacy'' eCQMs because they were re-specified as eCQMs after first 
being collected in chart abstracted form. These legacy eCQMs are 
considered endorsed until their next re-endorsement cycle. In 
communications with NQF, CMS and other measure stewards such as TJC 
were directed to submit the legacy eCQMs for endorsement during 
maintenance review in order for NQF to continue to consider the eCQM 
versions endorsed. We will take this information into consideration as 
our measures are due for their maintenance re-endorsement.
    Comment: One commenter expressed concern that we do not have the 
infrastructure to accept patient-level data. Another commenter noted 
their concern that 2015 is the first year electronic QRDA I submission 
has been accepted by CMS.
    Response: We note that 2015 is not the first year CMS has requested 
electronic QRDA I submission. As described in the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50905), electronic reporting pilots for the EHR 
Incentive Program from 2012 and 2013 included electronic reporting via 
QRDA I. In addition, as described above, we note that we are 
specifically delaying required electronic clinical quality measure 
reporting until Q3 or Q4 of CY 2016 for the FY 2018 payment 
determination with a submission deadline of February 28, 2017 in order 
to provide hospitals with additional time to implement any necessary 
software. We refer readers to section VIII.A.10.d. of the preamble of 
this final rule for additional detail on our QRDA requirements.
    Comment: Some commenters expressed concern about the public 
reporting implications of electronic data for hospitals in future 
years. These commenters noted that the proposed delay of public 
reporting acknowledges problems with electronic data accuracy.
    Response: Because we currently do not have results available from 
the validation pilot, we cannot yet comment, either negatively or 
positively, on the implications of public reporting of electronic data. 
Our intent is to assess results of the validation pilot once available 
and make recommendations regarding the reporting of electronic data 
accordingly. We note that we will propose plans to publicly display 
electronic data in next year's rulemaking, after the conclusion and 
assessment of the validation pilot. This timing would enable us to 
finalize public display details prior to the February 28, 2017 deadline 
for electronic clinical quality measure data submission.
    Comment: Some commenters noted their belief that the Hospital IQR 
Program is not aligned with TJC's core measure set and stated that the 
lack of quality measure harmonization and alignment creates 
inefficiencies and serves as a source of confusion. The commenters 
recommended that CMS align the electronic clinical quality measure set 
with the TJC core measure set.
    Response: We appreciate the commenters' promotion of measure 
alignment and will review TJC's core measure set to assess future 
potential for measure alignment opportunities. However, in doing so, we 
must consider external alignment with CMS' policy goals, including 
alignment with other CMS programs, CMS quality reporting programs, the 
EHR Incentive Program, and supporting efforts to move facilities 
towards reporting electronic measures. The Hospital IQR Program's 
requirements as finalized further our priorities while keeping hospital 
burden in mind.\228\
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    \228\ Conway, P. The Core Quality Measures Collaborative: A 
Rationale And Framework For Public-Private Quality Measure 
Alignment. Health Affairs Blog, June 23, 2015.
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    Comment: One commenter requested that CMS name e-measures 
distinctly, such that chart-abstracted or claims based measures will 
not be confused with these measures.
    Response: We acknowledge the commenter's concern around clear 
identification of electronic measures. Measures derived from EHRs are 
currently referred to as eCQMs (electronic clinical quality measures). 
We will take commenter's suggestion into consideration.
    Comment: One commenter noted its concern that the time required to 
complete electronic document templates is already burdensome and has 
impacted the amount of time providers have available for direct patient 
interaction. Rapidly increasing the amount of structured data required 
in order to support fully electronic clinical quality measure reporting 
would dramatically increase that burden.
    Response: We recognize the commenter's concern and we continue to 
work with stakeholders, specifically providers, to alleviate burden 
where possible. Once full data capture is possible within EHR, the time 
and resources needed to submit quality measures data are significantly 
less compared to manual abstraction.

[[Page 49698]]

    After consideration of the public comments we received, we are 
finalizing a modified version of our proposal. Specifically, instead of 
requiring hospitals to report 16 electronic clinical quality measures 
as proposed, we are finalizing that hospitals must report at least 4 
electronic clinical quality measures. However, we intend to propose to 
increase the number of required electronic clinical quality measures in 
the FY 2017 IPPS/LTCH PPS proposed rule, as hospitals should have 
sufficient time to address the mapping issues by February 2017. In 
addition, instead of requiring that hospitals select and report 
electronic clinical quality measures across three NQS domains as 
proposed, under our finalized policy, we will not require that any of 
the 4 electronic clinical quality measures fall under any particular 
NQS domain.
    Furthermore, instead of requiring two quarters of electronic 
clinical quality measure data (Q3 and Q4 of CY 2016) for the FY 2018 
payment determination (CY 2016 reporting), we are finalizing that 
hospitals must submit electronic clinical quality measure data for only 
one quarter, either Q3 or Q4, of CY 2016 for the FY 2018 payment 
determination by February 28, 2017. We also note that, although we 
proposed to allow hospitals to report 6 measures (ED-1, ED-2, PC-01, 
STK-4, VTE-5, and VTE-6) either via chart-abstraction or 
electronically, these measures will remain required via chart-
abstraction as previously required. However, hospitals may choose to 
submit electronic data, in addition to chart-abstracted data, on any of 
these 6 measures to meet the requirement to report 4 of 28 electronic 
clinical quality measures.
    Finally, while we proposed that measures reported via electronic 
clinical quality measure would be marked with a footnote on Hospital 
Compare, we are finalizing instead that any data submitted 
electronically will not be posted on the Hospital Compare Web site. We 
will address public reporting of electronic data in next year's 
rulemaking, after the conclusion and assessment of the validation 
pilot.
9. Future Considerations for Electronically Specified Measures: 
Consideration to Implement a New Type of Measure That Utilizes Core 
Clinical Data Elements
a. Background
    We have implemented several claims-based measures comparing 
hospital performance on 30-day mortality, 30-day readmission, and 
complications following hospitalization for several conditions and 
procedures in the Hospital IQR, Hospital Readmissions Reductions, and 
Hospital VBP Programs. Although these measures have been shown to 
provide valid information about hospital performance, the clinical 
community continues to express the opinion that data gathered directly 
from patients and used by clinicians to guide diagnostic decisions and 
treatment are preferable for risk adjustment of hospital outcome 
measures. In response to clinicians and providers' feedback in public 
comment periods during measure development, and keeping with our goal 
to move toward the use of electronic health records (EHRs) for 
electronic quality measure reporting throughout CMS programs, where 
feasible, we are considering: (1) The use of core clinical data 
elements derived from EHRs for use in future quality measures (for 
example, risk adjustment of outcome measures); (2) the collection of 
additional administrative linkage variables to link a patient's 
episode-of-care from EHR data with his administrative claim data, and 
(3) use of content exchange standards.
    During a July 2014 public comment period on the CMS Call for Public 
Comment Web site \229\ for the hybrid hospital-wide readmission measure 
with administrative claims and electronic health record data, we 
received supportive feedback on the importance of the use of clinical 
data in hospital outcome measures. Commenters supported our efforts in 
examining new approaches to provide a more accurate assessment and 
portrayal of services provided by clinicians and hospitals, and the 
feedback also indicated their belief that it is very important that 
enriched clinical data from an EHR be used to supplement the clinically 
limited datasets available from administrative claims data. We note 
that reviewers can find the public comment summary report within the 
Hybrid Hospital-Wide Readmission Measure with Electronic Health Record 
Extracted Risk Factors (Version 1.1), in the ``Downloads'' section of 
our Measure Methodology Web page. We refer readers to the Core Clinical 
Data Elements and Hybrid Measures zip file found on our Web site at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
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    \229\ CMS.gov. Measure Management System, Public Comment. Hybrid 
Hospital-Wide Readmission Measure with Claims and Electronic Health 
Record Data. Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/CallforPublicComment.html.
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    In response to this public feedback, as well as CMS policy goals, 
we have identified a set of 21 clinical variables, or core clinical 
data elements, which we note are routinely collected on hospitalized 
adults and feasibly extracted from hospital EHRs. We believe that these 
core clinical data elements can be adapted for future use as part of 
specific quality measures. During our testing, we found that these 21 
core clinical data elements can be used to risk adjust 30-day mortality 
and 30-day readmission outcome measures. Although we have thus far only 
tested the core clinical data elements for use in the risk adjustment 
models of hospital-level outcome measures, they could be utilized in 
other ways in the future. We anticipate that EHRs will continue to 
improve capturing of relevant clinical data and we also anticipate 
future expansion of the list of core clinical data elements.
    In the future, one way in which we envision using core clinical 
data elements in conjunction with other sources of data, such as 
administrative claims, is to calculate ``hybrid'' outcome measures, 
which are quality measures that utilize more than one source of data. 
We believe that these types of hybrid measures could enhance the 
current CMS administrative claims-based outcome measures by utilizing 
patient clinical data captured in the EHR. We have shown that core 
clinical data elements captured in EHRs and used to risk adjust 
hospital outcome measures improve the discrimination of the measures, 
or the ability to distinguish good and poor performers, as assessed by 
the c-statistic, which evaluates the measure's ability to discriminate 
or differentiate among high and low performing 
hospitals.230 231 232 Finally, hybrid measure results would 
need to be calculated by CMS to determine hospitals' risk-adjusted 
rates relative to national rates used in public reporting. With hybrid 
measures, hospitals would forward data extracted from the EHR, and CMS 
would perform the measure calculations.
---------------------------------------------------------------------------

    \230\ Hybrid 30-Day Risk-standardized Acute Myocardial 
Infarction Mortality Measure with Electronic Health Record Extracted 
Risk Factors (Version 1.1).
    \231\ Hybrid Hospital-Wide Readmission Measure with Electronic 
Health Record Extracted Risk Factors (Version 1.1).
    \232\ 2013 Core Clinical Data Elements Technical Report (Version 
1.1).
---------------------------------------------------------------------------

    To illustrate one way in which the 21 core clinical data elements 
can be used, we developed two hybrid measures: (1) Hospital 30-Day 
Risk-Standardized

[[Page 49699]]

Acute Myocardial Infarction (AMI) Mortality eMeasure (NQF #2473); and 
(2) a hybrid hospital-wide 30-day readmission measure, which has not 
yet undergone NQF endorsement proceedings. However, the latter 
measure's development was encouraged by the MAP.\233\ We note that the 
2013 Core Clinical Data Elements Technical Report Version 1.1 (a 
methodology report) provides a more detailed review of the clinical 
core data elements. This document is posted on our Measure Methodology 
Web page, under the ``Downloads'' section in Core Clinical Data 
Elements and Hybrid Measures zip file, available on our Web site at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    \233\ National Quality Forum. Measure Application Partnership. 
Available at: https://share.cms.gov/center/CCSQ/QMHAG/DHMM/Measures%20Development%20and%20Maintenance/map/MAP%202014/MAP%202015/map_pre-rulemaking_final_report_2015.pdf. Accessed on 
February 5, 2015.
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b. Overview of Core Clinical Data Elements
    Core clinical data elements are a set of clinical variables derived 
from EHRs that can be used to risk adjust hospital outcome measures. We 
have currently identified a set of 21 core clinical data elements that: 
(1) Can be feasibly extracted from current EHR systems; (2) are 
available on most adult patients; and (3) are relevant to patient 
outcomes following hospitalization. These core clinical data elements 
are listed in the table below.

  Currently Identified Core Clinical Data Elements Considered for Risk-
   Adjustment of Hybrid Outcome Measures Used in the Hospital Setting
------------------------------------------------------------------------
                                                        Time window for
          Data elements                Units of         first captured
                                      measurement           values
------------------------------------------------------------------------
                         Patient Characteristics
------------------------------------------------------------------------
Age at admission................  Years.............  --
Gender..........................  Male or female....  --
------------------------------------------------------------------------
                       First-Captured Vital Signs
------------------------------------------------------------------------
Heart Rate......................  Beats per minute..  0-2 hours.
Systolic Blood Pressure.........  mmHg..............  0-2 hours.
Diastolic Blood Pressure........  mmHg..............  0-2 hours.
Respiratory Rate................  Breath per minute.  0-2 hours.
Temperature.....................  Degrees Fahrenheit  0-2 hours.
Oxygen Saturation...............  Percent...........  0-2 hours.
Weight..........................  Pounds............  0-24 hours.
------------------------------------------------------------------------
                    First-Captured Laboratory Results
------------------------------------------------------------------------
Hemoglobin......................  g/dL..............  0-24 hours.
Hematocrit......................  % red blood cells.  0-24 hours.
Platelet........................  Count.............  0-24 hours.
WBC Count.......................  Cells/mL..........  0-24 hours.
Potassium.......................  mEq/L.............  0-24 hours.
Sodium..........................  mEq/L.............  0-24 hours.
Chloride........................  mEq/L.............  0-24 hours.
Bicarbonate.....................  mmol/L............  0-24 hours.
BUN.............................  mg/dL.............  0-24 hours.
Creatinine......................  mg/dL.............  0-24 hours.
Glucose.........................  mg/dL.............  0-24 hours.
Troponin........................  ng/mL.............  0-24 hours.
------------------------------------------------------------------------

    This set of core clinical data elements consists of the first 
captured vital signs, and the results of a complete blood count and 
basic chemistry panel. These core clinical data elements were selected 
because they were empirically shown to be captured during routine 
clinical practice on most adult hospitalized patients.\234\ Among other 
ways, one way in which we envision using these core clinical data 
elements is to risk adjust outcomes measures, since the elements 
improve the discrimination of hospital outcome measures as assessed by 
c-statistic and enhances the face validity of measures for the clinical 
community, which continue to express a preference for these types of 
data to account for patients' severity of illness.\235\
---------------------------------------------------------------------------

    \234\ 2013 Core Clinical Data Elements Technical Report (Version 
1.1). Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    \235\ Hybrid 30-day Risk-standardized Acute Myocardial 
Infarction Mortality Measure with Electronic Health Record Extracted 
Risk Factors (Version 1.1) and Hybrid Hospital-Wide Readmission 
Measure with Electronic Health Record Extracted Risk Factors 
(Version 1.1). Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    In the context of risk-adjustment, future hybrid measures would 
utilize some or all of the 21 core clinical data elements listed above, 
as well as any future feasible core clinical data elements. For 
example, the Hospital 30-day Risk-Standardized Acute Myocardial 
Infarction (AMI) Mortality eMeasure (NQF #2473) uses five core clinical 
data elements: Age; heart rate; systolic blood pressure; troponin; and 
creatinine.\236\ In contrast, the hybrid hospital-wide measure uses 14 
of the 21 core clinical data elements (age, heart rate, respiratory 
rate, temperature, systolic blood pressure, oxygen

[[Page 49700]]

saturation, weight, hematocrit, white blood cell count, sodium, 
potassium, bicarbonate, creatinine and glucose).\237\ These two hybrid 
measures illustrate how specific core clinical data elements used in a 
given hybrid measure will vary depending on the core clinical data 
elements identified as relevant for and predictive of that measure 
outcome in the target cohort.
---------------------------------------------------------------------------

    \236\ Hybrid 30-day Risk-standardized Acute Myocardial 
Infarction Mortality Measure with Electronic Health Record Extracted 
Risk Factors (Version 1.1). Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    \237\ Hybrid Hospital-Wide Readmission Measure with Electronic 
Health Record Extracted Risk Factors (Version 1.1). Available at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    We note that the 21 core clinical data elements included are 
already routinely recorded in the EHR by clinical staff at the 
beginning of an inpatient encounter to diagnose and treat patients. 
Collection of these core clinical data elements are in response to 
stakeholder preference, and in particular, for the use of clinical 
information in risk models, but is not meant to guide or alter the care 
patients receive. We believe clinical staff should continue to only 
perform measurements or tests that are appropriate for diagnostic 
assessment or treatment of patients.
    We assessed the feasibility of extraction of the 21 core clinical 
data elements in models of readmission and mortality outcome measures 
(Core Clinical Data Elements Development is discussed below). For 
additional detail on testing and the measure methodologies, we refer 
readers to the 2013 Core Clinical Data Elements Technical Report 
Version 1.1 methodology report posted on our Measure Methodology Web 
page, under the ``Downloads'' section in Core Clinical Data Elements 
and Hybrid Measures zip file, on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
c. Core Clinical Data Elements Development
    To identify this set of core clinical data elements, we first 
focused on those data elements that can be used to risk adjust hospital 
outcome measures. We developed a systematic five-step approach in which 
we: (1) Established a set of criteria to assess the feasibility of 
consistently identifying and extracting EHR data elements, and convened 
a diverse group of health information technology experts and end users 
to apply these criteria to EHR data; (2) conducted a systematic review 
of the literature to identify clinical data that has been shown to 
predict patient outcomes following acute care hospital admissions; (3) 
assessed the frequency and timing of capture of candidate data elements 
using a dataset from an active EHR data warehouse of a large healthcare 
system serving over 3.3 million beneficiaries; \238\ (4) tested the 
utility of feasible data elements in risk-adjusted hierarchical models 
of 30-day mortality following hospitalization for a variety of common 
and costly medical conditions (for example, heart failure, pneumonia, 
and stroke); and (5) tested the core clinical data elements as risk-
adjustment variables in the previously adopted Hospital IQR Program 
measure, CMS 30-Day Hospital-Wide All-Cause Unplanned Readmission 
Outcome measure (NQF #1789) finalized in the FY 2013 IPPS/LTCH PPS 
final rule (77 FR 53521 through 53528), creating the hybrid hospital-
wide readmission measure. These steps are discussed in more detail 
below.
---------------------------------------------------------------------------

    \238\ 2013 Core Clinical Data Elements Technical Report Version 
1.1. Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    To identify and test the core clinical data elements, a TEP was 
convened. TEP members applied feasibility criteria to each data type in 
the Quality Data Model (QDM) considering the context of adult 
hospitalized patients only. The QDM is an information model that 
provides a standardized description of the clinical information 
captured in EHRs, and provides a uniform framework to support quality 
measurement that utilizes EHR data. TEP members were asked to indicate 
whether at least one data element within each data type was: (1) 
Consistently obtained in the target population (patients 18 years and 
older) based on current clinical practice; (2) captured with a standard 
definition and recorded in a standard format within the EHR; and (3) 
entered in structured fields that are feasibly retrieved from current 
EHR systems.
    Next, we conducted a systematic review of the literature to 
identify clinical data shown to be predictive of mortality and 
readmission in statistical models. A thorough review of studies 
revealed that several categories of clinical information from patient 
medical records captured during diagnostic assessment and treatment 
were commonly used to predict mortality and readmission. These 
included, but were not limited to, basic demographic information, 
laboratory test results, and vital sign findings. The results are 
described in the 2013 Core Clinical Data Elements Technical Report 
(Version 1.1) and is available on our Measure Methodology Web page, 
under the ``Downloads'' section in Core Clinical Data Elements and 
Hybrid Measures zip file found on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    In order to empirically establish the feasibility of potential 
clinical data elements identified by the TEP, we used a large multi-
site database from a healthcare system serving over 3.3 million 
beneficiaries. We examined the format of the clinical data elements, 
the consistency and timing of capture, and the distribution of these 
extracted clinical data values across conditions, hospitals, and point 
of hospital entry. From the results of that analysis, we identified a 
list of clinical data elements that were consistently captured for more 
than 90 percent of adults admitted for common medical conditions. In 
addition, only the first clinical data elements captured close to the 
time a patient arrived at the facility were considered in order to 
reflect patients' clinical status when they presented, and not the 
results of treatment received at the facility. Analyses showed that 
vital signs (heart rate, systolic blood pressure, diastolic blood 
pressure, respiratory rate, temperature, and oxygen saturation) were 
captured within 2 hours of arrival to the hospital for most patients 
who were subsequently admitted to the same facility. In addition, 
analyses showed that weight and laboratory tests (hemoglobin, 
hematocrit, platelet, white blood cell (WBC) count, potassium, sodium, 
chloride, bicarbonate, blood urea nitrogen (BUN), creatinine, glucose, 
and troponin) were captured within 24 hours of arrival to the hospital 
for most patients who were subsequently admitted to the same facility. 
This was true whether patients were first assessed in the emergency 
department, or an inpatient unit. From these analyses, we specified the 
units of measurement and time window for first captured values for each 
of the 21 feasible and relevant core clinical data elements.
d. Core Clinical Data Elements Feasibility Testing Using Readmission 
and Mortality Models
    In order to demonstrate that the core clinical data elements 
improved hospital outcome measures, we tested them in models of 30-day 
mortality and 30-day readmission following hospitalization from a 
variety of conditions. The 21 core clinical data elements shown in the 
table above were statistically significant predictors in at least one 
measure of 30-day mortality after admission for eight common

[[Page 49701]]

medical conditions: AMI; congestive heart failure; pneumonia; acute 
cerebrovascular disease; septicemia (except during labor); diabetes 
mellitus with complications; coronary atherosclerosis; and cardiac 
dysrhythmias.\239\ All of the core clinical data elements listed above 
were also statistically significant predictors of readmission in the 
risk-adjusted models of 30-day readmission in a hospital-wide 
cohort.\240\ The testing results demonstrate that the core clinical 
data elements enhanced the discrimination (assessed using the c-
statistic) when used either in combination with or in place of 
administrative claims data for risk adjustment of currently reported 
CMS 30-day mortality and readmission outcome measures. For more 
detailed information on testing, we refer readers to the methodology 
reports posted on our Measure Methodology Web page, under the 
``Downloads'' section in Core Clinical Data Elements and Hybrid 
Measures zip file, found on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    \239\ Hybrid 30-Day Risk-standardized Acute Myocardial 
Infarction Mortality Measure with Electronic Health Record Extracted 
Risk Factors (Version 1.1). Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    \240\ Hybrid Hospital-Wide Readmission Measure with Electronic 
Health Record Extracted Risk Factors (Version 1.1). Available at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

e. Use of Core Clinical Data Elements in Hospital Quality Measures for 
the Hospital IQR Program
    In the future, we are considering requiring hospitals to 
electronically submit core clinical data elements in several contexts. 
One use considered would be to risk-adjust claims-based hybrid quality 
measures similar to what is described in our discussion above. In 
addition, we are also considering using core clinical data elements for 
quality measures that apply more generally to an all-payer population 
(that is, a population greater than or equal to 18 years of age). As we 
learn more about this method of data collection, we will be able to 
give more information. As it stands, we envision that use of core 
clinical data elements for an all payer population would not be limited 
to merely risk-adjustment or in claims-based hybrid measures. However, 
should we require reporting of core clinical data elements, it would be 
in the context of specific measures proposed through rulemaking for the 
Hospital IQR Program and potentially other CMS quality programs. 
Specific electronically submitted core clinical data elements required 
would depend on the individual measure adopted.
    For claims-based hybrid measures, linking variables would be 
required to ensure that the datasets containing administrative claims 
data are correctly linked with EHR datasets containing the core 
clinical data elements for proper risk adjustment. The linkage 
variables would come from an additional requirement for hospitals to 
submit these variables. Such linkage variables, for example, might 
include admission and discharge dates, CMS certification number, and 
date of birth. Some of these linkage variables are already routinely 
collected by EHRs; however, actual linkage variables required for a 
specific hybrid measure would depend on empirical testing of approaches 
to linkage for individual measure cohorts.
f. Content Exchange Standard Considerations for Core Clinical Data 
Elements
    Data can be collected in EHRs and health information technology 
(IT) systems using standardized formats to promote consistent 
representation and interpretation, as well as to allow for systems to 
compute data without needing human interpretation. These standards are 
referred to as content exchange standards, because the standard details 
how data should be represented and the relationships between data 
elements. This allows the data to be exchanged across EHRs and health 
IT systems while retaining their meaning. Commonly used content 
exchange standards include the Consolidated Clinical Data Architecture 
(C-CDA) and the Quality Reporting Data Architecture (QRDA). The C-CDA 
standard is frequently used for the representation of summary care 
records and provides a format for electronically representing data 
within document templates and sections.\241\ The QRDA standard provides 
a document format and standard structure to electronically report 
quality measure data.\242\ QRDA allows for the use of CDA templates 
(the same underlying standard used in C-CDA) to represent quality 
measures using the QDM information model described above. Thus, QRDA 
could be considered a related standard to C-CDA for the specific 
quality reporting use case.
---------------------------------------------------------------------------

    \241\ Health Level 7 International. Product Brief. Available at: 
http://www.hl7.org/implement/standards/product_brief.cfm?product_id=379.
    \242\ Health Level 7 International. Product Brief. Available at: 
http://www.hl7.org/implement/standards/product_brief.cfm?product_id=35.
---------------------------------------------------------------------------

    The core clinical data elements we are considering could be 
electronically reported to CMS formatted according to either the C-CDA 
or QRDA standard to promote consistent representation and more 
efficient calculation of hybrid measure results. These standards are 
also currently required for participation in the Medicare and Medicaid 
EHR Incentive Programs. Sections 1886(n) and 1814(l) of the Act, as 
added by the HITECH Act, authorize incentive payments under Medicare 
for eligible hospitals and critical access hospitals that successfully 
demonstrate the meaningful use of Certified EHR Technology (CEHRT). 
Section 1903(t)(6)(C) of the Act also requires that Medicaid providers 
adopt, implement, upgrade, or meaningfully use CEHRT if they are to 
receive incentives. We refer readers to the CEHRT definition adopted by 
the Office of the National Coordinator for Health IT (ONC) in its 2014 
Edition standards and certification criteria final rule (77 FR 53972). 
ONC's CEHRT definition is adopted in Sec.  170.102 and includes the 
capabilities defined for the Base EHR, including certification to 
create transitions of care documents using the C-CDA standard and to 
successfully report clinical quality measures using the QRDA standard 
(we refer readers to Table 6 of the ONC 2014 Edition standards and 
certification criteria final rule at 77 FR 54265).
    We are specifically considering the use of QRDA Category I (QRDA I) 
as the transmission standard for core clinical data elements to CMS, 
because the core clinical data elements specified for risk adjustment 
need to be captured in relation to the start of an inpatient encounter, 
to be certain the data has been appropriately connected to the 
encounter. The QRDA I standard enables an individual patient-level 
quality report that contains quality data for one patient for one or 
more quality measures. For further detail on QRDA I, the most recently 
available QRDA I specifications can be found at: http://www.hl7.org/implement/standards/product_brief.cfm?product_id=35.
    Regardless of whether C-CDA or QRDA I was used for the reporting of 
core clinical data elements, we note that these data exchange standards 
would enhance alignment across CMS programs, as well as reduce EHR 
developer and provider burden by adopting standards that are already in 
place for the exchange of electronically specified clinical and quality 
data.
    As part of this comment solicitation, we are inviting comment on 
whether

[[Page 49702]]

EHR technology should be required to be certified under the ONC Health 
IT Certification Program \243\ for the submission of the core clinical 
data elements for participation in the Hospital IQR Program using the 
most appropriate content exchange standard (such as, and not limited 
to, QRDA I or C-CDA). We believe that certification could test and 
certify that EHR technology can properly collect the core clinical data 
elements formatted to the appropriate content exchange standard (such 
as, and not limited to QRDA I or C-CDA), promoting more standardized 
and consistently represented data that can be submitted to CMS to risk-
adjust hybrid measures.
---------------------------------------------------------------------------

    \243\ Health IT.gov. Certification Programs and Policy. 
Available at: http://healthit.gov/policy-researchers-implementers/about-onc-hit-certification-program.
---------------------------------------------------------------------------

    In summary, we sought public comment on the concept of collecting 
core clinical data elements, and in particular, we are interested in 
feedback specifically regarding: (1) The use of the core clinical data 
elements derived from EHRs for use in risk adjustment of outcome 
measures as well as other types of measures; (2) the collection of 
additional administrative linkage variables to link a patient's 
episode-of-care from EHR data with his/her administrative claim data; 
and (3) the use of content exchange standards for reporting these data 
elements. Regarding the use of content exchange standards, we welcome 
input on the benefits and implementation considerations if CMS were to 
require QRDA I, as well as the tradeoffs to requiring QRDA I instead of 
C-CDA or other content exchange standards.
    Comment: Commenters noted either outright or conditional support 
for the future consideration to develop hybrid measures, including the 
collection of additional administrative linkage variables. A few 
commenters noted that collection of the core clinical data elements 
will not impose additional burden on hospitals.
    Response: We thank the commenters for their support.
    Comment: Many commenters supported submitting the core clinical 
data elements using an EHR technology certified by the ONC. One 
commenter specifically supported using C-CDA. Some commenters supported 
using QRDA I, and others stated that they did not want CMS to use QRDA 
I as the content exchange standard for the core clinical data elements. 
Many commenters supported aligning the standards for data transmission 
requirements with those used in other reporting programs.
    Response: We thank commenters for their suggestion to align 
standards across our programs. We agree that it is important to align 
these data collection requirements to reduce burden on hospitals and 
improve interoperability. We will take this feedback into consideration 
as we shape future proposals for the core clinical data elements.
    Comment: One commenter expressed concern that hybrid measure scores 
may be calculated close to the end of the reporting period, which would 
not allow hospitals time to identify or correct discrepancies. The 
commenter suggested that CMS provide hospitals with timely feedback on 
hybrid measure results.
    Response: Implementation planning for hybrid measures is ongoing 
and has not yet been finalized. The purpose of these measures is for 
comparison of hospital-level performance relative to national 
performance on a given outcome. These measures require a complete set 
of administrative claims and clinical data to reliably calculate 
results. The schedule for public reporting will likely be similar to 
the current schedule for reporting of other hospital outcome measures 
in the Hospital IQR Program, and would have the same lag time for data. 
Measures will not be calculated in real time. However, we acknowledge 
the importance of timely feedback and will take this into 
consideration.
    Comment: Several commenters recommended that CMS engage 
stakeholders when developing hybrid measures. Several commenters 
requested a national provider call.
    Response: We thank the commenters for their support and for 
encouraging stakeholder engagement during the development of hybrid 
measures. We note that the core clinical data elements were developed 
with input from a TEP and two public comment periods outside of 
rulemaking. Comments and responses from the latest comment period are 
posted on our Web site under the Download section in the ``Archived 
public comment files'' folder at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/CallforPublicComment.html. We intend to continue to seek input from all 
stakeholders in the development of the hybrid measures.
    Comment: Several commenters recommended that the core clinical data 
elements should be discussed with the MAP's Coordinating Committee and 
its Hospital Workgroup. Some commenters also suggested the core 
clinical data elements and hybrid measures should go through NQF 
review, or be endorsed by the NQF, prior to inclusion in a quality 
reporting program.
    Response: As the core clinical data elements are only one piece of 
a quality measure, there is no formal mechanism to submit core clinical 
data elements independent from a measure to the MAP or for NQF 
endorsement. However, we will submit measures that include core 
clinical data elements to the MAP and NQF. We note that measures 
proposed in CMS quality reporting programs are included on a publicly 
available document entitled ``List of Measures Under Consideration'' in 
compliance with section 1890A(a)(2) of the Act, which are reviewed by 
the MAP. The Hospital 30-day Risk-standardized Acute Myocardial 
Infarction (AMI) Mortality eMeasure (NQF #2473), which includes five of 
the core clinical data elements, was reviewed by the MAP in 2013 \244\ 
where it received conditional support pending NQF endorsement. This 
measure was then subsequently endorsed by the NQF in September of 2014. 
The Hybrid Hospital-wide 30-day Readmission measure, which includes the 
full core clinical data element set (with the exception of some data 
elements that were collinear with others), will be submitted to the NQF 
at the next available opportunity. The MAP encouraged further 
development of the Hybrid Hospital-wide 30-day Readmission measure in 
December 2014.\245\
---------------------------------------------------------------------------

    \244\ MAP Pre-Rulemaking Report: 2014 Recommendations on 
Measures for More than 20 Federal Programs. Available at: https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx.
    \245\ ``Spreadsheet of MAP 2015 Final Recommendations'' 
available at: http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

    Comment: Some commenters suggested that CMS enhance certification 
and interoperability standards before requiring hybrid measures 
utilizing the core clinical data elements and that these standards 
should be specified in the EHR Incentive Program. Several commenters 
recommended that CMS focus efforts toward ascertaining reliable, 
consistent, and valid methods of reporting electronic data, so that the 
reporting of the core clinical data elements as a part of hybrid 
measures can be implemented successfully and accurately.
    Response: One of the main tenets of the 2015 Edition Standards and 
Certification Criteria proposed rule is interoperability and adoption 
of

[[Page 49703]]

updated standards. We note that we have worked closely with ONC to 
enhance testing and validation of certified technology's ability to 
capture, exchange, and report electronic patient data, such as through 
improved testing and certification through the Cypress CQM testing and 
certification tool.\246\ As another example, we note that ONC proposed 
a 2015 Edition ``CQM--report'' certification criterion in the FY 2016 
IPPS/LTCH PPS proposed rule that sought stakeholder input on the 
standards for representing and reporting CQM data in certified health 
IT to improve the reliability and consistency of such data reporting 
(80 FR 24613 through 24614). Therefore, we thank commenters for their 
continued support of improving the electronic reporting process and 
plan to continue to make improvements as standards evolve. We thank 
commenters for the suggestion about including the core clinical data 
elements for voluntary eCQM reporting or in the EHR Incentive Program 
and will consider these for future rulemaking.
---------------------------------------------------------------------------

    \246\ http://projectcypress.org/.
---------------------------------------------------------------------------

    Comment: Several commenters recommended the continued collaboration 
between the ONC, the National Library of Medicine, providers, measure 
stewards, and electronic measure developers to improve the 
standardization of the terminology used to support the electronic 
capture of the proposed core clinical data elements. Several other 
commenters noted the need to ensure the alignment of the proposed data 
elements with data elements, definitions, and value sets used by other 
measures to reduce the burden on hospitals and vendors.
    Response: We thank commenters for their suggestion to align the 
data elements across CMS, ONC (for example, the Common Clinical Data 
Set definition), and the healthcare industry. In an effort to ensure 
harmonization with other measures and reporting requirements, the core 
clinical data elements use existing value sets where possible. We agree 
that it is important to align these data collection requirements to 
reduce burden on hospitals and improve interoperability, and we will 
take this feedback into consideration as we shape future proposals for 
the core clinical data elements.
    Comment: Several commenters suggested that CMS test the feasibility 
of collecting non-clinical data elements that capture patient 
sociodemographic status.
    Response: While we appreciate these comments and the importance of 
the role that sociodemographic status plays in the care of patients, as 
discussed in section VIII.A.7. of the preamble of this final rule, we 
continue to have concerns about holding hospitals to different 
standards for the outcomes of their patients of low sociodemographic 
status because we do not want to mask potential disparities or minimize 
incentives to improve the outcomes of disadvantaged populations. We 
routinely monitor the impact of sociodemographic status on hospitals' 
results on our measures. To date, we have found that hospitals that 
care for large proportions of patients of low sociodemographic status 
are capable of performing well on our measures (we refer readers to the 
2014 Chartbook pages 48-57, 70-73, and 78 at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/Medicare-Hospital-Quality-Chartbook-2014.pdf).
    NQF is currently undertaking a 2-year trial period in which new 
measures and measures undergoing maintenance review will be assessed to 
determine if risk-adjusting for sociodemographic factors is appropriate 
for each measure. For 2 years, NQF will conduct a trial of a temporary 
policy change that will allow inclusion of sociodemographic factors in 
the risk-adjustment approach for some performance measures. At the 
conclusion of the trial, NQF will determine whether to make this policy 
change permanent. Measure developers must submit information such as 
analyses and interpretations as well as performance scores with and 
without sociodemographic factors in the risk adjustment model.
    Furthermore, ASPE is conducting research on the issue of risk 
adjustment for sociodemographic status on quality measures, resource 
use, and other measures under the Medicare program as directed by the 
IMPACT Act. We will closely examine the findings of these reports and 
related Secretarial recommendations and consider how they apply to our 
quality programs at such time as they are available.
    Comment: Some commenters noted their concern that the quality of 
data extracted from electronic health records for electronic clinical 
quality measures are not the same as the data garnered via chart 
abstraction. The commenters recommended that, before CMS requires the 
submission of the core clinical data elements, CMS conduct further 
testing and analysis to ensure the accuracy and completeness of the 
data being submitted. One commenter suggested a testing period.
    Response: For clarification, hybrid measures are not electronic 
clinical quality measures. Hybrid measures are administrative claims-
based measures that include one use of the electronically extracted 
core clinical data elements, which is in the risk adjustment models of 
claims-based hospital-level outcome measures. We appreciate the 
commenter's concerns about thoroughly evaluating the core clinical data 
elements. Expanding on the discussion above in section VIII.A.9.c. of 
the preamble of this final rule, we conducted testing in 21 hospitals 
and found that the core clinical data elements were reliably and 
consistently collected for more than 90 percent of adults admitted for 
treatment of medical conditions.\247\ We also are conducting testing of 
the electronic specifications of the core clinical data elements, 
specifically to compare the electronically exported data to chart 
abstracted data, at several hospitals to ensure validity of the data 
element codes and logic, which will be completed in 2015. Data quality 
and accuracy is a top concern for CMS. We will consider proposing a 
pilot test of data submission in future rulemaking.
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    \247\ 2013 Core Clinical Data Elements Technical Report Version 
1.1. Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    Comment: One commenter was concerned that hospitals may have 
difficulty linking EHR data to administrative data and recommended 
there be stronger guidance provided around data capture and use of the 
core clinical data elements.
    Response: Hospitals will not need to perform this linking or be 
responsible for calculating hybrid measure scores. Calculation of 
hybrid measures will require that hospitals submit some administrative 
data elements along with the core clinical data elements. We will then 
use these variables to link or merge clinical and administrative claims 
data for measure calculation. Such linkage variables, for example, 
might include admission and discharge dates, CMS certification number, 
and date of birth. Some of these linkage variables are already 
routinely collected by EHRs; however, actual linkage variables required 
for a specific hybrid measure would depend on empirical testing of 
approaches to linkage for individual measure cohorts. We do not expect 
submission of these data to impose a significant burden on hospitals.
    Comment: Several commenters expressed concerns about the specific 
core clinical data elements identified, and their use. One commenter

[[Page 49704]]

supported the use of hybrid measures, and requested clarification on 
whether or not measure developers would be able to specify other types 
of measures that utilize laboratory results captured after the first 24 
hours, as the core clinical data elements are designed to only capture 
laboratory results within the 24 hours of hospital arrival. Another 
commenter suggested including an additional laboratory clinical data 
element. One commenter was concerned about capturing clinical severity.
    Response: We thank the commenters for their support and their 
suggestions. The core clinical data elements outlined here are 
currently developed for the risk adjustment of hybrid measures, which 
are hospital-level outcomes measures. Measure developers considering 
using the core clinical data elements would need to evaluate each data 
element in the context of any new measure. Measure developers are 
encouraged to consider using the core clinical data elements in their 
measures where appropriate, recognizing that this dataset only contains 
first captured values. The timeframes are specified to capture the 
patient's condition on arrival to the hospital before care has been 
initiated. Capturing the first set of vital signs and laboratory 
results are intended to adjust for a patient's overall severity of 
illness upon arrival at the hospital.
    We thank the commenter's suggestion to include another laboratory 
value. To reduce the reporting burden on hospitals, the core clinical 
data elements were developed as a minimum dataset that could be used 
across a variety of condition cohorts and measures. However, not all 
core clinical data elements referenced might be needed for all hybrid 
measures, and there may be some additional measure-specific data 
elements that need to be collected. For example, patients who are 
suspected of having had an acute myocardial infarction have a troponin 
test added to their blood work. Therefore, the hybrid AMI mortality 
measure includes four core clinical data elements, and one measure-
specific core clinical data element for troponin, in the risk model. 
Troponin is a core clinical data element that would assist in capturing 
the severity of a patient's AMI. Similarly, other condition-specific 
data elements will be considered during development of future hybrid 
measures and will be included in the models if they are reliable, can 
be feasibly extracted, and are statistically significant in the models. 
We intend to continue seeking input from all stakeholders in the 
development of the hybrid measures.
    Comment: One commenter recommended that CMS limit the core clinical 
data elements to only those needed for specific measures, and not 
impose the burden of collecting other information for potential 
purposes down the road that have yet to be defined. Similarly, several 
commenters were concerned that the volume of data collected might 
impact the validity and cause a submission burden. One commenter 
requested clarification around the use of an all-payer measure, while 
another commenter strongly supported hospitals reporting all of the 
core clinical data elements, including all-payer data.
    Response: We thank the commenters for this feedback. We appreciate 
the commenters' concerns about the validity and submission burden for 
hospitals regarding the volume of data requested. We plan to propose 
submission of only those core clinical data elements that are used in 
specific hybrid quality measures. While we are considering using core 
clinical data elements for quality measures that apply more generally 
to an all-payer population, we will be able to give more information as 
we learn more about this method of data collection. We will take these 
comments into consideration as we develop future policy.
    Comment: One commenter recommended that CMS develop a plan to 
reevaluate whether the required data elements continue to be valuable 
moving forward.
    Response: The core clinical data elements were developed with input 
from ONC, the National Library of Medicine, and stakeholders from the 
provider and vendor communities relating to the feasibility of 
collection and value for quality measurement. In addition, each hybrid 
measure is developed to only include those variables in the risk models 
that contribute to improved statistical performance. We note that this 
was a Request For Comment in anticipation of future rulemaking, and we 
will develop a plan to gather input from stakeholders on whether the 
proposed data elements continue to retain value. We intend to formally 
propose any data element requirements for hospital risk-adjusted hybrid 
measures as part of future rulemaking in order to allow stakeholders an 
opportunity to comment on any proposed program requirements. We conduct 
annual and comprehensive reevaluation of the core clinical data 
elements as well as the hybrid measures according to the Blueprint for 
the Measures Management System. We will take this comment into 
consideration as we develop future policy.
    Comment: One commenter recommended that CMS explore methods for 
obtaining patient transfer status, noting that the literature suggests 
that the health outcomes of patients experiencing inter-hospital 
transfers are different from patients receiving their entire course of 
care at a single institution.
    Response: We thank the commenter for the suggestion. Regarding 
capture of transfer status as a discrete data element, we will 
reevaluate as advancements in electronic health record technology and 
interoperability may make this data element more feasible to collect in 
the future.
    Comment: One commenter expressed concerns about obtaining 
historical electronic health record information from organizations that 
recently transitioned to a new electronic records system.
    Response: We are sensitive to the potential burden on hospitals of 
mapping, extracting, and reporting the core clinical data elements from 
their EHRs. Although implementation planning is ongoing and has not yet 
been finalized, we are considering only prospective collection of the 
core clinical data elements.
    We thank the commenters for their feedback and note that we will 
consider it in future rulemaking.
10. Form, Manner, and Timing of Quality Data Submission
a. Background
    Sections 1886(b)(3)(B)(viii)(I) and (b)(3)(B)(viii)(II) of the Act 
state that the applicable percentage increase for FY 2015 and each 
subsequent year shall be reduced by one-quarter of such applicable 
percentage increase (determined without regard to sections 
1886(b)(3)(B)(ix), (xi), or (xii) of the Act) for any subsection (d) 
hospital that does not submit data required to be submitted on measures 
specified by the Secretary in a form and manner, and at a time, 
specified by the Secretary. Previously, the applicable percentage 
increase for FY 2007 and each subsequent fiscal year until FY 2015 was 
reduced by 2.0 percentage points for subsection (d) hospitals failing 
to submit data in accordance with the description above. In accordance 
with the statute, the FY 2015 payment determination begins the first 
year that the Hospital IQR Program will reduce the applicable 
percentage increase by one-quarter of such applicable percentage 
increase.
    In order to participate in the Hospital IQR Program, hospitals must 
meet specific procedural, data collection,

[[Page 49705]]

submission, and validation requirements. For each Hospital IQR Program 
year, we require that hospitals submit data on each measure in 
accordance with the measure's specifications for a particular period of 
time. The data submission requirements, Specifications Manual, and 
submission deadlines are posted on the QualityNet Web site at: http://www.QualityNet.org/. Hospitals must register and submit quality data 
through the secure portion of the QualityNet Web site. There are 
safeguards in place in accordance with the HIPAA Security Rule to 
protect patient information submitted through this Web site.
b. Procedural Requirements for the FY 2018 Payment Determination and 
Subsequent Years
    The Hospital IQR Program procedural requirements are codified in 
regulation at 42 CFR 412.140. We refer readers to the codified 
regulations for participation requirements, as further explained by the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 50810 through 50811). We did 
not propose any changes to the procedural requirements.
c. Data Submission Requirements for Chart-Abstracted Measures
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51640 through 51641), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53536 
through 53537), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50811) 
for details on the Hospital IQR Program data submission requirements 
for chart-abstracted measures.
    Comment: One commenter requested clarification on the reporting 
requirements for the six measures which can be reported either via 
chart-abstraction or electronically.
    Response: Although we proposed to allow hospitals to report 6 
measures (ED-1, ED-2, PC-01, STK-4, VTE-5, and VTE-6) either via chart-
abstraction or electronically, we are finalizing a modified policy and 
these measures will remain required via chart-abstraction as previously 
required. However, hospitals may choose to submit electronic data, in 
addition to chart-abstracted data, on any of these 6 measures to meet 
the requirement to report 4 of 28 electronic clinical quality measures. 
We refer readers to section VIII.A.8.c. of the preamble of this final 
rule for details.
d. Alignment of the Medicare EHR Incentive Program Reporting for 
Eligible Hospitals and CAHs With the Hospital IQR Program
(1) Background
    We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50256 through 50259) for our policies to align electronic clinical 
quality measures data reporting and submission periods on a calendar 
year basis for the FY 2017 payment determination for both the Medicare 
EHR Incentive Program for eligible hospitals and CAHs, and the Hospital 
IQR Program. In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24587 
through 245888), we proposed to: (1) Continue to require Certified 
Electronic Health Record Technology (CEHRT) 2014 Edition and (2) update 
reporting periods and submission deadlines, for the FY 2018 payment 
determination for the Hospital IQR Program.
(2) Electronic Clinical Quality Measure Certification for the FY 2018 
Payment Determination
    As described in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50251), 
for the Hospital IQR Program, hospitals that submit electronic clinical 
quality measures data for the FY 2017 payment determination are 
required to submit data using CEHRT 2014 Edition, which is an 
Electronic Health Record certification. Although we required CEHRT, 
eligible hospitals were not required to ensure that their CEHRT 
products were recertified to the most recent version of the electronic 
specifications for the clinical quality measures. We also stated in the 
FY 2015 IPPS/LTCH PPS final rule (79 FR 50251), that for the FY 2017 
payment determination, a hospital could submit electronic clinical 
quality measures for the Hospital IQR Program during CY 2015 even if 
they attest their aggregate measure numerators and denominators through 
the Medicare EHR Incentive Program. The hospital could submit as test 
data or production data. Test data submissions are submissions that do 
not count as submissions; they are practice submissions. Production 
data submissions are considered final submissions meant to fulfill 
Hospital IQR Program submission requirements.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24587), we 
proposed to continue the requirement for hospitals to use CEHRT 2014 
Edition \248\ when submitting electronic clinical quality measures for 
the CY 2016/FY 2018 payment determination. The Office of the National 
Coordinator for Health Information Technology (ONC) has proposed a new 
Edition of EHR technology which may be available for some providers as 
early as 2016 in its ``2015 Edition Health Information Technology 
(Health IT) Certification Criteria, 2015 Edition Base Electronic Health 
Record (EHR) Definition, and ONC Health IT Certification Program 
Modifications'' (hereafter known as the ``2015 Edition proposed rule'') 
(80 FR 16804 through 16921). However, we will require hospitals to 
continue to submit data for Hospital IQR Program purposes using the 
2014 Edition for the FY 2018 payment determination. Any changes for the 
Hospital IQR Program because of ONC's update will be proposed in future 
rule making. We invited public comments on this proposal.
---------------------------------------------------------------------------

    \248\ Meaningful Use in 2014. Available at: http://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/EducationalMaterials.html.
---------------------------------------------------------------------------

    Comment: A few commenters supported the proposed electronic quality 
measure certification requirements for the FY 2018 payment 
determination.
    Response: We thank the commenters for their support.
    Comment: One commenter supported the proposal to require that EHR 
technology be certified for data element submission in line with the 
EHR Incentive Program, and hoped that it will allow providers to 
further test and validate that their platforms can transmit data 
successfully.
    Response: We thank the commenter for its support.
    Comment: Several commenters requested general clarification on the 
CEHRT requirements for the submission of electronic clinical quality 
measures. Noting our proposal to require the CEHRT 2014 Edition, some 
commenters suggested that hospitals be able to report electronic 
clinical quality measures using the CEHRT 2015 Edition, if they are 
able, for CY 2016/FY 2018. These commenters suggested that either 2014 
or 2015 CEHRT be accepted, and stated that hospitals will need ample 
time to adopt the CEHRT 2015 Edition in order to meet Stage 3 
Meaningful Use requirements.
    Response: In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24587), 
we proposed to continue the requirement for hospitals to use CEHRT 2014 
Edition when submitting electronic clinical quality measures for the CY 
2016/FY 2018 payment determination. However, in response to comments 
suggesting that hospitals be allowed to report using either the 2014 or 
2015 edition of CEHRT, we are finalizing a modification to our proposal 
such that, for CY 2016/

[[Page 49706]]

FY 2018 payment determination reporting of electronic clinical quality 
measures, hospitals can report using either the 2014 or 2015 edition of 
CEHRT.
    Comment: One commenter asked if vendors certified to the ONC 2014 
measure specifications must recertify for the May 2015 electronic 
clinical quality measure specifications to report electronic clinical 
quality measures. A few commenters specifically recommended that CMS 
allow hospitals to report electronic data via 2014 electronic clinical 
quality measure specifications, noting that some hospitals may not have 
the 2015 specifications available until early 2016.
    Response: We require the most recent version of electronic measure 
specifications (the May 2015 version) for CY 2016/FY 2018 payment 
determination electronic reporting. We believe requiring use of the 
most recent electronic measure specifications is important in allowing 
us to collect relevant electronic data. We refer readers to section 
VIII.A.8.c. of the preamble of this final rule where we discuss our 
modified policies and note the later reporting periods (Q3 or Q4 of CY 
2016) and extended submission deadline (by February 28, 2017) to 
provide hospitals with additional time to update to the 2015 measure 
specifications. The 2015 measure specifications are required whether 
hospitals use 2014 or 2015 CEHRT.
    Comment: One commenter recommended that QRDA I data be required for 
the FY 2018 payment determination. One commenter expressed concern that 
the proposed requirement of transmitting QRDA I files is not 
technically feasible at present, and if implemented, as planned, in 
January 2016, will not leave EHR vendors or providers with sufficient 
time to prepare.
    One commenter requested clarification on whether electronic 
clinical quality measures must be submitted via a QRDA I report, or if 
the electronic measures may be submitted via a data submission vendor. 
One commenter requested clarification on whether hospitals may abstract 
data from non-certified sources and then input these data into a 
certified technology for calculation and noted that organizations may 
have difficulty collecting all the necessary data elements required for 
electronic clinical quality measure reporting using their CEHRT 
technology.
    Response: We thank the commenters for their suggestion that we 
require QRDA I. Although we did not specify a QRDA version requirement 
in the FY 2016 IPPS/LTCH PPS proposed rule, in response to comments 
suggesting that QRDA I be required and other comments requesting 
clarification on our QRDA requirement, we are finalizing a modification 
of our proposal to include the requirement that hospitals must report 
via QRDA I.
    Requiring hospitals to report via QRDA I is consistent with our 
previous policies (described below in the preamble of this rule). It 
has been a requirement of 2014 Edition CEHRT under the EHR Incentive 
Program (we refer readers to section VIII.D.2.b. of the preamble of 
this final rule). In the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50206), we specified that hospitals that chose to voluntarily submit 
electronic clinical quality measures report using QRDA I. The 
electronic clinical quality measure validation pilot described in the 
FY 2015 IPPS/LTCH PPS final rule (79 FR 50269 through 50273) stated 
that participating hospitals must be able to produce QRDA Category 1 
Revision 2 files extracted automatically from an EHR. Therefore, we 
disagree with the commenter's concern that hospitals do not have 
sufficient time to prepare to submit data via QRDA I.
    We believe that requiring data via QRDA I is important, because: 
(1) It allows for patient-level validation of data rather than 
aggregated data; and (2) CEHRT requires data capture and reporting in 
QRDA I. In summary, hospitals must report data via QRDA I for 4 of 28 
available eCQMs for one quarter (either CY 2016 Q3 or Q4) by the 
submission deadline of February 28, 2017. We believe the delayed 
reporting period and submission deadlines finalized will provide 
hospitals with adequate time to prepare to report using QRDA I.
    In response to comments regarding use of a data submission vendor, 
hospitals may use a third party to submit QRDA I files on their behalf. 
Hospitals may also use abstraction or may pull the data from non-
certified sources and then input these data into CEHRT for capture and 
reporting (QRDA I).
    Comment: One commenter opposed the proposal to require hospitals to 
use updated specifications for eCQM reporting, and indicated that 
certified EHR vendors are not currently required to be updated to 
electronic clinical quality measure specifications and that this 
proposed requirement increases burden and costs. Some commenters 
recommended delaying updated specifications for electronic clinical 
quality measures until EHR vendors are required to support the annual 
updates. Some commenters also noted that vendors' inability to assist 
with technical mapping of data elements creates additional burden for 
hospitals. A few commenters recommended that CMS work closely with 
vendors to enable electronic reporting by hospitals.
    Response: We thank the commenters' for their recommendations but 
note that we believe requiring updated measure specifications for 
electronic clinical quality measure reporting is appropriate in order 
to provide the most relevant electronic data. Further, we do not 
believe delaying updated specifications for electronic clinical quality 
measures until EHR vendors are required to support the annual updates 
is appropriate, because we do not have the authority to set 
certification requirements for vendors. However, we encourage hospitals 
to work closely with their vendors to ensure that a contract is in 
place which supports the hospital's quality reporting requirements and 
the annual update of those measures.
    In response to concerns about a lack of vendor assistance with 
technical mapping, we recognize that technical mapping may be 
potentially burdensome and encourage hospitals to work with their 
vendors to overcome these issues. Further, we believe that requiring 
hospitals to report 4 electronic clinical quality measures for only 1 
quarter (in either Q3 or Q4) of CY 2016/FY2018 payment determination, 
with a submission deadline of February 28, 2017, will allow more time 
for hospitals to overcome vendor issues, such as mapping and testing. 
We note that by requiring only 4 electronic clinical quality measures, 
we have reduced the burden of reporting by 75 percent as compared to 
the proposal to require 16 electronic clinical quality measures. We 
believe the burden associated with mapping will also be reduced by our 
policy to require fewer electronic clinical quality measures. In 
addition, we are finalizing an expansion of our Extraordinary 
Circumstances Extensions and Exemptions policy to include an exemption 
based on hardships preventing hospitals from electronically reporting. 
We refer readers to section VII.A.8.c. of the preamble of this final 
rule for a discussion of this expansion.
    In response to the suggestion that we work closely with vendors to 
enable electronic reporting by hospitals, we currently meet with 
associations on a monthly basis and invite vendors to participate in 
Lean initiatives.\249\ We

[[Page 49707]]

will continue to work closely with the vendor community.
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    \249\ eCQI Resource Center. The one-stop shop for the most 
current resources to support electronic clinical quality 
improvement. Retrieved from: https://ecqi.healthit.gov/.
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    Comment: One commenter recommended adopting Release 3 of the HL7 
QRDA Category I Implementation Guide (HL7 CDA[supreg] R2 Implementation 
Guide: Quality Reporting Document Architecture--Category I (QRDA I) 
DSTU Release 3 (US Realm) or ``Release 3'').250 251 CMS is 
using QRDA Category I Release 3 for the 2015 Update electronic clinical 
quality measures for the 2016 reporting period, and the commenter 
suggested that ONC align with this version for program alignment.\252\ 
The commenter also indicated Release 3 best incorporates known issues, 
fixes mistakes, and adds missing content compared to earlier versions 
of the QRDA Category I standard. Release 3 also uses an incremental 
version of the underlying data model (the Quality Data Model 4.1.1) 
that is a step-wise approach toward the harmonized CQM and CDS 
standards that the industry is currently developing. The commenter also 
believed that CMS and ONC should both review responses to Request for 
Information (RFI) on the cycle and timeline for the introduction and 
certification of new measures before adopting additional certifications 
and finalizing the frequency of testing and reporting of certification 
requirements.
---------------------------------------------------------------------------

    \250\ The HL7 Implementation Guide is a document markup standard 
that specifies the structure and semantics of ``clinical documents'' 
for the purpose of exchange between healthcare providers and 
patients.
    \251\ HL7. Retrieved from: http://www.hl7.org/implement/standards/product_brief.cfm?product_id=7.
    \252\ http://www.cms.gov/regulations-and-guidance/legislation/ehrincentiveprograms/ecqm_library.html.
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    Response: We thank the commenter for these recommendations. We 
believe that Release 3 of the QRDA Category I IG will ultimately 
improve electronic clinical quality measure processing, reduce errors, 
and that it better aligns with the Consolidated CDA standard Release 
2.1 for interoperability, as compared to QRDA Category I Release 2 with 
the 2014 Errata.\253\ Release 3 of the QRDA Category I IG also aligns 
with the forthcoming CMS 2015 update to eCQM measures for 2016 e-
reporting. We refer readers to https://ecqi.healthit.gov/ecqm for 
further details on technical requirements.
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    \253\ Errata releases represent updates to the HL7 QRDA I 
standards. For more information please see: http://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/Downloads/QRDA_EP_HQR_Guide_2015.pdf.
---------------------------------------------------------------------------

    We also refer readers to the HITPC recommendations (http://healthit.gov/FACAS/sites/faca/files/HITPC_QMTF_Presentation_2015-06-3.pdf) for additional details regarding Clinical Quality Measurement 
(CQM) provisions in our payment rules, including the FY 2016 IPPS/LTCH 
PPS final rule. Finally, we appreciate the commenter's suggestion that 
we review responses to the RFI with ONC before adopting certifications. 
We collaborate very closely with ONC in relation to certification and 
will continue to do so.
    Comment: A few commenters asked for clarification on the frequency 
of required certification and, more specifically, the certification 
requirements for vendors as it relates to QRDA standards and the CMS 
Implementation Guide (whether vendors are required to certify to both 
the base QRDA standard and the CMS Implementation Guide). If the 
requirement is to certify to both, the commenters expressed concerned 
that this requires a duplicate effort. A few commenters recommended 
that CMS ensure that EHR vendors certify to one quality measurement 
submission format, preferably the CMS Implementation Guide. The 
commenters also expressed concern that certification may be required 
every time CMS changes its Implementation Guide to correct errors or 
accommodate the annual measure updates. The commenters also noted that 
annual recertification across multiple programs will be a significant 
burden on vendors as well as limit the amount of time vendors have to 
invest in product development initiatives and enhancement for stage 3. 
The commenters also recommended that CMS allow a minimum of 18 months 
for stakeholders to implement any major changes to quality measurements 
standards and also believed that recertification should not be required 
unless there are substantial changes to be made.
    Response: We note that specific guidance on the timing for 
certification is provided in ONC's rule, and hospitals are encouraged 
to maintain updated certifications. In response to the commenter that 
asked about certification requirements for vendors (that is, 
requirements for the base QRDA standard vs. the CMS Implementation 
Guide 254 255), we note that requirements are defined by 
ONC. For additional certification guidelines that hospitals must use to 
report electronic data, we refer readers to ONC's Health IT 
Certification Criteria available in the eCQM library at: http://
www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/
eCQM_Library.html. In addition, http://cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/Downloads/QRDA_2016_CMS_IG.pdf defines the QRDA release version. Regardless of 
CEHRT edition however, we are requiring use of CMS Implementation Guide 
for Quality Reporting Document Architecture Category I and Category III 
Supplementary Implementation Guide for 2016.\256\
---------------------------------------------------------------------------

    \254\ HL7. Retrieved from: http://www.hl7.org/implement/standards/product_brief.cfm?product_id=7.
    \255\ The HL7 Implementation Guide is a document markup standard 
that specifies the structure and semantics of ``clinical documents'' 
for the purpose of exchange between healthcare providers and 
patients.
    \256\ Available in the eCQM library at: http://www.cms.gov/
Regulations-and-Guidance/Legislation/EHRIncentivePrograms/
eCQM_Library.html.
---------------------------------------------------------------------------

    In regard to commenter concerns about certification requirements 
potentially duplicating effort and limiting product development 
initiatives and enhancement for stage 3 and in response to suggestions 
that updates be limited to major changes to avoid increasing burden, we 
note that updating standards and requirements is necessary to reduce 
development efforts and ease burden associated with reporting 
electronic clinical quality measures.
    In response to the request that 18 months be allowed for hospitals 
to implement standards, we are requiring hospitals to report just 4 
electronic clinical quality measures for only 1 quarter (in either Q3 
or Q4) of CY 2016/FY 2018 payment determination, with a submission 
deadline of February 28, 2017 (we refer readers to section VIII.A.8.c. 
of the preamble of this final rule for a further discussion of these 
requirements). We believe the extended submission deadline will provide 
more time for hospitals to update to the required specifications.
    Comment: Several commenters recommended that CMS continue to work 
with stakeholders to improve the process for annual updates to 
electronic clinical quality measures, including the testing 
infrastructure for electronic clinical quality measures.
    Response: We thank the commenters for their suggestion. We are 
currently engaged with stakeholders to beta test a pre-submission 
validation application that we anticipate making more widely available 
in CY 2016.
    After consideration of the public comments we received, we are 
finalizing a modification of our proposals. Although we proposed to 
continue the requirement for hospitals

[[Page 49708]]

to use CEHRT 2014 Edition for CY 2016 reporting/FY 2018 payment 
determination, we are finalizing that hospitals can report using either 
the 2014 or 2015 edition of CEHRT.
    In addition, as discussed in this section above, we are finalizing 
that hospitals must submit electronic data via a QRDA Category I file.
(3) Reporting Periods and Electronic Submission Deadlines for the FY 
2018 Payment Determination
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50256 through 
50259), we finalized our policy that hospitals could voluntarily submit 
electronic clinical quality measure data for one calendar year (CY) 
quarter's data for either CY Q1 (January 1-March 31, 2015), CY Q2 
(April 1-June 30, 2015), or CY Q3 (July 1-September 30) by November 30, 
2015.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24587 through 
24588), for the FY 2018 payment determination, we proposed changes to 
both the reporting periods and the submission deadlines.
    For the FY 2018 payment determination, we proposed that hospitals 
must submit both Q3 and Q4 of 2016 data for 16 measures reported as 
electronic clinical quality measures. We also proposed that for the FY 
2018 payment determination, hospitals must submit the electronic 
clinical quality measure data for these two quarters (Q3 and Q4 of 
2016) within 2 months after the end of the applicable calendar year 
quarter. For CY 2016, these deadlines would be November 30, 2016 for Q3 
and February 28, 2017 for Q4. We refer readers to the table entitled 
``Proposed CY 2016/FY 2018 Payment Determination Hospital IQR Program 
Electronic Reporting Periods and Submission Deadlines for Eligible 
Hospitals,'' set out in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24588).
    As part of our measure maintenance process, each year we make 
updates to the electronic specifications of the Clinical Quality 
Measures approved for submission in CMS programs. These annual updates 
are found on the CMS Web site at: http://www.cms.gov/Regulations-andGuidance/Legislation/EHRIncentivePrograms/eCQM_Library.html. In 
developing these reporting periods and submission timelines, we 
considered hospitals' and vendors' ability to report electronic 
clinical quality measures and the burden associated with implementing 
the 2015 annual update. The May 2015 annual update of electronic 
clinical quality measure specifications will include changes to the 
Quality Data Model (QDM) and the Health Quality Measure Format 
(HQMF),\257\ and we recognize that hospitals may require additional 
time to implement the associated software changes. Because of this, we 
proposed that hospitals must adopt the most recent annual update prior 
to data submission. For example, for the CY 2016/FY 2018 payment 
determination, hospitals would need to submit electronic clinical 
quality measure using the 2015 Annual Update. As a result and as stated 
above, we proposed to delay the required reporting of electronic 
clinical quality measures to begin with Q3 of 2016, with a reporting 
deadline of November 30, 2016. The table below shows the required 
electronic clinical quality measure reporting periods and submission 
deadlines for CY 2016.
---------------------------------------------------------------------------

    \257\ eCQI Resource Center: Advance Notice of Proposed Changes 
for the 2015 eCQM Annual Update; Pre-release 2015 Annual Update 
specifications available in HQMF R2.1 format. Available at: http://www.healthit.gov/ecqi-resource-center/.

  CY 2016/FY 2018 Payment Determination Hospital IQR Program Electronic
    Reporting Periods and Submission Deadlines for Eligible Hospitals
------------------------------------------------------------------------
        Discharge reporting periods              Submission deadline
------------------------------------------------------------------------
January 1, 2016-March 31, 2016............  N/A.
April 1, 2016-June 30, 2016...............  N/A.
July 1, 2016-September 30, 2016...........  November 30, 2016.
October 1, 2016-December 31, 2016.........  February 28, 2017.
------------------------------------------------------------------------

    We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50319 through 50321) for a detailed discussion of the final policy in 
the Medicare EHR Incentive Program for eligible hospitals and CAHs as 
well as section VIII.D. of the preamble of this final rule where the 
EHR Incentive Program discusses its proposals to further align with the 
Hospital IQR Program.
    We invited public comments on our proposal to update our electronic 
clinical quality measure data reporting and submission periods for the 
CY 2016/FY 2018 payment determination.
    Comment: One commenter supported the proposed submission deadlines 
for electronic clinical quality measures.
    Response: We thank the commenter for its support.
    Comment: One commenter requested clarification on the alignment of 
the reporting timeframes for electronic clinical quality measures for 
the Hospital IQR and the EHR Incentive Programs.
    Response: Consistent with our modified policies we are finalizing 
in section VIII.A.8.c. of the preamble of this final rule, our deadline 
for eCQMs in the Hospital IQR Program is February 28, 2017 for either 
the Q3 or Q4 reporting period. Under the EHR Incentive Program, the 
reporting period is one calendar quarter from Q1, Q2, or Q3 of CY 2015 
and the submission deadline is 2 calendar months after the close of the 
reporting CY quarter. For more detail on the EHR Incentive Program, we 
refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 50319 
through 50321) for a detailed discussion of the final policy regarding 
attesting in the Medicare EHR Incentive Program for eligible hospitals 
and CAHs as well as section VIII.D. of the preamble of this final rule 
where the EHR Incentive Program discusses its proposals to further 
align with the Hospital IQR Program.
    Comment: A few commenters suggested that the window for reporting 
electronic clinical quality measure data be extended from the proposed 
two months after the end of a quarter, to 3 or 4 months, and noted that 
extending the deadline will allow more time to develop reports and 
provide more accurate information.
    Response: We recognize that commenters requested an extended 
submission timeline for reporting electronic data. In response to 
comments, we are finalizing a modification of our proposal. Instead of 
requiring hospitals to report 2 quarters of data (Q3 and Q4) two months 
following the reporting period as proposed, we will require hospitals 
to report the 4 electronic clinical quality measures for only 1 quarter 
(either Q3 or Q4) of CY 2016/FY 2018 payment determination, with a 
submission deadline of February 28, 2017. We also refer readers to 
section VIII.A.8.c. of the preamble of this rule where we discuss our 
modified policies. We believe that this modified submission deadline 
provides hospitals additional time to develop reports and provide 
accurate information. For example, if hospitals choose to report Q3 CY 
2016 data, hospitals would have 5 months from the end of the reporting 
period (September 30, 2016) until the submission deadline (February 28, 
2017).
    Comment: Several commenters supported the options allowing 
simultaneous submission of electronic clinical quality measures for the 
Hospital IQR and EHR Incentive Programs during Q3 and Q4 of CY 2016 and 
noted their appreciation of CMS'

[[Page 49709]]

efforts to harmonize reporting and submission periods between the 
Hospital IQR Program and the EHR Incentive Program. Other commenters 
cited their appreciation that the number of required measures is 
consistent. Some commenters noted that the alignment could eventually 
streamline the quality measure reporting process, reduce provider 
reporting burdens, and support a transition towards healthcare systems 
focusing more on the measurement of patient-centered outcomes.
    Response: We thank the commenters for their support.
    Comment: Several commenters supported a long-term movement towards 
alignment between the Hospital IQR and the EHR Incentive Programs and 
urged CMS to employ a more patient-centered approach that prioritizes 
measures of patient outcomes that the commenter believes will reveal 
significant variation in performance.
    Response: We thank the commenters for their support and their 
suggested approach. We believe that current Hospital IQR Program 
measures emphasize patient outcomes and we will continue to adopt new 
measures that do so in the future.
    Comment: Several commenters noted that the Hospital IQR Program and 
the EHR Incentive Program are not aligned, given the proposal to 
require electronic reporting for the FY 2018 payment year under the 
Hospital IQR Program. A few commenters recommended that Meaningful Use 
and the Hospital IQR Programs share a single timeline for electronic 
reporting requirements, given that providers continue to exhibit 
significant challenges with electronic reporting. The commenters stated 
that generally, better alignment, or even outright consolidation 
between Meaningful-Use and Hospital IQR Program eMeasures reporting 
mechanisms would reduce provider burden.
    Response: The Hospital IQR Program and the EHR Incentive Program 
were created under independent statutory authorities--section 
1886(b)(3)(B)(viii) of the Act and section 1814(l)(3)(A) of the Act, 
respectively. The Secretary maintains the authority to determine the 
applicable policies under each program. We strive, to the extent 
possible, to align reporting periods and other policies across these 
programs, acknowledging that some provider burden exists with reporting 
for multiple programs. However, due to differences in statutes and 
policy goals between the programs, consolidation and exact alignment is 
not entirely feasible, thus, requiring the need for individual 
timelines for each program. However, we will continue to strive for 
greater alignment between the Hospital IQR and EHR Incentive Programs 
in future rulemaking.
    Comment: One commenter requested detail on why certain ``topped-
out'' measures in the Hospital IQR Program are being required by the 
EHR Incentive Program and asked for an explanation of the value added.
    Response: We have attempted to align Hospital IQR Program measures 
with those in the EHR Incentive Program. Specifically, we proposed to 
retain the electronic versions of five measures otherwise deemed 
``topped out'' (STK-06, STK-08, VTE-1, VTE-2, and VTE-3) under Hospital 
IQR Program standards in order to align with the EHR Incentive Program. 
We believe this approach allows for hospital flexibility and choice in 
reporting electronic clinical quality measures. In the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50203 through 50204), we finalized our 
proposal to clarify the criteria for determining when a measure is 
``topped out.'' However, we continue to believe that there are 
circumstances in which a measure that meets criteria for removal should 
be retained regardless, because the drawbacks of removing a measure 
could be outweighed by other benefits to retaining the measure.
    Therefore, because of the continued need to balance benefits and 
drawbacks as well as our desire to increase transparency, in the FY 
2016 IPPS/LTCH PPS proposed rule (80 FR 24556 through 24557), we 
proposed, and are finalizing in this final rule, additional factors to 
consider for measure removal and also include factors to consider in 
deciding whether to retain measures. Two of those factors are: (1) 
Measure aligns with other CMS programs, including other quality 
reporting programs, or the EHR Incentive Program; and (2) measure 
supports efforts to move facilities towards reporting electronic 
measures. We believe it is valuable and important to retain the 
electronic versions of these measures as hospitals learn to submit data 
in this form and manner.
    After consideration of the public comments received, and in 
accordance with our modified electronic clinical quality measure 
reporting requirements finalized in this final rule, we are finalizing 
a modification of our electronic clinical quality measure reporting 
periods from those proposed. Specifically, we are finalizing that 
instead of requiring hospitals to submit both Q3 and Q4 of CY 2016 data 
within 2 months after the end of the applicable calendar year quarter 
(November 30, 2016 for Q3 and February 28, 2017 for Q4), hospitals are 
required to submit only one quarter (either Q3 or Q4) of CY 2016 data 
by February 28, 2017. We refer readers to the table below.

   Adopted CY 2016/FY 2018 Payment Determination Hospital IQR Program
   Electronic Reporting Periods and Submission Deadlines for Eligible
                                Hospitals
------------------------------------------------------------------------
        Discharge reporting periods              Submission deadline
------------------------------------------------------------------------
January 1, 2016-March 31, 2016............  N/A.
April 1, 2016-June 30, 2016...............  N/A.
July 1, 2016-September 30, 2016...........  February 28, 2017.
October 1, 2016-December 31, 2016.........  February 28, 2017.
------------------------------------------------------------------------

e. Sampling and Case Thresholds for the FY 2018 Payment Determination 
and Subsequent Years
    We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 
50221), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641), the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53537), and the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50819) for details on our sampling and case 
thresholds for the FY 2016 payment determination and subsequent years. 
In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24588), we made one 
proposal regarding our population and sampling policy. However, we did 
not propose any changes to case thresholds.
    Currently, hospitals must submit to CMS quarterly aggregate 
population and sample size counts for Medicare and non-Medicare 
discharges for all measures in the topic areas for which chart-
abstracted data must be submitted. Hospitals are required to submit 
their aggregate population and sample size count for each topic area. 
In accordance with the policy we first adopted in the FY 2011 IPPS/LTCH 
PPS final rule (75 FR 50221), hospitals that have not treated patients 
in a specific topic area must still submit quarterly population and 
sample size counts for all Hospital IQR Program chart-abstracted data 
topics. For example, if a hospital has not treated AMI patients, the 
hospital is still required to submit a zero for its quarterly aggregate 
population and sample count for that topic in order to meet the 
requirement.
    In the proposed rule, we proposed to revise this policy so that, 
beginning with the FY 2018 payment determination and subsequent years, 
hospitals will be required to submit population and sample size data 
only

[[Page 49710]]

for those measures that a hospital submits as chart-abstracted measures 
under the Hospital IQR Program. This differs from the current policy in 
that there may be instances where a hospital chooses to electronically 
submit a measure that can be submitted either via chart-abstraction or 
as an electronic clinical quality measure and under the proposed 
policy, we would not require population and sample size data in this 
case. Under the proposed policy, if a hospital submits a measure as an 
electronic clinical quality measure, or if a measure becomes voluntary 
or suspended, the population and sample data would not be required.
    We invited public comments on this proposal.
    Comment: One commenter supported the proposed sampling and case 
thresholds for FY 2018 payment determination and subsequent years.
    Response: We thank the commenter for its support.
    After consideration of the public comment we received, we are 
finalizing our policy that hospitals will be required to submit 
population and sample size data only for those measures that a hospital 
submits as chart-abstracted measures under the Hospital IQR Program as 
proposed.
    We did not propose any changes to case thresholds. As stated in the 
FY 2015 IPPS/LTCH PPS final rule (79 FR 50258), we will continue to 
apply the zero denominator and case threshold exemption polices for the 
electronic clinical quality measures for the Hospital IQR Program. The 
zero denominator and case threshold exemptions are described in the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50323 through 50324).
f. HCAHPS Requirements for the FY 2018 Payment Determination and 
Subsequent Years
    We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 
50220), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641 through 
51643), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53537 through 
53538), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50819 through 
50820) for details on HCAHPS requirements. We did not propose any 
changes to HCAHPS requirements.
    Hospitals and HCAHPS survey vendors should check the official 
HCAHPS Web site at http://www.hcahpsonline.org for new information and 
program updates regarding the HCAHPS Survey, its administration, 
oversight and data adjustments.
g. Data Submission Requirements for Structural Measures for the FY 2018 
Payment Determination and Subsequent Years
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51643 through 51644) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53538 through 53539) for details on the data submission requirements 
for structural measures. We did not propose any changes to data 
submission requirements for structural measures.
h. Data Submission and Reporting Requirements for Healthcare-Associated 
Infection (HAI) Measures Reported via NHSN
    For details on the data submission and reporting requirements for 
healthcare-associated infection (HAI) measures reported via the CDC's 
National Healthcare Safety Network (NHSN) Web site, we refer readers to 
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51629 through 51633; 51644 
through 51645), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539), and 
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50821 through 50822). 
Clarifications to the HAI data reporting and submission requirements 
policy can also be found in the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50259 through 50262). The data submission deadlines are posted on the 
QualityNet Web site at: http://www.QualityNet.org/. In the FY 2016 
IPPS/LTCH PPS proposed rule (80 FR 24588), we did not propose any 
changes to data submission and reporting requirements for HAI measures 
reported via the NHSN.
    Comment: A few commenters requested that the reporting periods for 
the NHSN measures be aligned across programs and noted that the HAC 
Program uses 2 years of data while the Hospital IQR and Hospital VBP 
Programs use only 1 year of data.
    Response: We appreciate the commenters' feedback and suggestions. 
We strive, to the extent possible, to align reporting periods between 
our programs, acknowledging that some provider burden exists with 
reporting for multiple programs. However, given the varying policy, 
statutory, and data collections differences between these programs, 
exact alignment is not always feasible. For more details on the 2-year 
reporting period under the HAC Reduction Program, we refer readers to 
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717). We also refer 
readers to FY 2014 IPPS/LTCH PPS final rule (78 FR 50496) for reporting 
requirements for the Hospital VBP Program. As these programs grow in 
future years, we will examine the possibility of greater alignment.
11. Modifications to the Existing Processes for Validation of Hospital 
IQR Program Data
a. Background
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539 through 
53553), we finalized the processes and procedures for validation of 
chart-abstracted measures in the Hospital IQR Program for the FY 2015 
payment determination and subsequent years; the FY 2013 IPPS/LTCH PPS 
final rule also contains a comprehensive summary of all procedures 
finalized in previous years and still in effect. Several modifications 
to these processes were finalized for the FY 2016 and FY 2017 payment 
determinations in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50822 
through 50835).
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50262 through 50273) 
for the FY 2017 payment determination and subsequent years, we 
finalized additional modifications to these processes. These changes 
fall into the following categories: (a) Eligibility criteria for 
hospitals selected for validation; (b) number of charts to be submitted 
per hospital for validation; (c) combining scores for HAI and clinical 
process of care measures; (d) processes to submit patient medical 
records for chart-abstracted measures; and (e) plans to validate 
electronic clinical quality measure data.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50269 through 
50273), we finalized a policy to conduct a validation pilot test for 
electronic clinical quality measures. We stated that we intended to 
complete pilot activities in CY 2015 (79 FR 50271) and that continues 
to be our intention. We did not propose any changes to our validation 
pilot test.
    However, in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24588 
through 24589), we proposed modifications to existing processes for 
validation of chart-abstracted measures, specifically for the Influenza 
Immunization (NQF #1659) measure.
b. Modifications to the Existing Processes for Validation of Chart-
Abstracted Hospital IQR Program Data
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50265 through 
50273), we finalized a validation process, which included a separate 
validation stratum for the Influenza Immunization (NQF #1659) measure 
(the immunization measure validation stratum) because that measure 
overlapped with the

[[Page 49711]]

Hospital VBP Program. The finalized validation process for chart-
abstracted measures included three separate validation strata: HAI, 
Immunization, and Other/Clinical Process of Care (79 FR 50265 through 
50273). The Immunization stratum includes only one measure, 
Immunization for Influenza (NQF #1659). This Immunization measure was 
included in its own stratum because it is used in the Hospital VBP 
Program and we wanted to ensure that every hospital selected for 
validation would be validated in this topic area.
    As discussed in section IV.F.2.b.(1) of the preamble of this final 
rule, we proposed to remove the IMM-2 Influenza Immunization measure 
from the Hospital VBP Program. Given the proposed removal of the 
Influenza Immunization measure from the Hospital VBP Program, it would 
be no longer necessary to ensure validation of this topic area by 
including a separate stratum for the Influenza measure. As a result, in 
the proposed rule, for the Hospital IQR Program beginning with the FY 
2018 payment determination and for subsequent years, we proposed to 
remove the separate immunization validation stratum and include the 
Influenza Immunization measure in the clinical process of care measure 
validation stratum. Under this proposal, we would continue to apply our 
chart-abstracted measure validation processes only to those chart-
abstracted measures that are required under the Hospital IQR Program in 
a chart-abstracted form (as opposed to those measures that a hospital 
reports as electronic clinical quality measures, for example). This 
proposal is consistent with our proposed policy to require population 
and sample size data only for those measures that are required under 
the Hospital IQR Program. We refer readers to section VIII.A.10.e. of 
the preamble of this final rule for more detail on that proposal.
    Although this proposal includes an adjustment to the composition of 
the clinical process of care validation stratum, we did not propose any 
changes to the overall validation sample size. Under the existing 
validation process, a total of eight charts are drawn for validation--
five of which are drawn from the clinical process of care measures 
stratum and three of which are drawn from the immunization measure 
stratum. Under this proposal, however, while the total number of charts 
drawn is the same (eight), all eight measures will be drawn from the 
clinical process of care measure stratum, which would then include the 
Influenza Immunization measure. Accordingly, one sample of charts will 
be drawn from the clinical process of care measures.
    The proposed removal of the immunization validation stratum and 
inclusion of the Influenza Immunization measure in the clinical process 
of care validation stratum would result in an expanded pool of clinical 
process of care topic areas sampled for validation to include STK, VTE, 
ED, Sepsis, and Immunization. As described in the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 50266), all chart-abstracted measure topic areas 
included in the Hospital IQR Program, with the exception of the 
Perinatal Care topic area, are automatically included in the validation 
process. We do not include this topic area because the Elective 
Delivery PC-01 (NQF#0469) measure is reported in aggregate form, which 
is not consistent with our patient-level validation process (79 FR 
50266).
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50268 through 
50269), we outlined the weighting of each of three validation topic 
areas: Healthcare-associated infection (66.7 percent); Immunization 
(22.2 percent); and Other/Clinical Process of Care (11.1 percent). The 
table below shows the proposed effect on topic area weighting of our 
proposal to remove the immunization measure validation stratum and to 
move the Influenza Immunization (NQF #1659) measure to the clinical 
process of care validation stratum.

  Proposed Topic Area Weighting for Validation for the FY 2018 Payment
                   Determination and Subsequent Years
------------------------------------------------------------------------
                      Topic area                       Weight  (percent)
------------------------------------------------------------------------
Healthcare-associated infection (HAI)................               66.7
Other/Clinical Process of Care.......................               33.3
                                                      ------------------
    Total............................................              100.0
------------------------------------------------------------------------

    We invited public comments on our proposal to remove the 
immunization measure validation stratum, to move the Influenza 
Immunization (NQF #1659) measure to the clinical process of care 
validation stratum, and to reweight the topic areas for validation 
beginning with the FY 2018 payment determination and for subsequent 
years.
    Comment: Several commenters supported the proposed removal of the 
separate immunization validation stratum and moving of the influenza 
immunization measure (IMM-2) to the clinical process of care measure 
validation stratum due to the removal of the measure from the Hospital 
VBP Program.
    Response: We thank the commenters for their support.
    Comment: One commenter recommended that CMS continue the electronic 
clinical quality measure validation pilot in 2016 to ensure that a 
diverse group of hospitals and certified EHRs are represented and to 
inform an assessment of the work required to make eCQM feasible, 
reliable and valid. A few commenters noted their concern that the 
proposed data validation methodology does not address the barriers 
associated with reporting electronic clinical quality measures.
    Response: We thank commenters for the suggestion and will consider 
this approach in future rulemaking. We will allow for time to evaluate 
results of the pilot and particularly, the effectiveness of 
electronically reported clinical quality measure data once the pilot 
concludes. If analyses prove the need for an extension of the pilot, we 
will consider that approach. In addition, as described in the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50258), we have only heard anecdotal 
comments about performance level differences between the chart-
abstracted and electronic modes of collection. We recognize the 
potential for barriers associated with electronic reporting and intend 
to assess for them, but at this time, we do not have sufficient data to 
confirm the aforementioned comments. However, once results of the 
validation pilot are available, we will share the results and adapt the 
pilot if necessary and as needed to ensure that all critical factors 
(such as reporting barriers) are adequately analyzed.
    Comment: One commenter expressed appreciation for past education 
sessions clarifying the distinction between data collection methods and 
looked forward to seeing the results of the validation pilot.
    Response: We are pleased that the commenter found value in the 
education sessions \258\ and note that data from the electronic 
clinical quality measure validation pilot will be used to inform future 
rulemaking.
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    \258\ Hospital Inpatient Data Collection & CART. Available at: 
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    After consideration of the public comments we received, we are 
finalizing our proposals to remove the immunization measure validation 
stratum, to move the Influenza Immunization (NQF #1659) measure to the 
clinical process of care validation

[[Page 49712]]

stratum, and to reweight the topic areas for validation beginning with 
the FY 2018 payment determination and for subsequent years as proposed.
12. Data Accuracy and Completeness Acknowledgement Requirements for the 
FY 2018 Payment Determination and Subsequent Years
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53554) for details on Data Accuracy and Completeness Acknowledgement 
(DACA) requirements. We did not propose any changes to the DACA 
requirements.
13. Public Display Requirements for the FY 2018 Payment Determination 
and Subsequent Years
    We refer readers to the FY 2008 IPPS final rule (72 FR 47364), the 
FY 2011 IPPS/LTCH PPS final rule (75 FR 50230), the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51650), the FY 2013 IPPS/LTCH PPS final rule (77 
FR 53554), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836) for 
details on public display requirements. The Hospital IQR Program 
quality measures are typically reported on the Hospital Compare Web 
site at: http://www.medicare.gov/hospitalcompare, but on occasion are 
reported on other CMS Web sites such as http://www.cms.gov and/or 
https://data.medicare.gov.
    For the Mortality, Readmission, Complication, Payment and AHRQ 
measures, we will continue to replace publically reported data with a 
footnote for hospitals that do not have data for at least 25 cases 
combined during the reporting period. If there are fewer than 25 
eligible cases, the measures are assigned to a separate category 
described as ``The number of cases is too small (fewer than 25) to 
reliably tell how well the hospital is performing.'' The measures are 
included in the calculation but are not publicly reported on Hospital 
Compare. For chart-abstracted or Web-based measures, if either the 
numerator or the denominator is greater than 0 and less than 11, the 
data are not reported on Hospital Compare, but rather data is displayed 
as ``Not Available''. This guidance does not apply to calculated 
measures, only to those in which cases/patients could be identified. We 
also provide footnote explanations on the Hospital Compare Web site at: 
http://www.medicare.gov/hospitalcompare/Data/Footnotes.html.
    We refer readers to section VIII.A.8.b. of the preamble of this 
final rule, where we discuss our proposal to delay publicly reporting 
electronic clinical quality measure data submitted by hospitals for CY 
2016/FY 2018 payment determination in order to allow time for us to 
evaluate the effectiveness of electronically reported clinical quality 
measure data. In the meantime, measures reported via electronic 
clinical quality measures will be marked with a footnote on Hospital 
Compare noting that: (1) The hospital submitted data via EHR; (2) data 
are being processed and analyzed; and (3) we will eventually publicly 
report this data once we determine the data to be reliable and 
accurate.
    Comment: One commenter expressed concern that patients may be 
confused by a lack of available data for measures that hospitals choose 
to report electronically, especially given that hospitals chart-
abstracting a given measure will have data available. The commenter 
suggested that chart-abstracted data not be publicly displayed until 
electronic data is publicly displayed.
    Response: We appreciate the commenter's concern. The decision to 
delay the public display of electronic measures will allow for 
collaboration with measure developers and vendors as needed (per 
suggestions by other commenters) and an in-depth evaluation of the 
findings from the pilot. We recognize the importance of transparency, 
but also want to ensure the accuracy of the information being provided. 
This timing will enable us to finalize policies for public display 
prior to the February 28, 2017 deadline for electronic clinical quality 
measure data submission. In regards to the chart-abstracted data not be 
publicly displayed until electronic data is publicly displayed, we 
believe that limiting the data available would not further our goals of 
transparency and informing the public.
    Comment: One commenter requested general clarification regarding 
the public reporting of HAI results and requested clarification on 
whether the delay in publishing HAI results following the measurement 
period will be modified or continued.
    Response: Results for HAI measures will be posted on Hospital 
Compare in accordance with our existing policy, which we are not 
changing. HAI measures are posted according to our current policy of 
reporting data from the Hospital IQR Program as soon as it is feasible. 
We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 50203) 
and the FY 2012 IPPS/LTCH PPS final rule (76 FR 51608) for details. 
Public reporting for HAI measures have not changed.
    Comment: Several commenters supported the proposed public display 
requirements for the FY 2018 payment determination and subsequent 
years.
    Response: We thank the commenters for their support.
    Comment: Some commenters questioned the value of sharing the names 
of the hospitals that successfully submit electronic clinical quality 
measures data by the provided deadline. One commenter encouraged CMS to 
shift its focus to evaluate and publish the findings from the 
electronic clinical quality measure validation pilot. Another commenter 
requested clarification on what criteria and/or information will be 
used to establish a date for reporting on these measures going forward. 
Some commenters also requested additional detail on how and when 
electronic data will be available for public review. One commenter 
opposed the delay in the public display of electronic measures on 
Hospital Compare, noting that data transparency should be CMS' primary 
concern.
    Response: We recognize the importance of transparency, but also 
want to ensure the accuracy of the information being provided. We refer 
readers to section VIII.A.8.c. of the preamble of this rule where we 
finalize a modified version of our proposed policy. While we proposed 
that measures reported via electronic clinical quality measure would be 
marked with a footnote on Hospital Compare, we are finalizing instead 
that any data submitted electronically will not be posted on the 
Hospital Compare Web site. We will address public reporting of 
electronic data in next year's rulemaking, after the conclusion and 
assessment of the validation pilot. Therefore, we do not have plans to 
share the names of hospitals submitting electronic clinical quality 
measures. The decision to delay the public display of electronic 
measures will allow for collaboration with measure developers and 
vendors as needed (per suggestions received from other commenters) and 
an in-depth evaluation of the findings from the pilot. This timing will 
enable us to finalize public display details prior to the February 28, 
2017 deadline for electronic clinical quality measure data submission.
    After consideration of the public comments we received here and in 
our discussion of required eCQMs in section VIII.A.8.c. of the preamble 
of this final rule, we are modifying our proposal to publicly report 
electronic clinical quality measure data submitted by hospitals for CY 
2016/the FY 2018 payment determination in order to allow time for us to 
evaluate the effectiveness of electronically reported clinical quality 
measure data. Instead of

[[Page 49713]]

finalizing our proposal that measures reported via electronic clinical 
quality measures will be marked with a footnote on Hospital Compare 
noting that: (1) The hospital submitted data via EHR; (2) data are 
being processed and analyzed; and (3) we will eventually publicly 
report this data once we determine the data to be reliable and 
accurate, we are finalizing a policy to delay any public reporting of 
electronic data. We will address plans to publicly report electronic 
clinical quality measure data submitted by hospitals for CY 2016/FY 
2018 payment determination in the upcoming FY 2017 IPPS/LTCH PPS 
rulemaking.
14. Reconsideration and Appeal Procedures for the FY 2018 Payment 
Determination and Subsequent Years
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51650 through 51651), the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50836), and at 42 CFR 412.140(e) for details on reconsideration and 
appeal procedures for the FY 2017 payment determination and subsequent 
years. We did not propose any changes to the reconsideration and 
appeals procedures.
15. Hospital IQR Program Extraordinary Circumstances Extensions or 
Exemptions
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51651 through 51652), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836 
through 50837), and 42 CFR 412.140(c)(2) for details on the Hospital 
IQR Program extraordinary circumstances extensions or exemptions 
policy.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50277), we indicated 
that we will refer to the process as the extraordinary circumstances 
extensions or exemptions process and, accordingly, finalized changes 
reflecting this updated language in the corresponding regulation text. 
We did not propose any changes to the Hospital IQR Program's 
extraordinary circumstances extensions or exemptions policy.
    Comment: A few commenters opposed mandatory reporting of electronic 
clinical quality data unless a hardship exception is implemented, such 
as is allowed for under the EHR Incentive Program, given that some 
hospitals will be unable to achieve the electronic reporting 
requirements set forth in the Hospital IQR Program. In addition, a few 
commenters specifically requested that we adopt a hardship exemption, 
similar to the one used for under the EHR Incentive Program, to 
consider allowing hospitals to receive an exemption from the electronic 
reporting requirements if a hardship is demonstrated. One commenter 
noted that failure to provide an exception process will unfairly expose 
hospitals to risk for payment penalties.
    Response: We recognize that there may be special circumstances that 
prevent a hospital from reporting electronic clinical quality measures. 
In response to public comments we received and as discussed in section 
VIII.A.8.c. of the preamble of this final rule, we are expanding our 
previously established Extraordinary Circumstances Extensions/
Exemptions policy (79 FR 50277) to address commenters' suggestions. We 
are finalizing a policy to allow hospitals to utilize the existing 
Extraordinary Circumstances Exemption (ECE) form to request an 
exemption from the Hospital IQR Program's electronic clinical quality 
measure reporting requirement for the applicable program year based on 
hardships preventing hospitals from electronically reporting. Such 
hardships could include, but are not limited to, infrastructure 
challenges (hospitals must demonstrate that they are in an area without 
sufficient internet access or face insurmountable barriers to obtaining 
infrastructure) or unforeseen circumstances, such as vendor issues 
outside of the hospital's control (including a vendor product losing 
certification). In addition, hospitals newly participating in the 
Hospital IQR Program, that are required to begin data submission under 
Hospital IQR Program procedural requirements at 42 CFR 412.140(c)(1), 
which describes submission and validation of Hospital IQR Program data, 
may also be considered undergoing hardship and can apply for an 
exemption. Lastly, we will continue to allow hospitals to apply the 
zero denominator and case threshold exceptions described in the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50323 through 50324).
    This policy is based on our previously established extraordinary 
circumstances extensions/exemptions policy (79 FR 50277). Under the 
policy we are finalizing, hospitals may use the existing ECE form, 
which is available on QualityNet at: https://www.qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228890396823&blobheader=multipart%2Foctet-stream&blobheadername1=Content-Disposition&blobheadervalue1=attachment%3Bfilename%3DExtrdnryCircumForm_121714.pdf&blobcol=urldata&blobtable=MungoBlobs.
    After consideration of the public comments we received, we are 
expanding the Hospital IQR Program's Extraordinary Circumstances 
Extensions or Exemptions policy to include an exemption for hospitals 
that demonstrate hardship in reporting eCQMs according to the criteria 
discussed above. This expansion will be effective starting with the FY 
2018 payment determination.

B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program

1. Statutory Authority
    Section 3005 of the Affordable Care Act added new sections 
1866(a)(1)(W) and (k) to the Act. Section 1866(k) of the Act 
establishes a quality reporting program for hospitals described in 
section 1886(d)(1)(B)(v) of the Act (referred to as ``PPS-Exempt Cancer 
Hospitals'' or ``PCHs'') that specifically applies to PCHs that meet 
the requirements under 42 CFR 412.23(f). Section 1866(k)(1) of the Act 
states that, for FY 2014 and each subsequent fiscal year, a PCH must 
submit data to the Secretary in accordance with section 1866(k)(2) of 
the Act with respect to such a fiscal year. For additional background 
information, including previously finalized measures and other policies 
for the PCHQR Program, we refer readers to the following final rules: 
The FY 2015 IPPS/LTCH PPS final rule (79 FR 50277 through 50288); the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 50838 through 50846); and the 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53556 through 53561).
2. Removal of Six Surgical Care Improvement Project (SCIP) Measures 
From the PCHQR Program Beginning With Fourth Quarter (Q4) 2015 
Discharges and for Subsequent Years
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24590), we 
proposed to remove six SCIP measures from the PCHQR Program beginning 
with fourth quarter (Q4) 2015 discharges and for subsequent years. 
Under this proposal, PCHs will meet reporting requirements for the FY 
2016 and FY 2017 programs by submitting first quarter (Q1) through 
third quarter (Q3) 2015 data for these measures:
     Surgery Patients Who Received Appropriate Venous 
Thromboembolism Prophylaxis within 24 Hours Prior to Surgery to 24 
Hours After Surgery (NQF #0218)
     Urinary Catheter Removed on Post-Operative Day One (POD1) 
or Post-Operative Day Two (POD2) with Day of Surgery Being Day Zero 
(formerly NQF #0453)

[[Page 49714]]

     Prophylactic Antibiotic Received Within One Hour Prior to 
Surgical Incision (NQF #0527)
     Prophylactic Antibiotic Selection for Surgical Patients 
(NQF #0528)
     Prophylactic Antibiotic Discontinued Within 24 Hours After 
Surgery End Time (NQF #0529)
     Surgery Patients on Beta-Blocker Therapy Prior to 
Admission who Received a Beta-Blocker During the Perioperative Period 
(NQF #0284)
    We first adopted the six SCIP measures in the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50840 through 50841) and refer readers to that rule 
for a detailed discussion of the measures. As described in the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50205), these measures have been 
determined to be topped-out in the Hospital IQR Program and were 
removed from that program. To meet FY 2016 and FY 2017 program 
requirements, we proposed that PCHs would continue to submit these six 
measures for first quarter (Q1) 2015 through third quarter (Q3) 2015 
discharges in accordance with the submission timeline we finalized in 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50285). We proposed to 
remove these measures from the PCHQR Program because we have removed 
them from the Hospital IQR Program and, because they have been removed 
from that program, it is no longer operationally feasible to collect 
these measures under the PCHQR Program. By removing these measures, we 
also would alleviate the maintenance costs and administrative burden 
for PCHs associated with reporting them (79 FR 50205).
    We invited public comments on these proposals.
    Comment: Many commenters supported this proposal, noting the 
benefits of alignment with the Hospital IQR program and the reduction 
in burden for PCHs.
    Response: We thank these commenters for their support.
    Comment: Several commenters supported the intent of the proposal, 
but recommended that CMS also suppress public reporting on these 
measures because, as indicated by one commenter, one-time reporting of 
three quarters of the SCIP measures would promote confusion among the 
intended audience.
    Response: We thank these commenters for their support and 
recommendation. Under section 1866(k)(4) of the Act, we established a 
procedure for making the quality data submitted under the PCHQR Program 
available to the public. (We refer readers to section VIII.B.6. of the 
preamble to this final rule for a discussion of our public display 
procedure.) We believe that the commenters may be concerned that a 
short reporting period (only 3 quarters of data) may result in the 
public reporting of unreliable measure rates. We understand this 
concern and will address criteria for data suppression from public 
reporting in future rulemaking.
    Comment: One commenter supported the proposal to remove the SCIP 
measures, but recommended immediate removal, rather than waiting until 
the proposed 2018 program.
    Response: We thank the commenter for the support and 
recommendation. However we believe that since PCHs have already 
collected a large majority of 2015 reporting period data (approximately 
nine months (three quarters) of data) it will present minimum burden in 
submitting the rest of the data by the submission deadline which is 
outlined in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50851 through 
50852). We believe these data will provide valuable information in 
establishing some baselines for future measure selection surrounding 
this topic (surgical infection measures), especially when surgical 
infection rates are highly prevalent.\259\
---------------------------------------------------------------------------

    \259\ CDC. Healthcare Associated Infection. Available at: http://www.cdc.gov/HAI/surveillance/index.html.
---------------------------------------------------------------------------

    Comment: One commenter recommended that CMS keep SCIP-VTE-2 in the 
PCHQR Program rather than extrapolate findings from the Hospital IQR 
Program.
    Response: We thank the commenter for the recommendation. However, 
we are not extrapolating data for any of these measures from the 
Hospital IQR Program. Rather, we are removing the measures to improve 
alignment between these programs, reduce the reporting burden on PCHs, 
and focus our IT systems on PCHQR Program measures more closely linked 
with clinical outcomes.
    Comment: One commenter requested that CMS clarify how removal from 
the Hospital IQR Program impacts the operational feasibility of SCIP-
VTE-2 data in the PCHQR Program.
    Response: The Hospital IQR and PCHQR Programs, among others, share 
the same IT infrastructure and system operation platform in collecting 
data. Therefore, as a result of finalizing our proposal to remove these 
measures from the Hospital IQR Program, we intend to remove all IT 
business requirements and functionalities from the IT data warehouse. 
This approach will allow us to free up ``space'' to allow us to include 
additional measures adopted for quality and incentive programs. We 
recognize that this approach, in this case, has a significant impact on 
the PCHQR Program. However, we believe that this approach is the most 
operationally feasible under the circumstances.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove these six SCIP measures from the 
PCHQR Program beginning with fourth quarter (Q4) 2015 discharges and 
for subsequent years.
3. New Quality Measures Beginning with the FY 2018 Program
a. Considerations in the Selection of Quality Measures
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53556), the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50837 through 50838), and the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50278), we indicated that we have taken 
a number of principles into consideration when developing and selecting 
measures for the PCHQR Program, and that many of these principles are 
modeled on those we use for measure development and selection under the 
Hospital IQR Program. In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24590 through 24591), we did not propose any changes to the principles 
we consider when developing and selecting measures for the PCHQR 
Program.
b. Summary of New Measures
    For the FY 2018 PCHQR Program, in the FY 2016 IPPS/LTCH PPS 
proposed rule (80 FR 24591 through 24593), we proposed to adopt three 
new quality measures. These measures meet the requirement under section 
1866(k)(3)(A) of the Act that measures specified for the PCHQR Program 
be endorsed by the entity with a contract under section 1890(a) of the 
Act (currently the NQF).
    The proposed measures are as follows:
     Centers for Disease Control and Prevention (CDC) National 
Healthcare Safety Network (NHSN) Facility-wide Inpatient Hospital-onset 
Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717) (CDC 
NHSN CDI Measure)
     CDC NHSN Facility-wide Inpatient Hospital-onset 
Methicillin-resistant Staphylococcus aureus (MRSA) Bacteremia Outcome 
Measure (NQF #1716) (CDC NHSN MRSA Measure)
     CDC NHSN Influenza Vaccination Coverage Among Healthcare 
Personnel (HCP) Measure (NQF #0431) (CDC NHSN HCP Measure)
    The proposed measures were included on a publicly available

[[Page 49715]]

document entitled ``List of Measures Under Consideration (MUC) for 
December 1, 2014,'' \260\ which is a list of quality and efficiency 
measures being considered for use in various Medicare programs. The 
proposed measures were also submitted to the Measure Applications 
Partnership (MAP), a public-private partnership convened by the NQF for 
the purpose of providing input to the Secretary on the selection of 
certain quality and efficiency measures. For the PCHQR Program, the MAP 
supported the inclusion of all three measures. The MAP's 
recommendations can be found in the ``Spreadsheet of MAP 2015 Final 
Recommendations.'' \261\
---------------------------------------------------------------------------

    \260\ Measure Applications Partnership: List of Measures Under 
Consideration (MUC) for December 1, 2014. Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78318.
    \261\ National Quality Forum ``Process and Approach for MAP Pre-
Rulemaking Deliberations 2015'' Available at: http://www.qualityforum.org/Publications/2015/01/Process_and_Approach_for_MAP_Pre-Rulemaking_Deliberations_2015.aspx; 
and ``Spreadsheet of MAP 2015 Final Recommendations'' Available at: 
http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

    In addition, all three of the proposed measures are currently 
reported under the Hospital IQR Program as described in the FY 2012 
IPPS/LTCH PPS final rule (76 FR 51630 through 51631). We refer readers 
to CDC's Web site for detailed measure information for these three 
measures.262 263 The sections below outline our rationale 
for proposing to adopt these measures.
---------------------------------------------------------------------------

    \262\ CDC. Surveillance for C. difficile, MRSA, and other Drug-
resistant Infections. Available at: http://www.cdc.gov/nhsn/acute-care-hospital/cdiff-mrsa/index.html.
    \263\ CDC. Surveillance for Healthcare Personnel Vaccination. 
Available at: http://www.cdc.gov/nhsn/acute-care-hospital/hcp-vaccination/index.html.
---------------------------------------------------------------------------

c. CDC NHSN Facility-Wide Inpatient Hospital-Onset Clostridium 
difficile Infection (CDI) Outcome Measure (NQF #1717)
    Healthcare-associated infections (HAIs), such as CDI and MRSA, are 
a significant cause of morbidity and mortality. At any given time, 
approximately one in every 25 inpatients has an infection related to 
hospital care.\264\ These infections cost the U.S. health care system 
billions of dollars each year and lead to the loss of tens of thousands 
of lives. In addition, HAIs can have devastating emotional, financial 
and medical consequences.\265\ As a result of these adverse outcomes, 
we are committed to increasing patient safety by partnering with 
hospitals (for example, the CMS Partnership for Patients) \266\ to make 
hospital care safer, more reliable, and less costly by preventing 
injury and increased morbidity in patients, as well as allowing them to 
heal without complications.\267\
---------------------------------------------------------------------------

    \264\ HHS National Action Plan to Prevent Health Care-Associated 
Infections: Road Map to Elimination. Available at: http://www.health.gov/hai/prevent_hai.asp#hai.
    \265\ HHS National Action Plan to Prevent Health Care-Associated 
Infections: Road Map to Elimination. Available at: http://www.health.gov/hai/prevent_hai.asp#hai.
    \266\ CMS Innovation Center Partnership for Patients. Available 
at: http://innovation.cms.gov/initiatives/partnership-for-patients/.
    \267\ HHS National Action Plan to Prevent Health Care-Associated 
Infections: Road Map to Elimination. Available at: http://www.health.gov/hai/prevent_hai.asp#hai.
---------------------------------------------------------------------------

    CDC reports that prolonged antibiotic exposure, a long length of 
stay in a health care setting, and the existence of a serious 
underlying illness or immunocompromised condition (for example, cancer) 
increase the risk of CDI.\268\ As a result, we believe it is important 
to collect data on CDIs in the PCH setting, where cancer patients face 
increased exposure to these risk factors. In addition, in recent years, 
CDIs have become more frequent, more severe, and more difficult to 
treat.\269\ Each year, CDI is linked to 14,000 American deaths.\270\ 
Infection is especially common in older adults, but also affects some 
otherwise healthy people who are not hospitalized and/or taking 
antibiotics.\271\
---------------------------------------------------------------------------

    \268\ CDC C. difficile FAQ. Available at: http://www.cdc.gov/HAI/organisms/cdiff/Cdiff_infect.html.
    \269\ FY 2012 IPPS/LTCH PPS final rule (76 FR 51630 through 
51631).
    \270\ CDC Vital Signs. Available at: http://www.cdc.gov/vitalsigns/pdf/2012-03-vitalsigns.pdf.
    \271\ FY 2012 IPPS/LTCH PPS final rule (76 FR 51630 through 
51631).
---------------------------------------------------------------------------

    This proposed measure addresses the National Quality Strategy (NQS) 
Patient Safety domain. The measure reports the standardized infection 
ratio (SIR) of hospital-onset CDI Laboratory-identified events (LabID 
events) among all patients in the facility. The numerator includes the 
total number of observed hospital-onset CDI LabID events among all 
inpatients in the facility, excluding well baby-nurseries and Neonatal 
Intensive Care Units.\272\ The denominator includes the total number of 
predicted hospital-onset CDI LabID events, calculated by multiplying 
the number of inpatient days for the facility by the hospital-onset CDI 
LabID event rate for similar types of facilities (obtained from a 
standard population). 273 274
---------------------------------------------------------------------------

    \272\ NQF QPS. Available at: http://www.qualityforum.org/Qps/MeasureDetails.aspx?standardID=1717&print=0&entityTypeID=1.
    \273\ NQF QPS. Available at: http://www.qualityforum.org/Publications/2013/02/Patient_Safety_Measures_Complications_-_Phase_2.aspx.
    \274\ FY 2012 IPPS/LTCH PPS final rule (76 FR 51630 through 
51631).
---------------------------------------------------------------------------

    Beginning with a 2010-2011 baseline SIR of 1.0, we set a national 
goal to reduce the incidence of facility-onset CDI overall by 30 
percent (to a SIR of 0.70) by no later than 2013. However, we were not 
able to meet that goal, and the rate of facility-onset CDI decreased by 
only 2 percent as of 2012 (to a SIR of 0.98). Therefore, we believe it 
is critical to continue collecting data on CDI in the hospital setting, 
and to adopt this measure for the PCH setting, in order to ensure the 
highest quality of care for cancer patients and continue our effort to 
support HHS' National Action Plan to Prevent Healthcare Associated 
Infections (HAIs) and our proposed 2020 goal to reduce facility-onset 
of CDI by 30 percent from the 2015 baseline.\275\ The collection and 
evaluation of CDI data will allow PCH staff to evaluate whether their 
infection control efforts need improvement. We recognize the severe 
impact of CDI,\276\ and aim to continue efforts to increase patient 
protection and safety, and at the same time prevent adverse infections 
in the PCH setting.
---------------------------------------------------------------------------

    \275\ HHS National Action Plan to Prevent Health Care-Associated 
Infections: Road Map to Elimination: Proposed Targets. Available at: 
http://www.health.gov/hai/pdfs/HAI-Targets.pdf.
    \276\ Ibid.
---------------------------------------------------------------------------

    By proposing this measure in the PCHQR Program, we aim to continue 
to provide a common mechanism (that is, reporting to CDC's NHSN) that 
all hospitals, including PCHs, can use to uniformly submit and report 
measure data and inform their clinicians of the impact of targeted 
prevention efforts.
    We invited public comments on our proposal to add the CDC NHSN CDI 
Outcome Measure to the PCHQR Program beginning with the FY 2018 
program.
    Comment: Many commenters supported inclusion of the CDC NHSN CDI 
Outcome Measure in the PCHQR Program specifically citing the clinical 
significance of this measure.
    Response: We thank these commenters for their support.
    Comment: One commenter did not support this measure, and stated 
that individuals with cancer are more susceptible to infection because 
they are at higher risk of being infected due to the nature of their 
cancer condition (that is, immunocompromised). As a result, the 
commenter believed PCHs should not be compared with other settings.
    Response: We thank the commenter for this input. We believe that 
PCHs should not be compared with other settings if critical components 
of care, including measure population, severity

[[Page 49716]]

of illness and vulnerability to infections, significantly differ across 
settings of care and cannot be reliably adjusted through risk 
adjustment and other statistical modeling techniques. We note that 
PCHQR data is displayed separate from data reported by other settings. 
However, CDI is extremely prevalent and highly contagious,\277\ and we 
believe that PCH settings are as susceptible to this infectious disease 
as other settings where individuals with cancer or trauma (for example, 
burn patients) are treated. Therefore, we believe this measure could be 
applied to all settings and used to improve patient care. We are also 
fully committed to decreasing CDI rates and support the HHS' National 
Action Plan to Prevent Healthcare Associated Infections \278\ and 
Healthy People 2020 initiatives.
---------------------------------------------------------------------------

    \277\ CDC. Healthcare Associated Infections (HAIs). Available 
at: http://www.cdc.gov/HAI/surveillance/index.html.
    \278\ HHS. National Action Plan Targets and Metrics. Available 
at: http://www.health.gov/hcq/prevent_hai.asp#CDI.
---------------------------------------------------------------------------

    Comment: Several commenters supported the inclusion of this 
measure, but recommended that CMS monitor future novel diagnostic 
strategies for CDI (for example, new diagnostic ways to test 
Clostridium difficile bacteria.
    Response: We thank the commenters for their support. We will 
monitor all PCHQR Program measures closely and work with the CDC to 
identify future novel diagnostic strategies for CDI.
    After consideration of the public comments we received, we are 
finalizing our proposal to add the CDC NHSN CDI Outcome Measure to the 
PCHQR Program beginning with the FY 2018 program.
d. CDC NHSN Facility-Wide Inpatient Hospital-Onset Methicillin-
Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF 
#1716)
    Invasive MRSA infections may cause approximately 18,000 deaths per 
year during a hospital stay.\279\ Cancer patients are at increased risk 
for MRSA infections, specifically older adults with weakened immune 
systems who are receiving hospital inpatient care.\280\ As a result, we 
believe it is important to collect data on MRSA in the PCH setting.
---------------------------------------------------------------------------

    \279\ Catherine Liu, Arnold Bayer, et al.: Clinical Practice 
Guidelines by the Infectious Disease Society of America for the 
Treatment of Methicillin-Resistant Staphylococcus Aureus Infections 
in Adults and Children Infectious Disease Society of America 2011; 
52:e18.
    \280\ CDC. General Information about MRSA in Healthcare 
Settings: Available at: http://www.cdc.gov/mrsa/healthcare/index.html.
---------------------------------------------------------------------------

    This proposed measure addresses the NQS Patient Safety domain. This 
measure reports the SIR of hospital-onset unique blood source MRSA 
LabID events among all inpatients in a facility. The numerator includes 
the total number of observed hospital-onset unique blood source MRSA 
LabID events among all inpatients in the facility.\281\ The denominator 
includes the total number of predicted hospital-onset unique blood 
source MRSA LabID events, calculated by multiplying the number of 
inpatient days for the facility by the hospital-onset MRSA bacteremia 
LabID event rate for similar types of facilities (obtained from a 
standard population). 282 283
---------------------------------------------------------------------------

    \281\ NQF QPS. Available at: http://www.qualityforum.org/Qps/MeasureDetails.aspx?standardID=1716&print=0&entityTypeID=1.
    \282\ Ibid.
    \283\ FY 2012 IPPS/LTCH PPS final rule (76 FR 51630).
---------------------------------------------------------------------------

    Beginning with a 2009 baseline SIR of 1.0, we set a national goal 
to reduce the incidence of facility-onset MRSA infections by 50 percent 
by 2020. However, by 2012 the rate of facility-onset MRSA infections 
decreased by only 3 percent (to a SIR of 0.97). Therefore, we believe 
it is critical to continue collecting data on CDI in the hospital 
setting, and to adopt this measure for the PCH setting, to ensure the 
highest quality of care for cancer patients and continue our effort to 
support the HHS' National Action Plan and the proposed 2020 goal to 
reduce facility-onset MRSA infections by 50 percent from the 2015 
baseline.\284\
---------------------------------------------------------------------------

    \284\ HHS National Action Plan to Prevent Health Care-Associated 
Infections: Road Map to Elimination: Proposed Targets. Available at: 
http://www.health.gov/hai/pdfs/HAI-Targets.pdf.
---------------------------------------------------------------------------

    The collection and evaluation of MRSA data will allow PCH staff to 
evaluate whether their infection control efforts need improvement. By 
proposing this measure in the PCHQR Program, we aim to continue to 
provide a common mechanism (CDC NHSN) for all hospitals, including 
PCHs, to uniformly report measure data and inform their clinicians of 
the impact of targeted prevention efforts. Furthermore, we recognize 
the severe impact of MRSA and aim to continue our efforts to increase 
patient protection and safety, while at the same time preventing 
adverse infections in the PCH setting.
    We invited public comments on our proposal to add the CDC NHSN MRSA 
Measure to the PCHQR Program beginning with the FY 2018 program.
    Comment: Many commenters supported inclusion of the CDC NHSN MRSA 
Measure in the PCHQR Program specifically citing the clinical 
significance of this measure.
    Response: We thank these commenters for their support.
    Comment: Several commenters recommended postponing adoption of this 
measure until stratifications are adopted for cohorts of cancer 
patients (for example, bone marrow transplant, hematologic, and solid 
tumor). One commenter noted that this recommendation is consistent with 
recommendations from the NQF MAP Hospital Workgroup in terms of 
identifying benchmark calculations and risk adjustment methodologies to 
support valid comparisons among PCHs.
    Response: We thank the commenters for their input. We would like to 
clarify that while the MAP Hospital Workgroup expressed concerns 
regarding the need for stratification of cohorts of cancer patients 
(BMT, Hematologic, and Solid tumor), the Coordinating Committee did not 
support that suggestion noting public comments received from CMS.\285\ 
We refer readers to the NQF Web site for more public comment 
information.
---------------------------------------------------------------------------

    \285\ NQF. Spreadsheet of MAP 2015 Final Recommendations. 
Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78711/.
---------------------------------------------------------------------------

    In consultation with the CDC, we agree that the current risk models 
used for the calculation of MRSA bacteremia SIRs may not accurately 
predict these types of events in the cancer patient population, 
particularly within cancer hospitals. Until there are sufficient data 
with which to risk adjust MRSA bacteremia in this population, CDC plans 
to submit unadjusted, facility-specific healthcare facility-onset, 
incidence rates without comparison to a national benchmark. We further 
are clarifying that we have not provided any guidance surrounding the 
definition of a benchmark for any of the PCHQR Program measures.
    Comment: One commenter did not support this measure and stated that 
individuals with cancer are more susceptible to infection because they 
are at higher risk of being infected due to the nature of their cancer 
condition (that is, immunocompromised). As a result, the commenter 
believed that PCHs should not be compared with other settings.
    Response: We thank the commenter for this input. We believe that 
PCHs should not be compared with other settings if critical components 
of care, including measure population, severity of illness and 
vulnerability to infections, significantly differ across settings of 
care and cannot be reliably adjusted through risk adjustment and other 
statistical modeling techniques. We note that PCHQR data are displayed

[[Page 49717]]

separately from data reported by other settings.
    However, MRSA is extremely prevalent and highly contagious,\286\ 
and we believe that PCH settings are as susceptible as other settings 
where individuals with cancer or trauma (for example, burn patients) 
are treated. Therefore, we believe this measure could be applied to all 
settings and used to improve patient care. We also are fully committed 
to decreasing MRSA rates and support the HHS' National Action Plan to 
Prevent Healthcare Associated Infections \287\ and Healthy People 2020 
initiatives.
---------------------------------------------------------------------------

    \286\ CDC. Healthcare Associated Infections (HAIs). Available at 
http://www.cdc.gov/HAI/surveillance/index.html.
    \287\ HHS. National Action Plan Targets and Metrics. Available 
at http://www.health.gov/hcq/prevent_hai.asp#MRSAp.
---------------------------------------------------------------------------

    After consideration of the public comments we received, we are 
finalizing our proposal to add the CDC NHSN MRSA Measure to the PCHQR 
Program beginning with the FY 2018 program.
e. CDC NHSN Influenza Vaccination Coverage Among Healthcare Personnel 
[HCP] Measure (NQF #0431) (CDC NHSN HCP Measure)
    CDC estimates that in the United States, each year, on average 5 to 
20 percent of the population gets influenza and more than 200,000 
people are hospitalized from seasonal influenza-related 
complications.\288\ Influenza seasons are unpredictable and can be 
severe. Over a period of 30 years, between 1976 and 2006, estimates of 
influenza-associated deaths per year in the United States ranged from a 
low of approximately 3,000 to a high of approximately 49,000 
people.\289\ Because influenza can become widespread and have serious 
consequences, the Advisory Committee on Immunization Practices (ACIP) 
recommends that all health care personnel (HCP) and persons in training 
for health care professions be vaccinated annually against 
influenza.\290\ Persons who are infected with the influenza virus, 
including those with subclinical infection, can transmit the influenza 
virus to persons at higher risk for complications, such as 
immunocompromised cancer patients. In addition, vaccination of HCP has 
been associated with reduced work absenteeism and fewer deaths among 
patients. Results of several studies also indicate that higher 
vaccination coverage among HCP is associated with lower incidence of 
nosocomial influenza.291 292 293 Such findings have led 
researchers to call for mandatory influenza vaccination of HCP.\294\
---------------------------------------------------------------------------

    \288\ CDC. Seasonal Influenza Q&A. Available at: http://www.cdc.gov/flu/about/qa/disease.html.
    \289\ CDC. Estimating Seasonal Influenza-Associated Deaths in 
the United States: CDC Study Confirms Variability of Flu. Available 
at: http://www.cdc.gov/flu/about/disease/us_flu-related_deaths.html.
    \290\ CDC. ``Prevention and control of seasonal influenza with 
vaccines: Recommendations of the Advisory Committee on Immunization 
Practices (ACIP), 2009.'' MMWR 58, no. Early Release (2009):1-52.
    \291\ Salgado CD, Giannetta ET, Hayden FG, Farr BM.: Preventing 
influenza by improving the vaccine acceptance rate of clinicians. 
Infection Control and Hospital Epidemiology 2004; 25: 923-928.
    \292\ Potter J, Stott DJ, Roberts MA, et al.: Influenza 
vaccination of health-care workers in long-term-care hospitals 
reduces the mortality of elderly patients. Journal of Infectious 
Diseases 1997; 175:1-6.
    \293\ Hayward AC, Harling R, Wetten S, et al.: Effectiveness of 
an influenza vaccine program for care home staff to prevent death, 
morbidity, and health service use among residents: cluster 
randomized controlled trial. British Medical Journal 2006; 333:1241-
1246.
    \294\ Talbot TR, Bradley SF, Cosgrove SE., et al.: SHEA position 
paper: Influenza vaccination of healthcare workers and vaccine 
allocation for healthcare workers during vaccine shortages. 
Infection Control and Hospital Epidemiology 2005; 26:882-890.
---------------------------------------------------------------------------

    This proposed measure addresses the NQS Patient Safety domain. The 
measure reports the percent of HCP who receive the influenza 
vaccination.\295\ The numerator includes HCP in the denominator 
population who during the time from October 1 (or when the vaccine 
became available) through March 31 of the following year, either: (a) 
Received an influenza vaccination administered at the facility, or 
reported in writing (paper or electronic) or provided documentation 
that the influenza vaccination was received elsewhere; (b) were 
determined to have a medical contraindication or history of Guillain-
Barr[eacute] Syndrome within 6 weeks after a previous influenza 
vaccination; (c) declined the influenza vaccination; or (d) had an 
unknown vaccination status.\296\ The denominator includes the number of 
HCP who are working in the health care facility for at least 1 working 
day between October 1 and March 31 of the following year, regardless of 
clinical responsibility or patient contact, and includes: (a) 
Employees; (b) licensed independent practitioners; and (c) adult 
students/trainees and volunteers.297 298 Numerators and 
denominators are collected separately for each of the specified groups.
---------------------------------------------------------------------------

    \295\ NQF QPS. Available at: http://www.qualityforum.org/Qps/0431.
    \296\ Ibid.
    \297\ Ibid.
    \298\ FY 2012 IPPS/LTCH PPS final rule (76 FR 51631).
---------------------------------------------------------------------------

    We believe it is important to collect data on this measure in order 
to ensure the highest quality of care for cancer patients in our effort 
to support one of the Healthy People 2020 goals of immunizing 90 
percent of health care personnel nationally by 2020.\299\ Overall, 
final 2013-14 influenza vaccination coverage among HCP was 75.2 
percent, similar to coverage of 72.0 percent in the 2012-13 
season.\300\ We aim to increase patient protection and safety and at 
the same time prevent adverse outcomes (for example, transmitting 
influenza to patients, specifically high risk cancer patients, and 
premature death due to influenza) in the PCH setting.
---------------------------------------------------------------------------

    \299\ Healthy People 2020. Immunization and Infectious Diseases. 
Available at: http://www.healthypeople.gov/2020/topics-objectives/topic/immunization-and-infectious-diseases/objectives.
    \300\ CDC. Influenza Vaccination Information for Health Care 
Workers. Available at: http://www.cdc.gov/flu/healthcareworkers.html.
---------------------------------------------------------------------------

    We believe that this measure is applicable to the PCH setting based 
on CDC guidelines that patients who currently have cancer or who have 
had certain types of cancer in the past (such as lymphoma or leukemia), 
are at high risk for complications from influenza, including 
hospitalization and death.\301\ The involvement of HCP in influenza 
transmission has been a longstanding concern.302 303 
Vaccination is an effective preventive measure against influenza, and 
can prevent many illnesses, deaths, and losses in productivity.\304\
---------------------------------------------------------------------------

    \301\ CDC Preventing Infections in Cancer Patients. Available 
at: http://www.cdc.gov/cancer/flu/.
    \302\ Maltezou HC, Drancourt M.: Nosocomial influenza in 
children. Journal of Hospital Infection 2003; 55:83-91.
    \303\ Salgado CD, Farr BM, Hall KK, Hayden FG.: Influenza in the 
acute hospital setting. The Lancet Infectious Diseases 2002; 2:145-
155.
    \304\ Wilde JA, McMillan JA, Serwint J, Butta J, O'Riordan MA, 
Steinhoff MC.: Effectiveness of influenza vaccine in health care 
professionals: a randomized trial. The Journal of the American 
Medical Association 1999; 281:908-913.
---------------------------------------------------------------------------

    By proposing this measure in the PCHQR Program, we aim to not only 
provide a common mechanism (CDC NHSN) for all hospitals, including 
PCHs, to uniformly report the measure data, but also to inform their 
clinicians of the impact of targeted prevention efforts. In addition, 
and most importantly, we believe that collecting this measure data in 
the PCH setting is necessary to support our effort to prevent 
unnecessary additional or prolonged hospitalizations (and associated 
costs), and to decrease premature death among cancer patients.
    We invited public comments on our proposal to add the CDC NHSN HCP 
Measure to the PCHQR Program beginning with the FY 2018 program.

[[Page 49718]]

    Comment: Many commenters supported inclusion of the CDC NHSN HCP 
Measure in the PCHQR Program, specifically citing the clinical 
significance of this measure.
    Response: We thank these commenters for their support.
    Comment: One commenter supported this measure, but recommended 
against comparing PCH measure rates to those with a different patient 
population when this measure is applied across programs.
    Response: We thank the commenter for the comment. We believe that 
PCHs should not be compared with other settings if critical components 
of care, including measure population, severity of illness and 
vulnerability to infections, significantly differ across settings of 
care and cannot be reliably adjusted through risk adjustment and other 
statistical modeling techniques. We note that PCHQR data are displayed 
separate from data reported by other settings. However, influenza is 
extremely prevalent and highly contagious,\305\ and we believe that PCH 
settings are as susceptible to this disease as other settings where 
individuals with cancer or trauma (for example, burn patients) are 
treated. Therefore, we believe this measure could be applied to all 
settings and used to improve patient care. We also are fully committed 
to decreasing influenza rates and support the HHS' National Action Plan 
to Prevent Healthcare Associated Infections and Healthy People 2020 
initiatives.
---------------------------------------------------------------------------

    \305\ CDC. Healthcare Associated Infections (HAIs). Available 
at: http://www.cdc.gov/HAI/surveillance/index.html.
---------------------------------------------------------------------------

    Comment: One commenter recommended providing more specific 
direction for healthcare workers that decline and/or are medically 
excluded from influenza vaccination and have contact with patients. The 
commenter suggested refinement to the measure specifications to address 
clinical guidelines for health care workers who are excluded.
    Response: For clarification purposes, the measure specification 
does address HCP who decline vaccination and have medical conditions 
that would prevent them from receiving influenza vaccine. In addition, 
it further defines the time from October 1 (or when the vaccine became 
available) through March 31 of the following year, during which HCP 
either: (a) Received an influenza vaccination administered at the 
facility, or reported in writing (paper or electronic) or provided 
documentation that the influenza vaccination was received elsewhere; 
(b) were determined to have a medical contraindication or history of 
Guillain-Barr[eacute] Syndrome within 6 weeks after a previous 
influenza vaccination; (c) declined the influenza vaccination; or (d) 
had an unknown vaccination status.\306\
---------------------------------------------------------------------------

    \306\ NQF Quality Positioning System, Available at: http://
www.qualityforum.org/QPS/0431.
---------------------------------------------------------------------------

    The CDC provides guidance on influenza infection control posted to 
their ``Infection Control in Health Care Facilities'' Web page, which 
is located at http://www.cdc.gov/flu/professionals/infectioncontrol/. 
These resources can be utilized for HCP with medical contraindications 
to influenza vaccine or decline influenza vaccination.
    After consideration of the public comments we received, we are 
finalizing our proposal to add the CDC NHSN HCP Measure to the PCHQR 
Program beginning with the FY 2018 program.
    In summary, we are finalizing the addition of three new measures 
for reporting beginning with the FY 2018 program and removing six SCIP 
measures beginning with Q4 2015 discharges. The PCHQR measure set will 
consist of 16 measures beginning with the FY 2018 program. Our policies 
regarding the form, manner, and timing of data collection for these 
measures are discussed in section VIII.B.7. of the preamble to this 
final rule.
    The table below lists all adopted measures as well as the new 
measures we are finalizing for the PCHQR Program beginning with the FY 
2018 program.

------------------------------------------------------------------------
                                        Summary of adopted and newly
               Topic                  finalized PCHQR program measures
                                     beginning with the FY 2018 program
------------------------------------------------------------------------
Safety and Healthcare-Associated
 Infection--HAI.
                                     CDC NHSN Central Line-
                                     Associated Bloodstream Infection
                                     (CLABSI) Outcome Measure (NQF
                                     #0139)*.
                                     CDC NHSN Catheter-
                                     Associated Urinary Tract Infections
                                     (CAUTI) Outcome Measure (NQF
                                     #0138)*.
                                     Harmonized Procedure
                                     Specific Surgical Site Infection
                                     (SSI) Outcome Measure * [currently
                                     includes SSIs following Colon
                                     Surgery and Abdominal Hysterectomy
                                     Surgery] (NQF #0753)*.
                                     CDC NHSN Facility-wide
                                     Inpatient Hospital-onset
                                     Clostridium difficile Infection
                                     (CDI) Outcome Measure (NQF
                                     #1717)**.
                                     CDC NHSN Facility-wide
                                     Inpatient Hospital-onset
                                     Methicillin-resistant
                                     Staphylococcus aureus (MRSA)
                                     Bacteremia Outcome Measure (NQF
                                     #1716)**.
                                     CDC NHSN Influenza
                                     Vaccination Coverage Among
                                     Healthcare Personnel [HCP] (NQF
                                     #0431)**.
Clinical Process/Cancer-Specific
 Treatments.
                                     Adjuvant Chemotherapy is
                                     Considered or Administered Within 4
                                     Months (120 days) of Diagnosis to
                                     Patients Under the Age of 80 with
                                     AJCC III (lymph node positive)
                                     Colon Cancer (NQF #0223)*.
                                     Combination Chemotherapy is
                                     Considered or Administered Within 4
                                     Months (120 days) of Diagnosis for
                                     Women Under 70 with AJCC T1c, or
                                     Stage II or III Hormone Receptor
                                     Negative Breast Cancer (NQF
                                     #0559)*.
                                     Adjuvant Hormonal Therapy
                                     (NQF #0220)*.
Clinical Process/Oncology Care
 Measures.
                                     Oncology: Radiation Dose
                                     Limits to Normal Tissues (NQF
                                     #0382)*.
                                     Oncology: Plan of Care for
                                     Pain (NQF #0383)*.
                                     Oncology: Pain Intensity
                                     Quantified (NQF #0384)*.
                                     Prostate Cancer: Adjuvant
                                     Hormonal Therapy for High Risk
                                     Patients (NQF #0390)*.
                                     Prostate Cancer: Avoidance
                                     of Overuse of Bone Scan for Staging
                                     Low-Risk Patients (NQF #0389)*.
Patient Engagement/Experience of
 Care.
                                     HCAHPS [Hospital Consumer
                                     Assessment of Healthcare Providers
                                     and Systems Survey] (NQF #0166)*.
Clinical Effectiveness Measure....

[[Page 49719]]

 
                                     External Beam Radiotherapy
                                     for Bone Metastases (NQF #1822)*.
------------------------------------------------------------------------
*Previously finalized measures.
** Adopted beginning with the FY 2018 program in this final rule.

4. Possible New Quality Measure Topics for Future Years
    Future quality measure topics and quality measure domain areas are 
discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50280). In 
addition, in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24593), we 
welcomed public comment and specific suggestions for measure topics 
addressing the following CMS Quality Strategy domains: making care 
affordable; communication and coordination; and working with 
communities to promote best practices of healthy living.
    Comment: Several commenters recommended that CMS give priority to 
developing outcome and quality-of-life measures that are most important 
to patients, including patient-reported outcome measures instead of 
process measures.
    Response: We thank the commenters for their recommendation and will 
consider it in future years.
    Comment: One commenter suggested considering the following three 
issues in the PCHQR Program: (1) Use of multiple data sources; (2) 
continuing research in areas of concern that demonstrate gaps in 
clinical care; and (3) efforts to develop core metrics given the 
variation between cancer patients (diagnoses, conditions, and 
priorities).
    Response: We recognize and acknowledge the burden in extracting 
data from multiple sources (for example, administrative data and chart 
abstraction). However, we believe that our quality improvement effort 
(for example, improving quality of care and increasing life expectancy 
among cancer patients) outweighs the burden associated with data 
abstraction in selecting the most appropriate measures for the program. 
We will continue to engage and partner with all stakeholders in 
collaborating and corroborating on issues that address gaps in clinical 
care and developing core metrics specific to cancer treatment and care 
(for example, diagnoses, conditions, and priorities).
    Comment: One commenter supported measure development to address 
cancer measurement gaps in care coordination, functional status, 
patient safety, patient and caregiver experience of care, population/
community health, and efficiency. The commenter agreed that quality 
measurement strategies should be aligned with the three aims of the 
National Quality Strategy: better care; healthy people/healthy 
communities; and affordable care.
    Response: We thank the commenter for this support.
    Comment: Several commenters recommended that measures considered 
for the PCHQR Program be evaluated and risk-adjusted, prior to 
adoption.
    Response: We thank the commenters for the recommendation. During 
our measure development and testing, we assess for necessity of risk-
adjustment. Furthermore, measures that are not developed by CMS are 
also assessed for necessity of risk-adjustment when they undergo NQF 
endorsement and re-endorsement.
    Comment: Some commenters expressed the concern that measures that 
are not tested in the PCH environment may result in invalid measurement 
due to lack of a sufficient population for statistical significance and 
the lack of exclusions for this complex patient population.
    Response: We thank the commenters for their input. Historically, we 
have adopted measures across settings. Whenever feasible, we have also 
tested all measures for the applicable environment. We agree that a 
small number of cases or lack of a sufficient population could result 
in erroneous and misleading results. We also agree that data collection 
is not only necessary but crucial for quality improvement purposes. We 
will continue to work on ensuring that measures are appropriate, 
reliable, and valid for the PCH setting prior to adopting them in the 
PCHQR Program.
    Comment: One commenter recommended that CMS consider the following 
three measures for the PCHQR Program: (1) Post breast conservation 
surgery irradiation (E0219), (2) At least 12 regional lymph nodes are 
removed and pathologically examined for resected colon cancer (E0225), 
and (3) Needle biopsy to establish diagnosis of cancer precedes 
surgical excision/resection (E0221).
    Response: We thank the commenter for this recommendation. These 
measures were submitted and reviewed by the MAP in December 2014. The 
MAP agreed to conditionally support these measures pending inclusion of 
these measures in the Hospital IQR Program for general acute care 
hospitals. The Workgroup also noted that these measures have extremely 
high levels of performance (that is, they are nearly topped out) for 
the PCHs.\307\ Due to this reason (that they are nearly topped out in 
the PCH setting), we did not to propose these measures for the PCHQR 
Program.
---------------------------------------------------------------------------

    \307\ NQF. Spreadsheet of MAP 2015 Final Recommendations. 
Available at http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

    Comment: One commenter recommended that CMS exercise greater 
caution in the future when considering additional measures for PCHQR 
Program to avoid the undue burden associated with requiring PCHs to 
develop infrastructure to report for only a short time, such as with 
the SCIP measures.
    Response: We thank the commenter for this recommendation. We will 
continue to try to avoid and reduce burden in future years.
    Comment: Several commenters requested that CMS outline specific 
guidelines for determining when measures are ``topped out'' for the 
PCHQR Program.
    Response: We thank the commenter for this comment and will provide 
some guidance on topped out criteria in future rulemaking.
    Comment: One commenter recommended that CMS collaborate with the 
PCHs in developing PCHQR Program policies in the future.
    Response: We thank the commenter for this suggestion. As with all 
of our programs, we are fully committed to engaging and partnering with 
all stakeholders to ensure success and most importantly to improve 
quality of care.
5. Maintenance of Technical Specifications for Quality Measures
    We maintain technical specifications for the PCHQR Program 
measures, and we periodically update those specifications. The 
specifications may be found on the QualityNet Web site at: https://qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228774479863.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50281), we described 
a policy under which we use a subregulatory process to make 
nonsubstantive updates to measures

[[Page 49720]]

used for the PCHQR Program. We did not propose any changes to this 
policy in the proposed rule.
6. Public Display Requirements
a. Background
    Section 1866(k)(4) of the Act requires the Secretary to establish 
procedures for making the data submitted under the PCHQR Program 
available to the public. Such procedures must ensure that a PCH has the 
opportunity to review the data that are to be made public with respect 
to the PCH prior to such data being made public. Section 1866(k)(4) of 
the Act also provides that the Secretary must report quality measures 
of process, structure, outcome, patients' perspective on care, 
efficiency, and costs of care that relate to services furnished in such 
hospitals on the CMS Web site.
    In order to meet these requirements, in the FY 2013 IPPS/LTCH PPS 
final rule (77 FR 53562 through 53563), we finalized our policy to 
publicly display PCHQR Program data on the Hospital Compare Web site 
(http://www.hospitalcompare.hhs.gov/) and established a preview period 
of 30 days prior to making such data public.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50847 through 
50848), we finalized our proposal to display publicly in 2014 and 
subsequent years the data for two measures. In the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 50282), we finalized our proposal to display 
publicly in 2015 and subsequent years the data for one measure and our 
proposal to display publicly no later than 2017 the data for two 
additional measures. In summary, we have finalized proposals to 
publicly display five PCHQR measures on Hospital Compare, including 
three Cancer Specific Treatment measures and two CDC NHSN HAI measures.

            Summary of Finalized Public Display Requirements
------------------------------------------------------------------------
                  Measures                        Public  reporting
------------------------------------------------------------------------
 Adjuvant Chemotherapy is            2014 and subsequent years.
 Considered or Administered Within 4 Months
 (120 days) of Diagnosis to Patients Under
 the Age of 80 with AJCC III (lymph node
 positive) Colon Cancer (NQF #0223).
 Combination Chemotherapy is
 Considered or Administered Within 4 Months
 (120 days) of Diagnosis for Women Under 70
 with AJCC T1c, or Stage II or III Hormone
 Receptor Negative Breast Cancer (NQF
 #0559).
 Adjuvant Hormonal Therapy (NQF      2015 and subsequent years.
 #0220).
 CDC NHSN Central Line-Associated    2017 and subsequent years.
 Bloodstream Infection (CLABSI) Outcome
 Measure (NQF #0139).
 CDC NHSN Catheter-Associated
 Urinary Tract Infections (CAUTI) Outcome
 Measure (NQF #0138).
------------------------------------------------------------------------

b. Additional Public Display Requirements
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24594), we 
proposed to publicly display six additional PCHQR measures beginning in 
2016 and for subsequent years:
     Oncology: Radiation Dose Limits to Normal Tissues (NQF 
#0382)
     Oncology: Plan of Care for Pain (NQF #0383)
     Oncology: Pain Intensity Quantified (NQF #0384)
     Prostate Cancer: Adjuvant Hormonal Therapy for High Risk 
Patients (NQF #0390)
     Prostate Cancer: Avoidance of Overuse of Bone Scan for 
Staging Low-Risk Patients (NQF #0389)
     HCAHPS (NQF #0166)
    We invited public comment on these proposals.
    Comment: Several commenters supported the display of these measures 
to improve public awareness and beneficiary choice. Some of these 
commenters also noted the benefits of alignment across programs in 
publicly reporting these data.
    Response: We thank the commenters for their support.
    Comment: One commenter recommended that CMS delay public reporting 
of the CDC NHSN CAUTI measure until this measure has been revised by 
the CDC to account for all cancer-specific risks and exclude all 
infections unrelated to catheter placement.
    Response: We are collaborating, and will continue to collaborate, 
with the CDC to explore the best approach to account for all 
heterogeneous patient populations that are monitored and tracked using 
the NHSN, cancer patients being one of many such populations. As 
indicated in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50282), we 
have delayed public reporting of CAUTI until no later than 2017 so that 
reliable baseline estimates and expected rates can be determined. We 
agree with the commenter and believe this delay is necessary in order 
to provide meaningful and reliable data available for consumers to make 
informed health care decisions. For more information, we refer readers 
to that final rule.
    Comment: One commenter expressed concerns regarding how CAUTI is 
defined in the measure specifications because currently the measure 
specification does not address conditions that are critical to PCHs, 
such as cancer patients with multiple instruments in the genitourinary 
tract, urine collection obtained from different sources, long-term 
catheter use, cancer patients with neobladders, and cancer patients 
with neutropenic fever. The commenter also stated that the measure does 
not exclude patients with bladder fistulas between the gastrointestinal 
and reproductive tracts.
    Response: We thank the commenter for this input. For more 
information about this measure, we refer readers to the CDC's measure 
specifications at the CDC's Web site (http://www.cdc.gov/nhsn/acute-care-hospital/CAUTI/).
    For clarification purposes, in consultation with the CDC, we 
learned that the CAUTI definition working group (WG) (comprised of 
internal and external subject-matter experts (for example, infection 
preventionists, microbiologists, and hospital epidemiologists and 
infection disease physicians)) takes into consideration all patients 
(including cancer patients) when they review the NHSN CAUTI 
surveillance measure. While the WG agreed that these patients may be at 
an increased risk of Urinary Tract Infection (UTI), they also agreed 
that information used to identify these patients and to exclude them 
from surveillance is often difficult to ascertain because of 
shortcomings in clinical documentation of presence and timing of 
instrumentation.
    In addition, removing these patients from CAUTI surveillance would 
mean omitting their UTIs and their urinary catheter days. Separating 
these patients and excluding their data from surveillance would be 
labor intensive and beyond what is logistically feasible for many, if 
not most, PCHs. We note that only in the case that a concomitant urine 
culture collected from the urethral

[[Page 49721]]

catheter is negative, a positive urine culture from a nephrostomy tube 
will be excluded from surveillance for CAUTI in the NHSN. Such a 
scenario would suggest that the infection was not an ascending 
infection of the urinary tract, that is, not from the level of the 
urinary catheter, but rather is occurring from another source. This 
exclusion is feasible for surveillance because it only requires those 
performing surveillance to identify nephrostomy tubes when there is an 
infection, rather than requiring that they identify all patients with 
both nephrostomy tube and urethral catheter and remove any catheter 
days associated with those patients from CAUTI surveillance. For 
further information on this measure, we refer readers to the CDC's Web 
site (http://www.cdc.gov/nhsn/acute-care-hospital/CAUTI/).
    Comment: One commenter recommended that the CMS delay public 
reporting of the CDC NHSN CLABSI measure until this measures has been 
revised by the CDC to account for all cancer-specific risks and exclude 
all infections unrelated to central-line placement.
    Response: We thank the commenter for this input. We are 
collaborating, and will continue to collaborate, with the CDC to 
explore the best approach to account for all heterogeneous patient 
populations that are monitored and tracked using the NHSN, cancer 
patients being one of many such populations. As indicated in the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50282), we have delayed public 
reporting of CLABSI until no later than 2017 so that reliable baseline 
estimates and expected rates can be determined. We agree with the 
commenter and believe this delay is necessary in order to provide 
meaningful and reliable data available for consumers to make informed 
health care decisions. For more information, we refer readers to the 
referenced page.
    Comment: One commenter expressed specific concerns regarding how 
CLABSI is defined in the measure specifications because currently the 
measure specifications do not address conditions that are critical to 
PCHs. The commenter did not believe the exclusion criteria excluded 
cancer patients with mucosal barrier injury laboratory-confirmed 
bloodstream infections (MBI-LCBI) or excluded organisms that are part 
of the normal gastrointestinal (GI) flora, but said that cancer 
patients who are receiving cancer treatments (either of these 
combinations--chemotherapy or radiation or transplant) are at high risk 
of mucosal injury and highly susceptible to infection even from normal 
GI flora that normally are benign in healthy individuals.
    Response: We thank the commenter for this input. For more 
information about this measure, we refer readers to the CDC's measure 
specifications at the CDC's Web site (http://www.cdc.gov/nhsn/acute-care-hospital/clabsi/).
    For clarification purposes, in consultation with the CDC, we 
learned that the expert panel that the CDC worked with to develop the 
MBI-LCBI criteria developed the list of organisms which would be 
associated with MBI-LCBI events. This list was not intended to 
represent every organism that is common to the human gut, but rather to 
include only those which, when cultured from the bloodstream, were 
clinically most likely due to mucosal barrier injury rather than some 
other cause. Some organisms which are common to the human intestine are 
more commonly identified in the bloodstream due to other causes, 
including being associated with the presence of a central line. These 
organisms, for instance Pseudomonas spp., were intentionally excluded 
from the list for this reason. As experience with MBI-LCBI surveillance 
continues, the MBI-LCBI list will be reconsidered.
    In addition, excluding patients from developing a CLABSI simply 
because they have any of the symptoms listed in the measure 
specification manual could result in a CLABSI measure that is 
tremendously insensitive. The symptoms listed are often poorly defined; 
variation exists in the ways that clinicians identify them and rate 
them. They are therefore not good candidates for inclusion in 
surveillance definitions and protocols. For further information on this 
measure, we refer readers to the CDC's Web site (http://www.cdc.gov/nhsn/acute-care-hospital/clabsi/index.html).
    Comment: One commenter recommended that when CDC NHSN CLABSI and 
CDC NHSN CAUTI are publicly reported, the data be aggregated to report 
rates as ICU and non-ICU only versus at the inpatient unit level.
    Response: We received a similar comment last year and we continue 
to believe our response in the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50282) applies regarding this issue. We continue to collaborate with 
the CDC to account for all heterogeneous patient populations that are 
monitored and tracked using the NHSN, cancer patients being one of many 
such populations. We refer readers to the referenced final rule page 
for further discussion of this issue.
    Comment: Several commenters requested that prior to requiring 
public reporting, CMS clarify whether the Radiation Dose Limits to 
Normal Tissues (NQF 0382) measure applies only to lung and pancreas 
cancer patients, or if breast and rectal cancer patients should be 
included, since this cohort expansion was submitted by the measure 
steward in the November 2014 for measure maintenance and update to NQF.
    Response: At this time, this measure, which was finalized in FY 
2014 IPPS/LTCH PPS final rule (78 FR 50842 through 50842), does not 
include patients with breast or rectal cancer. However, we intend to 
address the expanded cohort issue in next year's rulemaking to include 
breast and rectal cancer patients after we receive recommendations from 
the MAP.
    Comment: One commenter requested that prior to publicly reporting, 
CMS clarify the sampling protocol for the Plan of Care for Pain (NQF 
0383) and Pain Intensity Quantified (NQF 0384) measures because it 
appears that this sampling protocol may require oversampling for the 
Pain Intensity Quantified (NQF 0384) measure.
    Response: Because these are two ``paired'' measures, cancer 
patients that are sampled for the Pain Intensity Quantified (NQF 0384) 
measure for the numerator case count are also sampled to account for 
the Plan of Care for Pain (NQF 0383) measure (denominator case count). 
This means that for any cancer patients that are reporting pain and 
their pain are quantified (for example, assessed for severity on a 
scale of one to ten), these cancer patients should have a care plan for 
pain management. We do not believe this approach is ``oversampling'' 
but rather a step toward improving quality of care by monitoring, 
managing, and controlling pain throughout the life cycle of cancer 
treatment. We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 
FR 50285) for further guidance on sampling these measures.
    Currently, we have in place outreach and education materials (for 
example, tools, Webinars, among others) to assist PCHs in their data 
abstraction (including sampling). Information on this outreach is 
available on our QualityNet Web site at: (https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=12287744
79863). We also have established a dedicated PCHQR Help Desk hotline to 
assist PCHs in data abstraction (https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=12287728
64236). However, we will continue to work with our

[[Page 49722]]

support contractor in providing additional education materials, 
including Webinars, on sampling for these measures.
    After consideration of the public comments we received, we are 
finalizing our proposal to publicly display these six additional PCHQR 
measures beginning in 2016 and for subsequent years. A summary of 
previously adopted and newly finalized public display policies is 
listed in the table below.

    Summary of Previously Adopted and Newly Finalized Public Display
                              Requirements
------------------------------------------------------------------------
                 Measures                         Public  reporting
------------------------------------------------------------------------
 Adjuvant Chemotherapy is           2014 and subsequent years.
 Considered or Administered Within 4
 Months (120 days) of Diagnosis to
 Patients Under the Age of 80 with AJCC
 III (lymph node positive) Colon Cancer
 (NQF #0223).
 Combination Chemotherapy is
 Considered or Administered Within 4
 Months (120 days) of Diagnosis for Women
 Under 70 with AJCC T1c, or Stage II or
 III Hormone Receptor Negative Breast
 Cancer (NQF #0559).
 Adjuvant Hormonal Therapy (NQF     2015 and subsequent years.
 #0220).
 Oncology: Radiation Dose Limits
 to Normal Tissues (NQF #0382).
 Oncology: Plan of Care for Pain
 (NQF #0383).
 Oncology: Pain Intensity
 Quantified (NQF #0384).
 Prostate Cancer: Adjuvant
 Hormonal Therapy for High Risk Patients
 (NQF #0390).
 Prostate Cancer: Avoidance of      2016 and subsequent years.
 Overuse of Bone Scan for Staging Low Risk
 Patients (NQF #0389).
 HCAHPS (NQF #0166)...............
 CDC NHSN Central Line-Associated
 Bloodstream Infection (CLABSI) Outcome
 Measure (NQF #0139).
 CDC NHSN Catheter-Associated       2017 and subsequent years.
 Urinary Tract Infections (CAUTI) Outcome
 Measure (NQF #0138).
------------------------------------------------------------------------

7. Form, Manner, and Timing of Data Submission
a. Background
    Section 1866(k)(2) of the Act requires that, beginning with the FY 
2014 PCHQR Program, each PCH must submit to the Secretary data on 
quality measures specified under section 1866(k)(3) of the Act in a 
form and manner, and at a time, as specified by the Secretary.
    Data submission requirements and deadlines for the PCHQR Program 
are generally posted on the QualityNet Web site at: http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228772864228.
b. Reporting Requirements for New Measures: CDC NHSN CDI (NQF #1717), 
CDC NHSN MRSA (NQF #1716), and CDC NHSN HCP (NQF #0431) Measures
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24594 through 
24595), we proposed that PCHs submit CDC NHSN CDI, MRSA, and HCP 
measure data for all patients to the CDC through the NHSN database. 
This is the same procedural/reporting mechanism used for the CDC NHSN 
CLABSI and CAUTI measures that we finalized in the FY 2013 IPPS/LTCH 
PPS final rule (77 FR 53563 through 53564) and for the CDC SSI measure 
that we finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50848 
through 50850). The data submission and reporting procedures have been 
set forth by the CDC for NHSN participation in general and for 
submission of the CDC NHSN CDI, MRSA, and HCP measures to NHSN. We 
refer readers to the CDC's Web site (http://www.cdc.gov/nhsn/cms/index.html) for detailed data submission and reporting procedures.
    We proposed to adopt a quarterly submission process for the CDC 
NHSN CDI and MRSA measures as shown in the table below. We have 
successfully implemented this reporting mechanism in the Hospital IQR 
Program (77 FR 53539), and we strongly believe that this type of data 
submission is the most feasible option because PCHs are currently 
reporting the CDC NHSN CAUTI, CLABSI, and CDC SSI measures to the CDC 
NHSN this way.

Proposed CDC NHSN CDI (NQF #1717) and CDC NHSN MRSA (NQF #1716) Measures
 Reporting Periods and Submission Timeframes Beginning With the FY 2018
                                 Program
------------------------------------------------------------------------
                                   Reporting periods    Data submission
       Program year  (FY)                (CY)           deadlines  (CY)
------------------------------------------------------------------------
2018............................  Q1 2016 events      August 15, 2016.
                                   (January 1, 2016-
                                   March 31, 2016).
                                  Q2 2016 events      November 15, 2016.
                                   (April 1, 2016-
                                   June 30, 2016).
                                  Q3 2016 events      February 15, 2017.
                                   (July 1, 2016-
                                   September 30,
                                   2016).
                                  Q4 2016 events      May 15, 2017.
                                   (October 1, 2016-
                                   December 31,
                                   2016).
Subsequent Years................  Q1 events (January  August 15 of year
                                   1-March 31 of       two years before
                                   year 2 years        the program year.
                                   before the
                                   program year).
                                  Q2 events (April 1- November 15 of
                                   June 30 of year 2   year 2 years
                                   years before the    before the
                                   program year).      program year.
                                  Q3 events (July 1-  February 15 of
                                   September 30 of     year 1 year
                                   year 2 years        before the
                                   before the          program year.
                                   program year).
                                  Q4 events (October  May 15 of year 1
                                   1-December 31 of    year before the
                                   year 2 years        program year.
                                   before the
                                   program year).
------------------------------------------------------------------------

    For the CDC NHSN HCP measure, we proposed that data be submitted 
annually by May 15 of the applicable year as shown in the table below. 
The vaccination period runs from October through March. The proposed 
reporting period for FY 2018 will include Q4 2016 and Q1 2017 counts 
submitted by May 15, 2017.

[[Page 49723]]



     Proposed CDC NHSN HCP (NQF #0431) Measure Reporting Periods and
        Submission Timeframes Beginning With the FY 2018 Program
------------------------------------------------------------------------
                                   Reporting periods    Data submission
       Program year  (FY)                (CY)           deadlines  (CY)
------------------------------------------------------------------------
2018............................  Q4 2016 counts      May 15, 2017.
                                   (October 1, 2016-
                                   December 31,
                                   2016).
                                  Q1 2017 counts
                                   (January 1, 2017-
                                   March 31, 2017)..
Subsequent Years................  Q4 counts (October  May 15 of year 1
                                   1-December 31 of    year before the
                                   year 2 years        program year.
                                   before the
                                   program year).
                                  Q1 counts (January
                                   1-March 31 of
                                   year 1 year
                                   before the
                                   program year)..
------------------------------------------------------------------------

    We invited public comments on these proposals.
    Comment: One commenter expressed support for the proposal to report 
the CDC NHSN MRSA and CDC NHSN CDI measures quarterly via CDC NHSN and 
the CDC NHSN HCP measure annually through the same process.
    Response: We thank this commenter for the support.
    After consideration of the public comments we received, we are 
finalizing our proposals for the form, manner, and timing of the CDC 
NHSN CDI, MRSA, and HCP measures.
    As specified by CDC, the CDC NHSN CDI, MRSA, and HCP measures are 
reported on a facility-wide basis.308 309 Accordingly, we 
did not propose a sampling methodology for these measures because CDC 
requirements are to collect data on all patients or HCP in the 
facility. However, measures specifications could be technically updated 
by the measure steward (CDC). We refer readers to the CDC Web site for 
technical changes and/or updates (http://www.cdc.gov/nhsn/acute-care-hospital/index.html).
---------------------------------------------------------------------------

    \308\ CDC Multidrug-Resistant Organism & Clostridium difficile 
Infection (MDRO/CDI) Module. Available at: http://www.cdc.gov/nhsn/PDFs/pscManual/12pscMDRO_CDADcurrent.pdf.
    \309\ CDC HCP Vaccination Module. Available at: http://www.cdc.gov/nhsn/PDFs/HPS-manual/vaccination/HPS-flu-vaccine-protocol.pdf.
---------------------------------------------------------------------------

    We also intend to issue guidance to PCHs that will provide 
additional information regarding the specific data submission deadlines 
that we previously finalized for certain PCHQR measures. This guidance 
will be issued through the QualityNet Web site.

C. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)

1. Background and Statutory Authority
    Section 3004(a) of the Affordable Care Act amended section 
1886(m)(5) of the Act, requiring the Secretary to establish the Long-
Term Care Hospital Quality Reporting Program (LTCH QRP). This program 
applies to all hospitals certified by Medicare as LTCHs. Beginning with 
the FY 2014 payment determination and subsequent years, the Secretary 
is required to reduce any annual update to the standard Federal rate 
for discharges occurring during such fiscal year by 2 percentage points 
for any LTCH that does not comply with the requirements established by 
the Secretary.
    The Act requires that, for the FY 2014 payment determination and 
subsequent years, each LTCH submit data on quality measures specified 
by the Secretary in a form and manner, and at a time, specified by the 
Secretary. The Secretary is required to specify quality measures that 
are endorsed by the entity with a contract under section 1890(a) of the 
Act. This entity is currently the NQF. Information regarding the NQF is 
available at: http://www.qualityforum.org/Measuring_Performance/Measuring_Performance.aspx. The Act authorizes an exception under which 
the Secretary may specify non-NQF-endorsed quality measures in the case 
of specified areas or medical topics determined appropriate by the 
Secretary for which a feasible or practical measure has not been 
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 refer readers to the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 50286) for a detailed discussion of the history 
of the LTCH QRP.
    In addition, section 1206(c) of the Pathway for SGR Reform Act of 
2013 added section 1886(m)(5)(D)(iv) of the Act, which requires the 
Secretary to establish, not later than October 1, 2015, a functional 
status quality measure under the LTCH QRP for change in mobility among 
inpatients requiring ventilator support. We refer readers to the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50298 through 50301) for a 
detailed discussion of the Functional Outcome Measure: Change in 
Mobility Among Long-Term Care Hospital Patients Requiring Ventilator 
Support (NQF #2632, endorsed on 7/23/15), which we adopted in the LTCH 
QRP for the FY 2018 payment determination and subsequent years to meet 
the requirements of section 1886(m)(5)(D)(iv) of the Act.
    Finally, the Improving Medicare Post-Acute Care Transformation Act 
of 2014 (Pub. L. 113-185) (the IMPACT Act) amended the Act in ways that 
affect the LTCH QRP. Specifically, section 2(a) of the IMPACT Act added 
section 1899B of the Act, and section 2(c)(3) of the IMPACT Act amended 
section 1886(m)(5) of the Act.
    New section 1899B of the Act is titled Standardized Post-Acute Care 
(PAC) Assessment Data for Quality, Payment and Discharge Planning. 
Under section 1899B(a)(1) of the Act, the Secretary must require post-
acute care (PAC) providers (defined in section 1899B(a)(2)(A) of the 
Act to include HHAs, SNFs, IRFs, and LTCHs) to submit standardized 
patient assessment data in accordance with section 1899B(b) of the Act, 
data on quality measures required under section 1899B(c)(1) of the Act, 
and data on resource use and other measures required under section 
1899B(d)(1) of the Act. The Act also sets out specified application 
dates for each of the measures. The Secretary must specify the quality, 
resource use, and other measures not later than the applicable 
specified application date defined in section 1899B(a)(2)(E) of the 
Act.
    Section 1899B(b) of the Act describes the standardized patient 
assessment data that PAC providers are required to submit in accordance 
with section 1899B(b)(1) of the Act; requires the Secretary, to the 
extent practicable, to match claims data with standardized patient 
assessment data in accordance with section 1899B(b)(2) of the Act; and 
requires the Secretary, as soon as practicable, to revise or replace 
existing patient assessment data to the extent that such data duplicate 
or overlap with standardized patient assessment data, in accordance 
with section 1899B(b)(3) of the Act.
    Sections 1899B(c)(1) and (d)(1) of the Act direct the Secretary to 
specify

[[Page 49724]]

measures that relate to at least five stated quality domains and three 
stated resource use and other measure domains. Section 1899B(c)(1) of 
the Act provides that the quality measures on which PAC providers, 
including LTCHs, are required to submit standardized patient assessment 
data and other necessary data specified by the Secretary must be with 
respect to at least the following domains:
     Functional status, cognitive function, and changes in 
function and cognitive function;
     Skin integrity and changes in skin integrity;
     Medication reconciliation;
     Incidence of major falls; and
     Accurately communicating the existence of and providing 
for the transfer of health information and care preferences of an 
individual to the individual, family caregiver of the individual, and 
providers of services furnishing items and services to the individual 
when the individual transitions (1) from a hospital or CAH to another 
applicable setting, including a PAC provider or the home of the 
individual, or (2) from a PAC provider to another applicable setting, 
including a different PAC provider, hospital, CAH, or the home of the 
individual.
    Section 1899B(c)(2)(A) of the Act provides that, to the extent 
possible, the Secretary must require such reporting through the use of 
a PAC assessment instrument and modify the instrument as necessary to 
enable such use.
    Section 1899B(d)(1) of the Act provides that the resource use and 
other measures on which PAC providers, including LTCHs, are required to 
submit any necessary data specified by the Secretary, which may include 
standardized assessment data in addition to claims data, must be with 
respect to at least the following domains:
     Resource use measures, including total estimated Medicare 
spending per beneficiary;
     Discharge to community; and
     Measures to reflect all-condition risk-adjusted 
potentially preventable hospital readmission rates.
    Sections 1899B(c) and (d) of the Act indicate that data satisfying 
the eight measure domains in the IMPACT Act is the minimum data 
reporting requirement. Therefore, the Secretary may specify additional 
measures and additional domains.
    Section 1899B(e)(1) of the Act requires that the Secretary 
implement the quality, resource use, and other measures required under 
sections 1899B(c)(1) and (d)(1) of the Act in phases consisting of 
measure specification, data collection, and data analysis; the 
provision of feedback reports to PAC providers in accordance with 
section 1899B(f) of the Act; and public reporting of PAC providers' 
performance on such measures in accordance with section 1899B(g) of the 
Act. Section 1899B(e)(2) of the Act generally requires that each 
measure specified by the Secretary under section 1899B of the Act be 
NQF-endorsed, but authorizes an exception under which the Secretary may 
select non-NQF-endorsed quality measures in the case of specified areas 
or medical topics determined appropriate by the Secretary for which a 
feasible or practical measure has not been 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. 
Section 1899B(e)(3) of the Act provides that the pre-rulemaking process 
required by section 1890A of the Act applies to quality, resource use, 
and other measures specified under sections 1899B(c)(1) and (d)(1) of 
the Act, but authorizes exceptions under which the Secretary may (1) 
use expedited procedures, such as ad hoc reviews, as necessary in the 
case of a measure required with respect to data submissions during the 
1-year period before the applicable specified application date, or (2) 
alternatively, waive section 1890A of the Act in the case of such a 
measure if applying section 1890A of the Act (including through the use 
of expedited procedures) would result in the inability of the Secretary 
to satisfy any deadline specified under section 1899B of the Act with 
respect to the measure.
    Section 1899B(f)(1) of the Act requires the Secretary to provide 
confidential feedback reports to PAC providers on the performance of 
such PAC providers with respect to quality, resource use, and other 
measures required under sections 1899B(c)(1) and (d)(1) of the Act 
beginning 1 year after the applicable specified application date.
    Section 1899B(g) of the Act requires the Secretary to establish 
procedures for making available to the public information regarding the 
performance of individual PAC providers with respect to quality, 
resource use, and other measures required under sections 1899B(c)(1) 
and (d)(1) of the Act beginning not later than 2 years after the 
applicable specified application date. The procedures must ensure, 
including through a process consistent with the process applied under 
section 1886(b)(3)(B)(viii)(VII) of the Act for similar purposes, that 
each PAC provider has the opportunity to review and submit corrections 
to the data and information that are to be made public with respect to 
the PAC provider prior to such data being made public.
    Section 1899B(h) of the Act sets out requirements for removing, 
suspending, or adding quality, resource use, and other measures 
required under sections 1899B(c)(1) and (d)(1) of the Act.
    Section 1899B(i) of the Act requires that not later than January 1, 
2016, and periodically thereafter (but not less frequently than once 
every 5 years), the Secretary must promulgate regulations to modify the 
Medicare conditions of participation (CoP) and subsequent 
interpretative guidance applicable to PAC providers, hospitals, and 
CAHs to, among other things, take into account quality, resource use, 
and other measures in the discharge planning process.
    Section 1899B(j) of the Act requires the Secretary to allow for 
stakeholder input, such as through town halls, open door forums, and 
mailbox submissions, before the initial rulemaking process to implement 
section 1899B of the Act.
    Section 2(c)(3) of the IMPACT Act amended section 1886(m)(5) of the 
Act to address the payment consequences for LTCHs with respect to the 
additional data which LTCHs are required to submit under section 1899B 
of the Act. This section added new sections 1886(m)(5)(F) and (G) to 
the Act and made conforming changes. New section 1886(m)(5)(F) of the 
Act requires LTCHs (other than a hospital classified under section 
1886(d)(1)(B)(iv)(II)) of the Act) to submit the following additional 
data: (1) For the fiscal year beginning on the applicable specified 
application date and subsequent years, data on the quality, resource 
use, and other measures required under sections 1899B(c)(1) and (d)(1) 
of the Act; and (2) for FY 2019 and subsequent years, the standardized 
patient assessment data required under section 1899B(b)(1) of the Act. 
Such data must be submitted in the form and manner, and at the time, 
specified by the Secretary. Finally, new section 1886(m)(5)(G) of the 
Act generally provides that to the extent that the additional data 
required under section 1886(m)(5)(F) of the Act duplicates other data 
required under section 1886(m)(5)(C) of the Act, submission of the 
former must be in lieu of submission of the latter.
    As stated above, the IMPACT Act adds a new section 1899B to the Act 
that imposes new data reporting requirements for certain PAC providers, 
including LTCHs. Sections 1899B(c)(1) and 1899B(d)(1) of the Act 
collectively require that the Secretary specify quality measures and 
resource use and other

[[Page 49725]]

measures with respect to certain domains not later than the specified 
application date that applies to each measure domain and PAC provider 
setting. Section 1899B(a)(2)(E) of the Act delineates the specified 
application dates for each measure domain and PAC provider. The IMPACT 
Act also amends various other sections of the Act, including section 
1886(m)(5) of the Act, to require the Secretary to reduce the otherwise 
applicable PPS payment to a PAC provider that does not report the new 
data in a form and manner, and at a time, specified by the Secretary. 
For LTCHs, amended section 1886(m)(5)(A)(i) of the Act requires the 
Secretary to reduce the payment update for any LTCH that does not 
satisfactorily submit the new required data.
    Under the current LTCH QRP, the general timeline and sequencing of 
measure implementation occurs as follows: specification of measures; 
proposal and finalization of measures through notice-and-comment 
rulemaking; LTCH submission of data on the adopted measures; analysis 
and processing of the submitted data; notification to LTCHs regarding 
their quality reporting compliance with respect to a particular rate 
year; consideration of any reconsideration requests; and imposition of 
a payment reduction in a particular rate year for failure to 
satisfactorily submit data with respect to that rate year. Any payment 
reductions that are taken with respect to a rate year begin 
approximately one year after the end of the data submission period for 
that rate year and approximately two years after we first adopt the 
measure.
    To the extent that the IMPACT Act could be interpreted to shorten 
this timeline so as to require us to reduce an LTCH's PPS payment for 
failure to satisfactorily submit data on a measure specified under 
section 1899B(c)(1) or (d)(1) of the Act beginning with the same rate 
year as the specified application date for that measure, such a 
timeline would not be feasible. The current timeline discussed above 
reflects operational and other practical constraints, including the 
time needed to specify and adopt valid and reliable measures, collect 
the data, and determine whether an LTCH has complied with our quality 
reporting requirements. It also takes into consideration our desire to 
give LTCHs enough notice of new data reporting obligations so that they 
are prepared to timely start reporting the data. Therefore, we intend 
to follow the same timing and sequence of events for measures specified 
under sections 1899B(c)(1) and (d)(1) of the Act that we currently 
follow for other measures specified under the LTCH QRP. We intend to 
specify each of these measures no later than the specified application 
dates set forth in section 1899B(a)(2)(E) of the Act and, in the FY 
2016 IPPS/LTCH PPS proposed rule (80 FR 24597), we proposed to adopt 
them consistent with the requirements in the Act and Administrative 
Procedure Act. To the extent that we finalize a proposal to adopt a 
measure for the LTCH QRP that satisfies an IMPACT Act measure domain, 
we intend to require LTCHs to report data on the measure for the rate 
year that begins two years after the specified application date for 
that measure. Likewise, we intend to require LTCHs to begin reporting 
any other data specifically required under the IMPACT Act for the rate 
year that begins two years after we adopt requirements that would 
govern the submission of that data.
    We received several public comments regarding the IMPACT Act, which 
we summarize and respond to below.
    Comment: One commenter stated that its LTCH has been exempted from 
other CMS regulations due to unique circumstances of being located in 
an underserved, small community/geographic area. The commenter stated 
that previous exemptions have allowed their LTCH to remain open and 
provide critical long-term care for the patients in the community and 
suggested that an exemption for LTCHs with grandfathered status from 
the previously finalized and proposed LTCH QRP requirements described 
in the FY 2016 IPPS/LTCH PPS proposed rule would help ensure that 
critical medical care is available for patients in their communities.
    Response: In the FY 2016 IPPS/LTCH PPS proposed rule, we did not 
propose to adopt an exception from the LTCH QRP requirements due to an 
LTCH being located in an underserved or small community/geographic 
area. Therefore, we consider this comment to be outside the scope of 
the proposed rule. We note that in section VIII.C.9.b. of the FY 2016 
IPPS/LTCH PPS proposed rule (80 FR 24606), we proposed that a new LTCH 
must begin reporting quality data under the LTCH QRP by no later than 
the first day of the calendar quarter subsequent to 30 days after the 
date on its CMS Certification Number (CCN) notification letter. If a 
hospital is classified as an LTCH for purposes of Medicare payments (as 
denoted by the last four digits of its six-digit CMS Certification 
Number [CCN] in the range of 2000-2299), it is subject to the 
requirements of the LTCH QRP. There is no statutory exemption from the 
LTCH QRP requirements due to an LTCH being located in an underserved or 
small community/geographic area, nor have we proposed any such 
exception in rulemaking.
    Comment: Several commenters recommended that CMS develop a 
comprehensive plan for implementation of the IMPACT Act across all 
settings. The commenters stated that a comprehensive implementation 
plan would give PAC providers an opportunity to plan for the potential 
impacts to their operations and enable all stakeholders to understand 
CMS' approach to implementing the IMPACT Act across care settings. The 
commenters requested that CMS describe an overall strategy for 
identifying cross-cutting measures, timelines for data collection, and 
timelines for reporting. One commenter requested that CMS communicate 
its plans as soon as possible and that CMS develop setting-specific 
communications to facilitate understanding of the IMPACT Act 
requirements.
    Response: We appreciate the request for a comprehensive plan to 
allow PAC providers to plan for the implementation of the IMPACT Act, 
as well as the need for stakeholder input, the development of reliable, 
accurate measures, clarity on the level of standardization of items and 
measures, and avoidance of unnecessary burden on PAC providers. Our 
intent has been to comply with these principles in the implementation 
and rollout of the QRPs in the various settings and we will continue to 
adhere to these principles as the agency moves forward with 
implementing IMPACT Act requirements.
    We will use the rulemaking process to communicate timelines for 
implementation, including timelines for the replacement of items in PAC 
assessment tools, timelines for implementation of new or revised 
quality measures, and timelines for public reporting. As described more 
fully above, the IMPACT Act requires us to specify measures that relate 
to at least five stated quality domains and three stated resource use 
and other measure domains.
    In addition, we must follow all processes in place for adoption of 
measures including the Measure Applications Partnership (MAP) and the 
notice and comment rulemaking process, subject to certain exceptions 
under section 1899B(e)(3) of the Act for expedited procedures or, 
alternatively, waiver of section 1890A of the Act. In our selection and 
specification of measures, we employ a transparent

[[Page 49726]]

process in which we seek input from stakeholders and national experts 
and engage in a process that allows for pre-rulemaking input on each 
measure, as required by section 1890A of the Act. This process is based 
on a private-public partnership and it occurs via the MAP. The MAP is 
composed of multi-stakeholder groups convened by the NQF, our current 
contractor under section 1890 of the Act, to provide input on the 
selection of quality and efficiency measures described in section 
1890(b)(7)(B) of the Act. The NQF must convene these stakeholders and 
provide us with the stakeholders' input on the selection of such 
measures. We, in turn, must take this input into consideration in 
selecting such measures. In addition, the Secretary must make available 
to the public by December 1 of each year a list of such measures that 
the Secretary is considering under Title XVIII of the Act. In addition, 
proposed measures and specifications are to be announced through the 
rulemaking process in which proposed rules are published in the Federal 
Register and are available for public review and comment.
    Comment: Commenters asked for more opportunities for stakeholder 
input into various aspects of the measure development process. The 
commenters requested opportunities to provide input early and ongoing 
input into measure development. One commenter requested opportunities 
for input prior to the development of proposed measure specifications. 
Another commenter requested that CMS establish an advisory committee of 
PAC providers to meet on a frequent and regular basis to help develop 
measure specifications.
    One commenter noted that CMS did provide opportunities for input 
into listening sessions and open door forums. However, the commenter 
expressed concern that these events did not provide an opportunity for 
substantive input. For example, the commenter noted that the open door 
forum call did not provide measure specifications for public input and 
that the listening sessions did not include a discussion of the 
proposed measures. One commenter specifically noted an appreciation for 
the listening sessions held by CMS thus far, but also requested 
opportunities for more extensive collaboration.
    Response: It is our intent to move forward with IMPACT Act 
implementation in a manner in which the measure development process 
continues to be transparent, and includes input and collaboration from 
experts, the PAC provider community, and the public at large. It is of 
the utmost importance to CMS to continue to engage stakeholders, 
including patients and their families, throughout the measure 
development lifecycle through their participation in our measure 
development public comment periods; the pre-rulemaking process; 
participation in the TEPs provided by our measure development 
contractors, as well as open door forums and other opportunities. We 
have already provided multiple opportunities for stakeholder input, 
which include the following activities: our measure development 
contractor(s) convened a TEP that included stakeholder experts on 
February 3, 2015; we convened two separate listening sessions on 
February 10th and March 24, 2015; we heard stakeholder input during the 
February 9th 2015 ad hoc MAP meeting provided for the sole purpose of 
reviewing the measures adopted in response to the IMPACT Act. In 
addition, we implemented a public mail box for the submission of 
comments in January 2015, [email protected], which is 
listed on our post-acute care quality initiatives Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html, and we held a Special Open Door Forum to 
seek input on the measures on February 25, 2015. The slides from the 
Special Open Door Forum are available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html.
    Comment: Several commenters requested more information regarding 
the timing of the development of the IMPACT Act measures, the 
development of associated data elements, data collection and reporting. 
One commenter noted the considerable time constraints under which the 
Secretary is required to implement the provisions of the IMPACT Act. 
One commenter urged CMS to first specify the standardized patient 
assessment data being used across all PAC settings and requested that 
measures be developed from standardized patient assessment data that 
cut across PAC assessment instruments. A few commenters requested that 
CMS communicate estimated implementation timelines for all data 
collection and reporting requirements. Some commenters urged CMS to 
move quickly towards changes so as to reduce burden on duplicative data 
collection and to allow for better cross-setting comparisons, as well 
as the evolution of better quality measures. However, other commenters 
stated that efforts had been made to move too quickly to implement 
IMPACT Act measures, potentially resulting in the inability to compare 
measures across settings. One commenter requested that CMS provide more 
information in the rule about the timing and sequencing of the 
specification of a common assessment tool, the replacement of existing 
data elements in the PAC assessment tool with the proposed common 
assessment tool, and the endorsement of quality measures. One commenter 
noted specifically the difficulty of the timing of specification of 
measures through rulemaking prior to NQF endorsement, noting that the 
NQF endorsement process typically resulted in changes in measure 
specifications.
    Response: We believe that the commenter is requesting information 
pertaining to specific milestones related to our efforts to meet the 
statutory timelines which are specified within the IMPACT Act, as well 
as in the final rule. We intend to use the rulemaking process to 
establish and communicate timelines for implementation. In addition to 
using the rulemaking process to establish and communicate timelines for 
implementation, we will continue to provide ongoing education and 
outreach to stakeholders through Special Open Door Forums and periodic 
training sessions. We will also provide information about the measures 
at this Web site: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html.
    Because the IMPACT Act requires us to utilize the rulemaking 
process, prior notice of timeline and sequencing outside of the 
rulemaking process is not feasible. However, it should also be noted 
the IMPACT Act specifies a general timeline for standardization of 
patient assessment data. For example, the IMPACT Act specifies that 
LTCHs shall submit standardized patient assessment data to the 
Secretary for FY 2019 and for each subsequent fiscal year.
    Also, as a part of the rulemaking process, we have made additional 
details regarding standardization of patient assessment data and the 
cross-setting measure specifications available at the following Web 
site: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html. We plan to continue

[[Page 49727]]

to update this information as additional measures are specified.
    Comment: Several commenters expressed concerns about the 
reliability and accuracy of the proposed cross-setting measures. 
Commenters supported the use of NQF-endorsed measures, while some of 
the commenters expressed concern that two of the proposed measures for 
FY 2018 lacked NQF endorsement as proposed. A few commenters requested 
that CMS only use measures that had been endorsed by NQF, while one 
commenter strongly recommended that CMS use only NQF-endorsed measures 
which are specified and NQF-endorsed for the specific PAC setting in 
which they will be used. One commenter expressed concern that the 
current interpretation of the IMPACT Act could allow potential 
circumvention of the NQF endorsement process. Another commenter 
expressed concern that the due consideration process allowing CMS to 
select quality measures which are not NQF-endorsed is not well defined. 
Commenters suggested that, in the absence of NQF endorsement, to 
fulfill IMPACT Act requirements, CMS should implement measures that are 
fully supported by the MAP and a technical expert panel (TEP) that 
includes LTCH community input. One commenter further requested that 
additional consideration be given to quality measures that are proposed 
for implementation in the LTCH setting. The commenter stated that as 
the patient population in this particular setting is very different due 
to their medical complexity, it is of particular importance to 
determine whether the measure is appropriate for the LTCH setting, and 
if it should be modified for the LTCH setting.
    Response: We intend to consider and propose appropriate measures 
that meet the requirements of the IMPACT Act measure domains and that 
have been adopted or endorsed by a consensus organization, whenever 
possible. However, when this is not feasible because there is no NQF-
endorsed measure that meets all the requirements for a specified IMPACT 
Act measure domain, we intend to rely on the exception authority given 
to the Secretary in section 1899B(e)(2)(B)of the Act. This statutory 
exception, allows the Secretary to specify a measure for the LTCH QRP 
setting that is not NQF-endorsed where, as here, we have not been able 
to identify other measures on the topic that are endorsed or adopted by 
a consensus organization. With respect to the proposed measures for the 
LTCH QRP, we sought MAP review, as well as expert opinion, on the 
validity and reliability of those measures. Finally, we will take the 
variations in patient populations treated in the different type of PAC 
settings into consideration when selecting cross-setting measures and 
assessment items.
    Comment: Several commenters remarked on the level of 
standardization among PAC settings as required by the IMPACT Act. Most 
commenters recognized the need to have as much standardization of 
measures and data collection across PAC settings as possible, while 
recognizing that some variations among settings may be necessary. One 
commenter urged CMS to work for full standardization across measures 
adopted for PAC settings to allow for comparison.
    Another commenter asked that CMS more clearly define the 
subregulatory process criteria for determining what constitutes a 
nonsubstantive change. In addition, the commenter requested that CMS 
consider any potential impacts that measure numerator or denominator 
changes would have on the relative ranking of LTCH providers on the 
measure. The commenter further noted that while a change may appear to 
be nonsubstantive, it might adversely affect an LTCH facility ranking.
    Response: We agree that standardization is important, but would 
like to clarify that while the IMPACT Act requires the enablement of 
interoperability through the use of standardized data, there will be 
instances where some provider types may need more or fewer standardized 
items than other provider types. We will work to ensure that core items 
are standardized.
    We believe that it is important to have in place a subregulatory 
process to incorporate nonsubstantive updates made by the NQF into the 
measure specifications so that the measures remain up-to-date. For 
example, we could use the CMS Web site as a place to announce changes. 
As noted in the proposed rule, the subregulatory process proposed is 
the same process as we have adopted for the Hospital IQR Program and 
which has been used successfully in that program. We believe that the 
criteria for what constitutes a non-substantive change could vary 
widely and is best described by examples, as we have done in the 
proposed rule. As noted, what constitutes a substantive versus a 
nonsubstantive change is determined on a case-by-case basis.
    Comment: Commenters requested that CMS consider minimizing the 
burden for PAC providers when available and avoid duplication in data 
collection efforts. Several commenters stated the need for improved 
risk adjustment. One commenter requested that CMS support an additional 
study to develop and improve upon existing risk adjustment methods for 
IMPACT Act quality and resource use measures so that the newly 
developed methods could be used to compare outcomes across PAC 
settings.
    Response: We appreciate the importance of avoiding undue burden and 
will continue to evaluate and consider any burden the IMPACT Act and 
the LTCH QRP places on LTCHs. In implementing the IMPACT Act thus far, 
we have taken into consideration the new burden that our requirements 
place on PAC providers, and we believe that standardizing patient 
assessment data will allow for the exchange of data among PAC providers 
in order to facilitate care coordination and improve patient outcomes.
    We also will continue to assess current risk adjustment methods for 
IMPACT Act quality and resource use measures. As a part of measure 
development and maintenance, CMS supports the ongoing evaluation of 
risk adjustment which includes obtaining expert input, the review of 
relevant literature for identification of appropriate risk adjusters 
and appropriate testing through data analysis. We will continue these 
processes to promote appropriate utilization of measures in PAC 
settings.
    Comment: One commenter requested that CMS develop a plan to revise 
the CoPs for hospitals to meet the IMPACT Act in an effort to align 
quality metrics and discharge information from inpatient settings.
    Response: We recognize the necessity of a streamlined and efficient 
regulatory framework in order to allow the healthcare system to promote 
economic growth and innovation. As a part of an ongoing process, we 
review hospital CoPs to reduce any burden or inefficiencies imposed by 
actions resulting from the implementation of the IMPACT Act.
    Comment: One commenter requested that CMS make data from the PAC 
PRD study publicly available to facilitate stakeholder analysis and 
input. The commenter suggested data could be made available through a 
research identifiable file (RIF) data request process, similar to the 
current process to obtain RIF data. In addition, the commenter stated 
the data, which would be used to develop payment recommendations, 
should be made available to stakeholders in a timely way.
    Response: We appreciate the request for PAC PRD data to be made 
publicly available. Currently, we make claims and routinely collected 
PAC setting

[[Page 49728]]

assessment data available to researchers via ResDAC. We will review the 
feasibility of making PAC PRD data available and will ensure that data 
released to the public is available in a timely manner.
    We thank the commenters for their views, and we will consider them 
as we develop quality measures and future quality measure proposals for 
the LTCH QRP and other PAC settings, including those that are developed 
and proposed in order to meet the requirements of the IMPACT Act.
2. General Considerations Used for Selection of Quality, Resource Use, 
and Other Measures for the LTCH QRP
    We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50286 through 50287) for a detailed discussion of the considerations we 
use for the selection of LTCH QRP quality measures. In the FY 2016 
IPPS/LTCH PPS proposed rule (80 FR 24597), we applied the same 
considerations to the selection of quality, resource use, and other 
measures required under section 1899B of the Act for the LTCH QRP, in 
addition to the considerations discussed below.
    The quality measures we proposed and are finalizing address some of 
the measure domains that the Secretary is required to specify under 
sections 1899B(c)(1) and (d)(1) of the Act. The totality of the 
measures considered to meet the requirements of the IMPACT Act will 
evolve, and additional measures will be proposed over time as they 
become available.
    To meet the first specified application date applicable to LTCHs 
under section 1899B(a)(2)(E) of the Act, which is October 1, 2016, we 
have focused on measures that:
     Correspond to a measure domain in section 1899B(c)(1) or 
(d)(1) of the Act and are setting-agnostic: For example, falls with 
major injury and the incidence of pressure ulcers;
     Are currently adopted for one or more of our PAC quality 
reporting programs that are already either NQF-endorsed and in place or 
finalized for use, or already previewed by the MAP with support;
     Minimize added burden on LTCHs;
     Minimize or avoid, to the extent feasible, revisions to 
the existing items in assessment tools currently in use (for example, 
the LTCH CARE Data Set);
     Avoid, where possible, duplication of existing assessment 
items.
    In our selection and specification of measures, we employ a 
transparent process in which we seek input from stakeholders and 
national experts and engage in a process that allows for pre-rulemaking 
input on each measure, as required by section 1890A of the Act. This 
process is based on a private-public partnership, and it occurs via the 
MAP. The MAP is composed of multi-stakeholder groups convened by the 
NQF, our current contractor under section 1890 of the Act, to provide 
input on the selection of quality and efficiency measures described in 
section 1890(b)(7)(B) of the Act. The NQF must convene these 
stakeholders and provide us with the stakeholders' input on the 
selection of such measures. We, in turn, must take this input into 
consideration in selecting such measures. In addition, the Secretary 
must make available to the public by December 1 of each year a list of 
such measures that the Secretary is considering under title XVIII of 
the Act.
    As discussed in section VIII.C.1. of the preamble of this final 
rule, section 1899B(e)(3) of the Act provides that the pre-rulemaking 
process required by section 1890A of the Act applies to the measures 
required under section 1899B of the Act, subject to certain exceptions 
for expedited procedures or, alternatively, waiver of section 1890A of 
the Act.
    We initiated an Ad Hoc MAP process for the review of the quality 
measures under consideration for proposal in preparation for adoption 
of those quality measures into the LTCH QRP that are required by the 
IMPACT Act, and which must be specified by October 1, 2016. The List of 
Measures under Consideration (MUC List) under the IMPACT Act was made 
available to the public for comment during the MAP Meeting on February 
9, 2015 (http://www.meeting-support.com/downloads/703163/4524/PACLTC%20Ad%20Hoc%20Slides.pdf). Under the IMPACT Act, these measures 
must be standardized so they can be applied across PAC settings and 
must correspond to measure domains specified in sections 1899B(c)(1) 
and (d)(1) of the Act. The specific cross-setting application of the 
measures under consideration for each such measure is discussed in the 
MAP Off-Cycle Deliberations 2015: Measures under Consideration to 
Implement Provisions of the IMPACT Act: Final Report available at: 
http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx. The MAP reviewed each IMPACT Act -related 
quality measure proposed in the proposed rule for the LTCH QRP, in 
light of its intended cross-setting use. We refer readers to section 
VIII.C.6. of the preamble of this final rule for more information on 
the MAP's recommendations.
    As discussed in section VIII.C.1. of the preamble of this final 
rule, section 1899B(j) of the Act requires that we allow for 
stakeholder input as part of the pre-rulemaking process. To meet this 
requirement, we provided the following opportunities for stakeholder 
input: (1) Our measure development contractor convened a TEP that 
included stakeholder experts and patient representatives on February 3, 
2015; (2) we provided two separate listening sessions on February 10, 
2015 and March 5, 2015; (3) we sought public input during the February 
2015 Ad Hoc MAP process provided for the sole purpose of reviewing the 
measures we proposed in reaction to the IMPACT Act; and (4) we sought 
public comment as part of our NQF measure maintenance submissions. In 
addition, we implemented a mailbox for the submission of comments in 
January 2015, [email protected], which is accessible 
from our PAC quality initiatives Web site: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html, 
and held a National Stakeholder Special Open Door Forum to seek input 
on the measures on February 25, 2015.
    For measures that do not have NQF endorsement, or which are not 
fully supported by the MAP for the LTCH QRP, we proposed measures that 
most closely align with the national priorities discussed in the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50286 through 50287), and for 
which the MAP supports the measure concept. Further discussion as to 
the importance and high-priority status of these measures in the LTCH 
setting is included under each quality measure proposal in the preamble 
of this final rule. In addition, for measures not endorsed by the NQF, 
we have sought, to the extent practicable, to adopt measures that have 
been endorsed or adopted by a national consensus organization, 
recommended by multi-stakeholder organizations, and/or developed with 
the input of providers, purchasers/payers, and other stakeholders.
    While we did not solicit comments specifically regarding the 
general considerations used for selecting quality, resource use, and 
other measures for the LTCH QRP, we received several comments, most 
notably on the NQF MAP pre-rulemaking process and MAP review process, 
which are addressed under the comments and responses portion of section 
VIII.C.1. of the preamble of this final rule.

[[Page 49729]]

3. Policy for Retention of LTCH QRP Measures Adopted for Previous 
Payment Determinations
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53614 through 
53615), for the LTCH QRP, we adopted a policy that once a quality 
measure is adopted, it will be retained for use in subsequent years, 
unless otherwise stated. For the purpose of streamlining the rulemaking 
process, when we initially adopt a measure for the LTCH QRP for a 
payment determination, this measure will be automatically adopted for 
all subsequent years or until we propose to remove, suspend, or replace 
the measure. For further information on how measures are considered for 
removal, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 
FR 53614 through 53615).
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24598), we did 
not propose any changes to this policy for retaining LTCH QRP measures 
adopted for previous payment determinations.
4. Policy for Adopting Changes to LTCH QRP Measures
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53615 through 
53616), we finalized a policy that if the NQF updates an endorsed 
measure that we have adopted for the LTCH QRP in a manner that we 
consider to not substantively change the nature of the measure, we will 
use a subregulatory process to incorporate those updates to the measure 
specifications that apply to the LTCH QRP. Substantive changes will be 
proposed and finalized through rulemaking. We refer readers to the FY 
2013 IPPS/LTCH PPS final rule (77 FR 53615 through 53616) for further 
information on what constitutes substantive and nonsubstantive changes 
to a measure. In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24598), 
we did not propose any changes to the policy for adopting changes to 
LTCH QRP measures.
5. Previously Adopted Quality Measures
a. Previously Adopted Quality Measures for the FY 2015 and FY 2016 
Payment Determinations and Subsequent Years
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53624 through 
53636), for the FY 2014 payment determination and subsequent years, we 
adopted updated versions of National Healthcare Safety Network (NHSN) 
Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure 
(NQF #0138) and the NHSN Central Line-Associated Blood Stream Infection 
(CLABSI) Outcome Measure (NQF #0139). For the FY 2015 payment 
determination and subsequent years, we retained the application of 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (Short Stay) (NQF #0678) measure to the LTCH setting 
(initially adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51745 
through 51750)). We also adopted two new quality measures for the LTCH 
QRP for the FY 2016 payment determination and subsequent years, in 
addition to the three previously adopted measures (the CAUTI measure, 
CLABSI measure, and Pressure Ulcer measure): (1) Percent of Residents 
or Patients Who Were Assessed and Appropriately Given the Seasonal 
Influenza Vaccine (Short Stay) (NQF #0680); and (2) Influenza 
Vaccination Coverage Among Healthcare Personnel (NQF #0431) (77 FR 
53624 through 53636).
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50861 through 
50863), we adopted the NQF-endorsed version of the Percent of Residents 
or Patients with Pressure Ulcers That Are New or Worsened (Short Stay) 
(NQF #0678) measure for the LTCH QRP for the FY 2015 payment 
determination and subsequent years.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50289 through 
50305), we revised the data collection and submission period for the 
Percent of Residents or Patients Who Were Assessed and Appropriately 
Given the Seasonal Influenza Vaccine (Short Stay) (NQF #0680) measure.
    Set out below are the quality measures, both previously adopted 
measures retained in the LTCH QRP and measures adopted in FY 2013 and 
FY 2014 IPPS/LTCH PPS final rules, for the FY 2015 and FY 2016 payment 
determinations and subsequent years.

LTCH QRP Quality Measures Previously Adopted for the FY 2015 and FY 2016
               Payment Determinations and Subsequent Years
------------------------------------------------------------------------
                                                            Payment
         NQF Measure ID              Measure title       determination
------------------------------------------------------------------------
NQF #0138.......................  National            FY 2015 and
                                   Healthcare Safety   Subsequent Fiscal
                                   Network (NHSN)      Years.
                                   Catheter-
                                   Associated
                                   Urinary Tract
                                   Infection (CAUTI)
                                   Outcome Measure.
NQF #0139.......................  National            FY 2015 and
                                   Healthcare Safety   Subsequent Fiscal
                                   Network (NHSN)      Years.
                                   Central Line-
                                   Associated Blood
                                   Stream Infection
                                   (CLABSI) Outcome
                                   Measure.
NQF #0678.......................  Percent of          FY 2015 and
                                   Residents or        Subsequent Fiscal
                                   Patients with       Years.
                                   Pressure Ulcers
                                   That Are New or
                                   Worsened (Short
                                   Stay).
NQF #0680.......................  Percent of          FY 2016 and
                                   Residents or        Subsequent Fiscal
                                   Patients Who Were   Years.
                                   Assessed and
                                   Appropriately
                                   Given the
                                   Seasonal
                                   Influenza Vaccine
                                   (Short Stay).
NQF #0431.......................  Influenza           FY 2016 and
                                   Vaccination         Subsequent Fiscal
                                   Coverage Among      Years.
                                   Healthcare
                                   Personnel.
------------------------------------------------------------------------

b. Previously Adopted Quality Measures for the FY 2017 and FY 2018 
Payment Determinations and Subsequent Years
    In the FY 2014 IPPS/LTCH PPS final rule, we adopted three 
additional measures--National Healthcare Safety Network (NHSN) 
Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant 
Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF #1716), 
National Healthcare Safety Network (NHSN) Facility-Wide Inpatient 
Hospital-Onset Clostridium difficile Infection (CDI) Outcome Measure 
(NQF #1717), and All-Cause Unplanned Readmission Measure for 30 Days 
Post-Discharge from LTCHs (NQF #2512) (this measure was not NQF-
endorsed at the time of its initial adoption)--for the FY 2017 payment 
determination and subsequent years (78 FR 50863 through 50874) and one 
additional measure, an application of Percent of Residents Experiencing 
One or More Falls with Major Injury (Long Stay) (NQF #0674), for the FY 
2018 payment determination and subsequent years (78 FR 50874 through 
50877).
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50289 through 
50305), we: (1) Revised the data collection and submission period for 
one measure, an application of the Percent of Residents Experiencing 
One or More Falls with Major Injury (Long Stay) (NQF #0674); and (2) 
adopted three new quality measures--Percent of Long-Term Care Hospital 
Patients with an Admission and Discharge Functional Assessment and a 
Care Plan That Addresses Function (NQF #2631; endorsed on 07/23/2015), 
Functional Status Outcome

[[Page 49730]]

Measure: Change in Mobility Among Long-Term Care Hospital Patients 
Requiring Ventilator Support (NQF #2632; endorsed on 7/23/15), and 
National Healthcare Safety Network (NHSN) Ventilator-Associated Event 
(VAE) Outcome Measure--for the FY 2018 payment determination and 
subsequent years.
    These measures are set out in the table below.

LTCH QRP Quality Measures Previously Adopted for the FY 2017 and FY 2018
               Payment Determinations and Subsequent Years
------------------------------------------------------------------------
                                                            Payment
         NQF Measure ID              Measure title       determination
------------------------------------------------------------------------
NQF #1716.......................  National            FY 2017 and
                                   Healthcare Safety   Subsequent Years.
                                   Network (NHSN)
                                   Facility-Wide
                                   Inpatient
                                   Hospital-Onset
                                   Methicillin-
                                   Resistant
                                   Staphylococcus
                                   aureus (MRSA)
                                   Bacteremia
                                   Outcome Measure.
NQF #1717.......................  National            FY 2017 and
                                   Healthcare Safety   Subsequent Years.
                                   Network (NHSN)
                                   Facility-Wide
                                   Inpatient
                                   Hospital-Onset
                                   Clostridium
                                   difficile
                                   Infection (CDI)
                                   Outcome Measure.
NQF #2512.......................  All-Cause           FY 2018 and
                                   Unplanned           Subsequent Years.
                                   Readmission
                                   Measure for 30
                                   Days
                                   Post[dash]Dischar
                                   ge from Long-Term
                                   Care Hospitals.
Application of NQF #0674........  Percent of          FY 2018 and
                                   Residents           Subsequent Years.
                                   Experiencing One
                                   or More Falls
                                   with Major Injury
                                   (Long Stay).
NQF #2631*......................  Percent of Long-    FY 2018 and
                                   Term Care           Subsequent Years.
                                   Hospital Patients
                                   with an Admission
                                   and Discharge
                                   Functional
                                   Assessment and a
                                   Care Plan That
                                   Addresses
                                   Function.
NQF #2632*......................  Functional Status   FY 2018 and
                                   Outcome Measure:    Subsequent Years.
                                   Change in
                                   Mobility Among
                                   Long-Term Care
                                   Hospital Patients
                                   Requiring
                                   Ventilator
                                   Support.
Not NQF endorsed................  National            FY 2018 and
                                   Healthcare Safety   Subsequent Years.
                                   Network (NHSN)
                                   Ventilator-
                                   Associated Event
                                   (VAE) Outcome
                                   Measure.
------------------------------------------------------------------------
* Endorsed on July 23, 2015. We refer readers to: http://www.qualityforum.org/ProjectMeasures.aspx?projectID=73867, NQF #2631
  and NQF #2632.

6. Previously Adopted LTCH QRP Quality Measures Finalized for the FY 
2018 Payment Determination and Subsequent Years
    For the FY 2018 payment determination and subsequent years, in 
addition to the measures we are retaining under our policy described in 
VIII.C.3. of the preamble of this final rule, in the FY 2016 IPPS/LTCH 
PPS proposed rule (80 FR 24599 through 24605), we proposed four quality 
measures in order to reflect the NQF endorsement of one measure (NQF 
#2512) and three measures (NQF #0678; application of NQF #0674; 
application of NQF #2631; endorsed on 07/23/2015) to meet the 
requirements of the IMPACT Act. Specifically, we proposed the following 
measures: (a) All-Cause Unplanned Readmission Measure for 30 Days Post-
Discharge from LTCHs (NQF #2512) to reflect NQF endorsement; (b) 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (Short Stay) (NQF #0678) to meet the requirements of the 
IMPACT Act; (c) an application of Percent of Residents Experiencing One 
or More Falls with Major Injury (Long Stay) (NQF #0674) to meet the 
requirements of the IMPACT Act; and (d) an application of Percent of 
LTCH Patients with an Admission and Discharge Functional Assessment and 
a Care Plan That Addresses Function (NQF #2631; endorsed on 07/23/2015) 
to meet the requirements of the IMPACT Act. These quality measures are 
discussed in more detail below.
a. Finalized Measure To Reflect NQF Endorsement: All-Cause Unplanned 
Readmission Measure for 30 Days Post-Discharge From LTCHs (NQF #2512)
    The All-Cause Unplanned Readmission Measure for 30 Days Post-
Discharge from LTCHs (NQF #2512) was adopted for use in the LTCH QRP in 
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50868 through 50874). In 
the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24600), we proposed to 
adopt this measure to reflect that it is NQF-endorsed for use in the 
LTCH setting as of December 2014. Current specifications of this NQF-
endorsed measure are available for download on the NQF Web site at: 
http://www.qualityforum.org/QPS/2512.
    As adopted in the FY 2014 IPPS/LTCH PPS final rule, this is a 
Medicare FFS claims-based measure, and LTCHs are not required to report 
any additional data to CMS. Because we would calculate this measure 
based on claims data that are already reported to the Medicare program 
for payment purposes, we believe there would be no additional data 
collection burden on LTCHs resulting from our implementation of this 
measure as part of the LTCH QRP. In the FY 2014 IPPS/LTCH PPS final 
rule, we stated that we will calculate this measure using claims data 
beginning with FY 2013 and FY 2014 and provide initial feedback to 
LTCHs prior to public reporting of this measure. However, the NQF-
endorsed measure (NQF #2512) is based on 2 consecutive calendar years 
of Medicare FFS claims data. Therefore, in addition to our proposal to 
adopt the NQF-endorsed version of this measure, we proposed that the 
initial calculation of the measure and feedback to LTCHs, prior to 
public reporting of this measure, would be based on CY 2013 and CY 2014 
Medicare FFS claims data related to readmissions post-LTCH discharge.
    The description of this measure provided in the FY 2014 IPPS/LTCH 
PPS final rule (78 FR 50868 through 50874) noted this measure is the 
ratio of the number of risk-adjusted predicted unplanned readmissions 
for each LTCH, including the estimated facility effect, to the average 
number of risk-adjusted predicted unplanned readmissions for the same 
patients if treated at a facility with the average effect on 
readmissions. This ratio is referred to as the standardized risk ratio 
or SRR. The NQF-endorsed specifications compute the risk-standardized 
readmission rate (RSRR) for this measure. The RSRR is the SRR 
multiplied by the overall national raw readmission rate for all LTCH 
stays; it is expressed as a percentage rate rather than a ratio.
    This measure, which was developed to harmonize with the Hospital-
Wide All-Cause Unplanned Readmission

[[Page 49731]]

Measure (NQF #1789) that is currently in use in the Hospital IQR 
Program, continues to use the CMS Planned Readmission Algorithm as the 
main component for identifying planned readmissions. This algorithm was 
refined in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50211 through 
50216). The All-Cause Unplanned Readmission Measure for 30 Days Post-
Discharge from LTCHs (NQF #2512) for the LTCH QRP will utilize the most 
recently updated version of the algorithm. A complete description of 
the CMS Planned Readmission Algorithm, which includes lists of planned 
diagnoses and procedures, can be found on the CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. The 
additional PAC planned readmission types specified for this measure 
remain the same as when first adopted through the FY 2014 IPPS/LTCH PPS 
final rule. Documentation on the additional PAC planned readmissions 
for this measure is available at: http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=2512.
    We invited public comments on: (1) Our proposal to adopt the NQF-
endorsed version of All-Cause Unplanned Readmission Measure for 30 Days 
Post-Discharge from LTCHs (NQF #2512) for the LTCH QRP and (2) our 
proposal that the initial feedback to LTCHs, prior to public reporting 
of this measure, would be based on CY 2013 and CY 2014 Medicare FFS 
claims data related to readmissions post-LTCH discharge.
    Comment: One commenter supported the proposal to require continued 
reporting on this measure as part of LTCH QRP.
    Response: We appreciate the commenter's support of CMS proposal of 
this measure as a quality measure for the LTCH QRP.
    Comment: Several commenters expressed concerns over the lack of 
risk adjustment for sociodemographic status (SDS) factors among LTCH 
patients, such as community factors including access to primary care, 
medications, and appropriate food. One commenter recommended using 
proxy data on these factors such as census-derived data on income and 
the proportion of facilities patients that are dually eligible for 
Medicare and Medicaid.
    Response: While we appreciate these comments and the importance of 
the role that sociodemographic status plays in the care of patients, we 
continue to have concerns about holding providers to different 
standards for the outcomes of their patients of low sociodemographic 
status because we do not want to mask potential disparities or minimize 
incentives to improve the outcomes of disadvantaged populations. We 
routinely monitor the impact of sociodemographic status on facilities' 
results on our measures.
    NQF is currently undertaking a 2-year trial period in which new 
measures and measures undergoing maintenance review will be assessed to 
determine if risk-adjusting for sociodemographic factors is appropriate 
for each measure. For 2 years, NQF will conduct a trial of a temporary 
policy change that will allow inclusion of sociodemographic factors in 
the risk-adjustment approach for some performance measures. At the 
conclusion of the trial, NQF will determine whether to make this policy 
change permanent. Measure developers must submit information such as 
analyses and interpretations as well as performance scores with and 
without sociodemographic factors in the risk adjustment model.
    Furthermore, the Office of the Assistant Secretary for Planning and 
Evaluation (ASPE) is conducting research to examine the impact of 
socioeconomic status on quality measures, resource use, and other 
measures under the Medicare program as directed by the IMPACT Act. We 
will closely examine the findings of these reports and related 
Secretarial recommendations and consider how they apply to our quality 
programs at such time as they are available.
    Comment: One commenter asked whether all LTCH cases would be 
included in the LTCH QRP measures (including the All-Cause Unplanned 
Readmission Measure for 30 Days Post-Discharge from LTCHs (NQF #2512)) 
or only cases that qualify as site neutral cases.
    Response: We appreciate this commenter's inquiry. At this time, all 
LTCH patients that meet the sample inclusion criteria for this measure 
are included in this All-Cause Unplanned Readmission Measure for 30 
Days Post-Discharge from LTCHs (NQF #2512). The inclusion criteria for 
this measure do not distinguish whether LTCH cases meet the site 
neutral qualification.
    Comment: One commenter indicated that this measure was proposed to 
meet the requirements for the IMPACT Act and expressed concern that it 
does not meet all the statutory requirements, regarding quality 
measures, measure specifications, standardized patient assessments, and 
NQF endorsement.
    Response: We appreciate this commenter's feedback. However, we 
would like to clarify that we did not propose the All-Cause Unplanned 
Readmission Measure for 30 Days Post- Discharge from LTCHs (NQF #2512) 
to meet the requirements of the IMPACT Act. This measure was not NQF-
endorsed at the time of our initial adoption of the measure for the 
LTCH QRP in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50868 through 
50874). Rather, we proposed this previously adopted measure in the FY 
2016 IPPS/LTCH PPS proposed rule (80 FR 24600) to reflect its NQF 
endorsement status.
    Comment: One commenter noted that CMS had provided conflicting 
information on the date for the payment determination for this measure, 
noting that the year for the payment determination is reported as both 
FY 2017 and FY 2018 in the proposed rule.
    Response: We appreciate this commenter's concern, and appreciate 
the opportunity to provide a clarification. We refer readers to our 
adoption of non-NQF-endorsed version of this measure for the LTCH QRP 
for FY 2017 payment determination in the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50868 through 50874), related to the use of the measure as 
it relates to FY 2017. We note that the discrepancy in the FY 2016 
IPPS/LTCH PPS proposed rule regarding the applicable FY related to the 
endorsed version of this measure was a technical error, and the measure 
is effective relative to FY 2018.
    After consideration of the public comments we received, we are 
finalizing our proposal to adopt the NQF-endorsed version of the All-
Cause Unplanned Readmission Measure for 30 Days Post-Discharge from 
LTCHs (NQF #2512) for the LTCH QRP effective with the FY 2018 payment 
determination. We are also finalizing our proposal that the initial 
calculation of the measure and feedback to LTCHs, prior to public 
reporting of this measure, would be based on CY 2013 and CY 2014 
Medicare FFS claims data related to readmissions post-LTCH discharge.
b. Finalized Measure To Address the IMPACT Act: Quality Measure 
Addressing the Domain of Skin Integrity and Changes in Skin Integrity: 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (Short Stay) (NQF #0678)
    Section 1899B(c)(1) of the Act directs the Secretary to specify 
quality measures on which PAC providers are required under the 
applicable reporting provisions to submit standardized patient 
assessment data and other necessary data specified by the Secretary 
with respect to five quality domains, one of which is skin integrity 
and changes in skin integrity. The

[[Page 49732]]

specified application date by which the Secretary must specify quality 
measures to address this domain for IRFs, SNFs, and LTCHs is October 1, 
2016, and for HHAs is January 1, 2017. To satisfy these requirements, 
in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24600 through 24601), 
we proposed to adopt the Percent of Residents or Patients with Pressure 
Ulcers That Are New or Worsened (Short Stay) (NQF #0678) measure, that 
we have already adopted for the LTCH QRP, as a cross-setting quality 
measure that satisfies the domain of skin integrity and changes in skin 
integrity. The reporting of data for this measure would affect the FY 
2018 payment determination and subsequent years. In the LTCH setting, 
the measure assesses the percent of patients with Stage 2 through Stage 
4 pressure ulcers that are new or worsened since admission.
    As described in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51754 
through 51756), pressure ulcers are high-cost adverse events and are an 
important measure of quality. For information on the detailed rationale 
for relevance, evidence, appropriateness, importance, and applicability 
of this quality measure in the LTCH QRP, we refer readers to the FY 
2012 IPPS/LTCH PPS final rule (76 FR 51754 through 51756) and the FY 
2014 IPPS/LTCH PPS final rule (78 FR 50861 through 50863). Measure 
specifications are available on the NQF Web site at: http://www.qualityforum.org/QPS/0678.
    The IMPACT Act requires the implementation of quality measures and 
resource use and other measures that are standardized and interoperable 
across PAC settings as well as the reporting of standardized patient 
assessment data and other necessary data specified by the Secretary. 
This requirement is in line with the NQF Steering Committee report, 
which stated, ``to understand the impact of pressure ulcers across 
settings, quality measures addressing prevention, incidence, and 
prevalence of pressure ulcers must be harmonized and aligned.'' \310\ 
The Percent of Residents or Patients with Pressure Ulcers That Are New 
or Worsened (Short Stay) (NQF #0678) measure is NQF-endorsed and has 
been successfully implemented using a harmonized set of data elements 
in three PAC settings (LTCHs, IRFs, and SNFs). As discussed in section 
VIII.C.6.b. of the preamble of this final rule, above, an application 
of this measure was adopted for the LTCH QRP in the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51753 through 51756) for the FY 2014 payment 
determination, and the current NQF-endorsed version of the measure was 
adopted in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50861 through 
50863) for the FY 2015 payment determination and subsequent years. The 
measure has been in use in the LTCH QRP since October 1, 2012, and 
LTCHs are currently submitting data for this measure using the LTCH 
Continuity Assessment Record and Evaluation (CARE) Data Set.
---------------------------------------------------------------------------

    \310\ National Quality Forum. National voluntary consensus 
standards for developing a framework for measuring quality for 
prevention and management of pressure ulcers. April 2008. Available 
at: http://www.qualityforum.org/Projects/Pressure_Ulcers.aspx.
---------------------------------------------------------------------------

    The Percent of Residents or Patients with Pressure Ulcers That Are 
New or Worsened (Short Stay) (NQF #0678) measure was adopted for use in 
the IRF QRP in the FY 2012 IRF PPS final rule (76 FR 47876 through 
47878) for the FY 2014 payment determination and subsequent years and 
has been successfully submitted by IRFs using the Inpatient 
Rehabilitation Facility--Patient Assessment Instrument (IRF-PAI) since 
October 2012. It has also been implemented in the CMS Nursing Home 
Quality Initiative, using the Minimum Data Set (MDS) Version 3.0 since 
2011, and is currently publicly reported on CMS' Nursing Home Compare 
at: http://www.medicare.gov/nursinghomecompare/search.html.
    A TEP convened by our measure development contractor in February 
2015, provided input on the technical specifications of this quality 
measure, as well as the applicability of this measure as a cross-
setting measure across PAC settings, including the LTCH setting, to 
meet the requirements of the IMPACT Act. The TEP supported the 
applicability of this measure as a cross-setting measure across PAC 
settings and also supported our efforts to standardize items for data 
collection and submission of this measure as well as our efforts to 
standardize the measure for cross-setting development. In addition, on 
February 9, 2015, the MAP met to provide input to CMS on the measure. 
The MAP supported the use of Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678) 
measure in the LTCH QRP as a cross-setting quality measure. More 
information about the MAP's recommendations for this measure is 
included in: The MAP Off-Cycle Deliberations 2015: Measures under 
Consideration to Implement Provisions of the IMPACT Act: Final Report 
which is available at: http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx.
    We proposed that data collection for this measure continue to occur 
through the LTCH CARE Data Set submitted through the CMS Quality 
Improvement and Evaluation System (QIES) Assessment Submission and 
Processing (ASAP) system. LTCHs have been submitting data on the 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (Short Stay) (NQF #0678) measure through the LTCH CARE Data 
Set since October 2012. By building on the existing reporting and 
submission infrastructure for LTCHs, we intend to minimize the 
administrative burden related to data collection and submission for 
this measure under the LTCH QRP. For more information on LTCH QRP 
reporting using the QIES ASAP system, we refer readers to our Web site 
at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html.
    We proposed that data collected using standardized items through 
the LTCH CARE Data Set would continue to be used to calculate this 
quality measure. LTCH CARE Data Set items used to identify new or 
worsened pressure ulcers consist of: M0800A \311\ (Worsening in 
Pressure Ulcer Status Since Prior Assessment, Stage 2); M0800B \312\ 
(Worsening in Pressure Ulcer Status Since Prior Assessment, Stage 3); 
and M0800C \313\ (Worsening in Pressure Ulcer Status Since Prior 
Assessment, Stage 4). In addition, we proposed to continue to use items 
from the LTCH CARE Data Set to risk-adjust this quality measure. These 
items consist of: GG0160C \314\ (Functional Mobility; Lying to Sitting 
on Side of Bed), H0400 (Bowel Continence); I0900 (Peripheral Vascular 
Disease (PVD) or Peripheral Arterial Disease (PAD); I2900 (Diabetes 
Mellitus), K0200A (Height); and K0200B (Weight). More information about 
the LTCH CARE Data Set items is available in the LTCH QRP Manual 
available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-

[[Page 49733]]

Assessment-Instruments/LTCH-Quality-Reporting/index.html.
---------------------------------------------------------------------------

    \311\ For the April 1, 2016 release of the LTCH CARE Data Set 
version 3.00, item M0800A will be revised to Worsening in Pressure 
Ulcer Status Since Admission, Stage 2.
    \312\ For the April 1, 2016 release of the LTCH CARE Data Set 
version 3.00, item M0800B will be revised to Worsening in Pressure 
Ulcer Status Since Admission, Stage 3.
    \313\ For the April 1, 2016 release of the LTCH CARE Data Set 
version 3.00, item M0800C will be revised to Worsening in Pressure 
Ulcer Status Since Admission, Stage 4.
    \314\ For the April 1, 2016 release of LTCH CARE Data Set 
version 3.00, this item (GG0160C) will be renumbered to GG0170C.
---------------------------------------------------------------------------

    The specifications and data elements for the Percent of Residents 
or Patients with Pressure Ulcers That Are New or Worsened (Short Stay) 
(NQF #0678) measure for LTCHs are available in the LTCH QRP Manual at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/index.html.
    We invited public comment on our proposal to adopt the Percent of 
Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short Stay) (NQF #0678) measure for the FY 2018 payment determination 
and subsequent years to fulfill the requirements of the IMPACT Act.
    Comment: Several commenters supported the proposal to implement the 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (Short Stay) (NQF #0678) to fulfill the requirements of the 
IMPACT Act. Commenters noted that this measure is NQF-endorsed for the 
LTCH setting, data have been collected by LTCHs as part of the LTCH QRP 
since October 2012, and the NQF MAP supported the use of this measure 
in the LTCH QRP to meet the requirements of the IMPACT Act.
    Response: We thank these commenters for their support of our 
proposal.
    Comment: One commenter supported the proposal to implement this 
measure to fulfill the requirements of the IMPACT Act and stated that 
the implementation of this measure would not add any additional burden 
for LTCHs, because there are already mechanisms in place to collect and 
submit the pressure ulcer data. The commenter sought clarification 
regarding the coding instructions for the new or worsened unstageable 
pressure ulcer items added to Section M of the LTCH CARE Data Set 
version 3.00.
    Response: We thank the commenter for its support of our proposal 
and recognition that the implementation of this measure does not add 
additional data collection and reporting burden for LTCHs. Regarding 
the commenter's request related to coding the LTCH CARE Data Set 
version 3.00 new items, we are committed to providing additional 
guidance to support and allow LTCHs to accurately interpret and 
complete quality reporting items, including the new or worsened 
unstageable pressure ulcer items included in Section M of the LTCH CARE 
Data Set version 3.00. Similar to training and outreach efforts that we 
have conducted in the past, we will make available an updated LTCH QRP 
Manual Version 3.0 at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/index.html. We 
also have made available the technical submission specifications for 
the LTCH CARE Data Set version 3.00 at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Technical-Information.html.
    In fall 2015, prior to the implementation of new quality measures 
and new items of LTCH CARE Data Set version 3.00, we intend to offer 
free trainings to LTCH providers and interested stakeholders. This 
training is part of our ongoing strategy to ensure successful 
implementation of the LTCH QRP. In addition, we will continue to 
maintain and provide guidance through the LTCH help desk via 
[email protected]. We invite LTCHs to submit specific 
inquires related to LTCH CARE Data Set version 3.00 via email at the 
address provided.
    Comment: Several commenters supported the intent of this measure, 
but provided recommendations regarding risk adjustment of the pressure 
ulcer measure. Commenters suggested modifications, including risk 
adjustment for patients with multiple-organ failure, for patients on 
dialysis, and for patients with morbid obesity. One commenter 
recommended ongoing evaluation of the risk adjustment methodology to 
ensure it is appropriate for standardized cross-setting risk adjustment 
purposes.
    Another commenter was concerned that the measure is limited to only 
high risk patients or residents, and that the denominator size is 
decreased by excluding individuals who are low risk. The commenter 
indicated that that pressure ulcers do develop in low-risk individuals 
and that this exclusion will impact each PAC setting differently 
because the prevalence of low risk individuals varies across settings. 
The commenter suggested that CMS use a logistic regression model for 
risk adjustment to allow for an increase in the measure sample size by 
including all admissions, take into consideration low-volume providers, 
and capture the development of pressure ulcers in low-risk individuals. 
This commenter expressed concern that the current risk factors for this 
measure were selected for the SNF setting and are therefore 
inappropriate for the LTCH setting, and recommended use of an ordinal 
scale related to an increasing number and severity of risk factors 
rather than grading risk dichotomously (for example, high risk vs. low 
risk). The commenter further recommended additional risk stratification 
and expanding the list of risk factors to better capture variation 
across different PAC settings. Finally, the commenter noted that the 
TEP that evaluated this cross-setting pressure ulcer measure 
recommended that CMS consider modifying the risk adjustment model and 
either excluding or risk adjusting for Hospice patients and patients 
receiving end-of-life care.
    Response: We thank the commenters for their support of this measure 
and for their specific recommendations to inform and improve risk 
adjustment for this measure. Section 1899B(c)(3)(B) of the IMPACT Act 
states that quality measures shall be risk-adjusted, as determined 
appropriate by the Secretary.
    In regard to the commenter who recommended we risk adjust using a 
logistic regression model and incorporate low risk patients into the 
measure, we believe that this commenter may have submitted comments 
regarding the wrong quality measure. Their comments apply to the 
quality measure, Percent of High Risk Residents with Pressure Ulcers 
(Long Stay) (NQF #0679), which is not the measure that we proposed for 
the LTCH QRP. The proposed measure is Percent of Residents or Patients 
with Pressure Ulcers That Are New or Worsened (NQF #0678). This measure 
is currently risk-adjusted using a logistic regression model and 
includes low-risk patients. In the model, patients are categorized as 
either high or low risk for four risk factors: functional limitation, 
bowel incontinence, diabetes or peripheral vascular disease (PVD)/
peripheral arterial disease (PAD), and low body mass index (BMI). Low-
risk patients are included in the measure calculation. An expected 
score is calculated for each patient or resident using that patient or 
resident's risk level on the four risk factors described above. The 
patient/resident-level expected scores are then averaged to calculate 
the facility-level expected score, which is compared to the facility-
level observed score to calculate the adjusted score for each facility. 
Additional detail regarding risk adjustment for this measure is 
available in the measure specifications, available at: https://
www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-
Instruments/LTCH-Quality-Reporting/Downloads/Long-Term-Care-Hospital-
Quality-Reporting-Program-Specifications-for-the-Quality-Measures-
Proposed-through-the-Fiscal-Year-2016-

[[Page 49734]]

Notice-of-Proposed-Rule-Making-report.pdf.
    We have determined that the current risk-adjustment methodology is 
appropriate for this measure and have developed and implemented the 
risk adjustment model for this measure. To arrive at this 
determination, we rely on ongoing measure development and measure 
maintenance activities undertaken by our measure development 
contractor, RTI International. These activities include a review of the 
relevant literature, careful analyses to examine the appropriateness of 
current and additional risk factors using facility-level data submitted 
by over 400 LTCHs nationwide by means of the LTCH CARE Data Set as part 
of the LTCH QRP, input from a LTCH-setting-specific TEP, input from a 
cross-setting TEP, and advisement and clinical guidance of subject 
matter experts and other stakeholders to examine current risk factors 
and to identify additional risk factors.
    We recognize that it is important to continue to examine additional 
risk-adjustment factors to ensure valid and reliable quality measures 
and to consider further improvement of the risk adjustment model for 
our quality measures for the LTCH QRP. To this end, we will take into 
consideration the TEP discussion and these commenters' thoughtful 
feedback to inform our ongoing assessment of risk factors and future 
risk adjustment and stratification model for the Percent of Residents 
or Patients with Pressure Ulcers That Are New or Worsened (Short Stay) 
(NQF #0678) measure, including consideration of the recommendation to 
exclude or adjust for hospice patients and patients receiving end-of-
life care. We remain committed to conducting ongoing testing and 
measure development activities in an effort to improve the risk 
adjustment of quality measures implemented through the quality 
reporting programs. These activities will ensure that this quality 
measure remains valid and reliable and provides usable information to 
inform quality improvement activities within the LTCH setting as well 
as other PAC settings, and to fulfill the public reporting goals of the 
CMS quality reporting programs, including the LTCH QRP.
    Comment: One commenter asked CMS to clarify how discharges paid 
under the LTCH PPS standard Federal payment rate versus the LTCH PPS 
site neutral rate will be included in the quality metrics in the future 
years. This commenter noted that if there is no differentiation in the 
quality metrics for the two different types of payment methodologies, 
it is likely that the quality metrics could become skewed. The 
commenter also asked CMS whether the metrics can be reported separately 
for discharges that are paid under the LTCH PPS standard Federal 
payment rate versus the LTCH PPS site neutral rate and further 
recommended that all LTCH appropriate metrics should be risk-adjusted.
    Response: We refer readers to our response to the preceding comment 
regarding current and future risk adjustment for this measure. At this 
time, all LTCH patients that meet the sample inclusion criteria for 
this measure, irrespective of payer source and payment methodology, are 
included in this measure. We will take commenter's recommendations 
regarding analysis and separate reporting for discharges that are paid 
under the LTCH PPS standard Federal payment rate versus the LTCH PPS 
site neutral rate under advisement to inform future analyses of the 
data for the Percent of Residents or Patients with Pressure Ulcers That 
Are New or Worsened (Short Stay) (NQF #0678) measure.
    Comment: Several commenters expressed concern regarding the 
reliability and validity of this measure across the different PAC 
settings. The commenters were concerned that the reliability and 
validity testing for this measure were only conducted in the SNF 
setting. One commenter stated that the populations in which the data 
collection tools are used and risk factors in LTCH, IRF, and SNF 
settings are not similar. The commenter highlighted differences in LTCH 
clinical characteristics and susceptibility to pressure ulcers amongst 
LTCH patients as compared to IRF and SNF patient/resident populations, 
stating that these differences make the application of reliability 
testing results from the SNF resident population to the LTCH and IRF 
patient populations inaccurate. The commenter encouraged CMS to conduct 
additional testing on the reliability and validity of this quality 
measure using data from LTCHs, IRFs, and SNFs to accurately assess the 
appropriate use of MDS 3.0 items across settings.
    Response: We appreciate the commenters' concern that the LTCH, IRF 
and SNF populations are not identical and that some differences may 
exist in the reliability and validity of the measure across settings. 
We are working towards standardizing data across PAC settings as 
mandated in the IMPACT Act. As such, we continue to conduct measure 
development and testing to explore the best way to standardize quality 
measures, while ensuring reliability and validity for the measures to 
appropriately account for the unique differences in populations across 
PAC settings.
    The application of this quality measure for use in the LTCH QRP and 
IRF QRP was established in the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51745 through 51750) and the IRF PPS FY 2012 (76 FR 47876 through 
47878) when this quality measure was finalized for use in the LTCH QRP 
and IRF QRP, respectively. The NQF endorsement was expanded to the LTCH 
and IRF settings in 2012. The expanded measure was finalized in the FY 
2014 IPPS/LTCH PPS final rule (78 FR 50861 through 50863) and the FY 
2014 IRF PPS final rule (78 FR 47911 through 47912) for use in the LTCH 
and IRF QRP, respectively. As part of NQF endorsement maintenance for 
this measure, CMS and our measure contractor will continue to perform 
reliability and validity testing. Findings from early data analyses 
have shown that the measure continues to be valid and reliable for LTCH 
and IRF settings in addition to the SNF/NH setting.
    Comment: One commenter was concerned that the pressure ulcer 
measure is not standardized across PAC settings. The commenter stated 
that although the measure appears meets the goals and the intent of the 
IMPACT Act, it does not use a single data assessment tool.
    The commenter specifically mentioned the frequency of assessments, 
highlighting the fact that the LTCH and IRF versions of the measure are 
calculated using data from assessments conducted at two points in time 
(admission and discharge), while the SNF version uses assessments at 
more than two points in time. The commenter expressed concern that the 
higher frequency of assessments for the MDS could potentially result in 
higher rates of pressure ulcer counts for SNFs. Another commenter 
voiced particular concerns regarding differences in the look back 
periods, for the items used on the IRF, SNF and LTCH assessments (MDS = 
7-day assessment period; IRF = 3-day assessment period; LTCH = 3-day 
assessment period) and suggested that this would result in different 
rates of detection of new or worsened ulcers. Commenters encouraged CMS 
to address all of these discrepancies, and suggested that CMS should 
switch to using only an admission and discharge assessment in the SNF 
version of the measure.
    Response: We appreciate the commenters' review of the measure 
specifications across the post-acute care settings. We wish to clarify 
that while

[[Page 49735]]

the IMPACT Act requires the modification of PAC assessment instruments 
to revise or replace certain existing patient assessment data with 
standardized patient assessment data as soon as practicable, it does 
not require a single data collection tool. We intend to modify the 
existing PAC assessment instruments as soon as practicable to ensure 
the collection of standardized data. While we agree that it is possible 
that within the PAC assessment instruments certain sections could 
incorporate a standardized assessment data collection tool, for 
example, the Brief Interview for Mental Status (BIMS), we have not yet 
concluded whether this kind of modification of the PAC assessment 
instruments is necessary.
    As to the concern that the pressure ulcer measure calculation is 
based on more frequent assessments in the SNF setting than in the LTCH 
and IRF settings, we wish to clarify that result of the measure 
calculation for all three PAC providers is the same. For all three PAC 
providers, the measure calculation ultimately shows the difference 
between the number of pressure ulcers present on admission and the 
number of new or worsened pressure ulcers present on discharge. While 
SNF measure calculation arrives at that number differently than does 
the measure calculation in the IRF and LTCH settings, ultimately all 
three settings report the same result--as noted, the difference between 
the number of pressure ulcers present on admission and the new or 
worsened pressure ulcers at discharge. To explain, in IRFs and LTCHs, 
pressure ulcer assessment data is obtained only at two points in time--
on admission and on discharge. Therefore, the calculation of the 
measure includes all new or worsened pressure ulcers since admission. 
In contrast, in SNFs, pressure ulcer assessment data is obtained on 
admission, at intervals during the stay (referred to as ``interim 
assessments''), and at discharge. Each interim assessment and the 
discharge assessment only look back to whether there were new or 
worsened pressure ulcers since the last interim assessment. The sum of 
number of new or worsened pressure ulcers identified at each interim 
assessment and at the time of discharge yields the total number of new 
or worsened pressure ulcers that occurred during the stay and that were 
present on discharge. In other words, the collection of pressure ulcer 
data in LTCHs and IRFs is cumulative, whereas in SNFs, data collection 
is sequential. In both cases the calculation reaches the same result--
the total number of new or worsened pressured ulcers between admission 
and discharge. Thus, this is the same result of the measure calculation 
for SNFs as is obtained for IRFs and LTCHs.
    We interpret the commenter's concern related to a higher frequency 
of assessments for the MDS potentially resulting in higher rates of 
pressure ulcer counts pertains to the potential inclusion of wounds 
that are new or worsened and are identified on such interim assessments 
but actually heal by the time of discharge. We wish to clarify that, as 
with the LTCH and IRF measure calculation that does not include 
pressure ulcers that heal, we will calculate the quality measure such 
that any new or worsened pressure ulcer wounds found on interim 
assessments but have healed will not be included.
    In regard to the commenter's concern about different look-back 
periods, we acknowledge that although the LTCH CARE Data Set and IRF-
PAI allow up to the third day starting on the day of admission as the 
assessment period and the MDS allows for an assessment period of 
admission up to day 7, we note that the training manuals for SNFs, 
LTCHs and IRFs provide specific and equivalent-coding instructions 
related to the items used to calculate this measure (found in Section 
M--skin conditions for all three assessments). These instructions 
ensure that the assessment of skin integrity occurs at the initiation 
of patients' or residents' PAC stays regardless of setting. All three 
manuals direct providers to complete the skin assessment for pressure 
ulcers present on admission as close to admission as possible, ensuring 
a harmonized approach to the timing of the initial skin assessment. 
Regardless of differences in the allowed assessment periods, providers 
across PAC settings should adhere to best clinical practices, 
established standards of care, and the instructions in their respective 
training manuals, to ensure that skin integrity information is 
collected as close to admission as possible. Although the manual 
instructions are harmonized to ensure assessment at the beginning of 
the stay, based on the commenter's feedback, we will take into 
consideration the incorporation of uniform assessment periods for this 
section of the assessments.
    Comment: One commenter expressed concern that this measure is NQF-
endorsed for the SNF setting and suggested that CMS delay implementing 
the cross-setting measure until it is NQF-endorsed across all PAC 
settings. The commenter urged CMS to request formal NQF review, using 
the Consensus Development Process rather than ``time-limited review'' 
of the Percent of Residents or Patients with Pressure Ulcers That Are 
New or Worsened (Short Stay) (NQF #0678) measure for the LTCH setting 
before adopting the measure for the LTCH QRP. The commenter also 
encouraged CMS to convene a TEP that includes representatives from the 
LTCH setting to review the applicability of this measure to the LTCH 
setting, and noted that the NQF MAP only conditionally supported this 
quality measure for the LTCH QRP. In addition, the commenter expressed 
concern that the specifications available on the NQF Web site are dated 
October 2013.
    Response: Although the proposed pressure ulcer measure was 
originally developed for the SNF/nursing home populations, it has been 
respecified for the LTCH and IRF settings, underwent review for 
expansion to the LTCH and IRF settings by the NQF Consensus Standards 
Approval Committee (CSAC) on July 11, 2012 \315\ and was subsequently 
ratified by the NQF Board of Directors for expansion to the LTCH and 
IRF settings on August 1, 2012.\316\ As reflected on the NQF Web site, 
the endorsed settings for this measure include Post-Acute/Long Term 
Care Facility: Inpatient Rehabilitation Facility, Post-Acute/Long Term 
Care Facility: Long Term Acute Care Hospital, Post-Acute/Long Term Care 
Facility: Nursing Home/Skilled Nursing Facility.\317\ NQF endorsement 
of this measure for the LTCH setting indicates that NQF supports the 
use of this measure in the LTCH and IRF settings, as well as in the SNF 
setting. This measure was fully supported by the MAP for cross-setting 
use at its meeting of February 9, 2015. With regard to the comment 
regarding the measure specifications posted on the NQF Web site, we 
note that the most up-to-date version of the measure specifications 
were posted for stakeholder review at the time of the proposed rule on 
the CMS Web site at: https://www.cms.gov/Medicare/Quality-Initiatives-
Patient-Assessment-Instruments/LTCH-Quality-Reporting/Downloads/Long-
Term-Care-Hospital-Quality-Reporting-Program-Specifications-for-the-
Quality-Measures-Proposed-through-the-Fiscal-Year-2016-

[[Page 49736]]

Notice-of-Proposed-Rule-Making-report.pdf. The specifications posted on 
the NQF Web site for the quality measure, the Percent of Residents or 
Patients with Pressure Ulcers That Are New or Worsened (Short Stay) 
(NQF #0678) during the comment period are computationally equivalent 
and have the same measure components as those posted on the CMS Web 
site at the time of the proposed rule. However, we provided more detail 
in the specifications posted with the proposed rule, in an effort to 
more clearly explain aspects of the measure that were not as clear in 
the NQF specifications. In addition, we clarified language to make 
phrasing more parallel across settings, and updated item numbers and 
labels to match the 2016 data sets (MDS 3.0, LTCH CARE Data Set, and 
IRF-PAI). We are working closely with NQF to make updates and ensure 
that the most current language and clearest version of the 
specifications are available on the NQF Web site.
---------------------------------------------------------------------------

    \315\ Nation Quality Forum, Consensus Standardbreds Approval 
Committee. Meeting Minutes, July 11, 2012. 479-489.
    \316\ National Quality Forum, Consensus Standards Approval 
Committee. Meeting Minutes, July 11, 2012. 479-489.
    \317\ National Quality Forum. Percent of Residents or Patients 
with Pressure Ulcers that are New or Worsened (Short Stay). 
Available: http://www.qualityforum.org/QPS/0678.
---------------------------------------------------------------------------

    In addition to NQF review, this measure has been reviewed by 
several TEPs, which included representatives from the LTCH setting. In 
June and November 2013, our measure development contractor convened a 
cross-setting pressure ulcer TEP, which included representatives from 
the LTCH setting and provided detailed input regarding the Percent of 
Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short Stay) (NQF #0678).\318\ An additional cross-setting TEP, which 
also included representatives from the LTCH setting, was convened in 
February 2015 and provided input on the technical specifications of 
this quality measure, as well as the applicability of this measure as a 
cross-setting measure applied across PAC settings, including the LTCH 
setting, to meet the requirements of the IMPACT Act.\319\ Finally, an 
LTCH-specific TEP provided recommendations regarding this measure in 
January \320\ and September 2011.\321\
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    \318\ Schwartz, M., Nguyen, K.H., Swinson Evans, T.M., Ignaczak, 
M.K., Thaker, S., and Bernard, S.L.: Development of a Cross-Setting 
Quality Measure for Pressure Ulcers: OY2 Information Gathering, 
Final Report. Centers for Medicare & Medicaid Services, November 
2013 (Chapter 5). Available: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/Development-of-a-Cross-Setting-Quality-Measure-for-Pressure-Ulcers-Information-Gathering-Final-Report.pdf
    \319\ RTI International. Summary of Feedback from the Technical 
Expert Panel (TEP) Regarding Cross-Setting Measures Aligned with the 
IMPACT Act. Centers for Medicare & Medicaid Services, April 2015. 
Available: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/SUMMARY-OF-FEEDBACK-FROM-THE-TECHNICAL-EXPERT-PANEL-TEP-REGARDING-CROSS-SETTING-MEASURES-ALIGNED-WITH-THE-IMPACT-ACT-OF-2014-Report.pdf.
    \320\ Thaker, S., Gage, B., Bernard, S., and Nguyen, K. 
Technical Expert Panel Report: Quality Measures for Long-Term Care 
Hospitals. Centers for Medicare & Medicaid Services, January 2011.
    \321\ Thaker, S., Nguyen, K., Berzin, O., Shadle, J., and 
Bernard, S. Technical Expert Report: Summary of Long-Term Care 
Hospital Technical Expert Panel Meeting. Centers for Medicare & 
Medicaid Services, September 2011.
---------------------------------------------------------------------------

    As noted, this measure was fully supported by the MAP at their 
meeting on February 9, 2015 for use in the LTCH QRP as a cross-setting 
quality measure.\322\ The MAP noted that this measure is NQF-endorsed 
for, and already implemented in, the LTCH QRP. We refer readers to the 
FY 2012 IPPS/LTCH PPS final rule (76 FR 51748 through 51750) for 
details on our efforts to solicit and engage technical experts from the 
LTCH setting as part of our adoption of this measure for the LTCH QRP. 
We also refer readers to our earlier response on our measure 
developer's ongoing efforts to further develop this measure and note 
that we remain committed to soliciting ongoing input and working 
closely with LTCH, IRF, SNF/nursing home and cross-setting stakeholders 
and clinical experts as part of our ongoing measure development and 
maintenance efforts.
---------------------------------------------------------------------------

    \322\ National Quality Forum; Measure Application Partnership 
(MAP). February 2015. MAP PAC-LTC Programmatic Deliverable--Final. 
Available: https://www.qualityforum.org/Publications/2015/02/MAP_PAC-LTC_Programmatic_Deliverable_-_Final_Report.aspx.
---------------------------------------------------------------------------

    After consideration of the public comments we received, we are 
finalizing our proposal to adopt the Percent of Residents or Patients 
with Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678) 
measure for the FY 2018 payment determination and subsequent years to 
fulfill the requirements of the IMPACT Act.
c. Finalized Measure To Address the IMPACT Act: Quality Measure 
Addressing the Domain of Incidence of Major Falls: Application of 
Percent of Residents Experiencing One or More Falls With Major Injury 
(Long Stay) (NQF #0674)
    Section 1899B of the Act directs the Secretary to specify quality 
measures on which PAC providers are required under the applicable 
reporting provisions to submit standardized patient assessment data and 
other necessary data specified by the Secretary with respect to five 
quality domains, one of which is the incidence of major falls. The 
specified application date by which the Secretary must specify quality 
measures to address this domain for IRFs, SNFs, and LTCHs is October 1, 
2016, and for HHAs is January 1, 2019. To satisfy these requirements, 
in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24601 through 24602), 
we proposed to adopt an application of the Percent of Residents 
Experiencing One or More Falls with Major Injury (Long Stay) (NQF 
#0674) measure in the LTCH QRP as a cross-setting quality measure that 
addresses the domain of incidence of major falls. The purpose of our 
proposal was to establish this measure's use as a cross-setting measure 
that satisfies the required adoption of such a measure under the domain 
of falls with major injury. There is no difference between this measure 
and the measure we previously adopted, beyond the proposed intent to 
use the measure to satisfy the requirements of the IMPACT Act. Data 
collection would start on April 1, 2016. The reporting of data for this 
measure would affect the payment determination for FY 2018 and 
subsequent years.
    For the LTCH setting, this measure would report the percentage of 
patients who experienced one or more falls with major injury during the 
LTCH stay. This measure was developed by CMS and is NQF-endorsed, 
currently for long-stay residents of nursing facilities. It was adopted 
for the LTCH QRP in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50874 
through 50877). In the FY 2015 IPPS/LTCH PPS final rule, we adopted a 
revised start for data collection of April 1, 2016 and affecting FY 
2018 payment determination, and we adopted data collection and 
submission timelines for the FY 2018 payment determination and 
subsequent years. For information on the detailed rationale for 
relevance, evidence, appropriateness, importance, and applicability of 
this quality measure in the LTCH QRP, we refer readers to these final 
rules.
    Measure specifications are available on the NQF Web site at: http://www.qualityforum/QPS/0674.
    The IMPACT Act requires the implementation of quality measures and 
resource use and other measures that are standardized and interoperable 
across PAC settings as well as the reporting of standardized patient 
assessment data and other necessary data specified by the Secretary. 
The Percent of Residents Experiencing One or More Falls with Major 
Injury (Long Stay) (NQF #0674) measure is NQF-endorsed for long-stay 
residents of nursing facilities and has been successfully implemented 
in such settings. The NQF-endorsed measure has been in use as part of 
the CMS Nursing Home Quality Initiative since

[[Page 49737]]

2011. In addition, the measure is currently reported on the CMS Nursing 
Home Compare Web site at: http://www.medicare.gov/nursinghomecompare/search.html. As noted previously, this measure was adopted for use in 
the LTCH QRP in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50874 
through 50877). In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50290 
through 50291), we revised the data collection start date for this 
measure with data collection to begin starting April 1, 2016, and we 
adopted data collection and submission timelines for the FY 2018 
payment determination and subsequent years.
    We reviewed the NQF's consensus endorsed measures and did not 
identify any NQF-endorsed cross-setting quality measures focused on 
falls with major injury applicable to multiple PAC settings. We are 
unaware of any other cross-setting quality measures for falls with 
major injury that have been endorsed or adopted by another consensus 
organization. Therefore, we proposed an application of the measure, the 
Percent of Residents Experiencing One or More Falls with Major Injury 
(Long Stay) (NQF #0674) measure under the Secretary's authority to 
select non-NQF-endorsed measure.
    A TEP convened by our measure development contractor provided input 
on the measure specifications, as well as the feasibility and clinical 
appropriateness of implementing the measure across PAC settings, 
including the LTCH setting. The TEP supported the implementation of 
this measure across PAC settings and also supported CMS' efforts to 
standardize this measure for cross-setting development. In addition, 
the MAP met on February 9, 2015, and provided input to CMS on the 
measure. The MAP conditionally supported the use of an application of 
the Percent of Residents Experiencing One or More Falls with Major 
Injury (Long Stay) (NQF #0674) measure in the LTCH QRP as a cross-
setting quality measure. More information about the MAP's 
recommendations for this measure is included in The MAP Off-Cycle 
Deliberations 2015: Measures under Consideration to Implement 
Provisions of the IMPACT Act: Final Report which is available at: 
http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx.
    More information on the Percent of Residents Experiencing One or 
More Falls with Major Injury (Long Stay) (NQF #0674) measure can be 
found on the NQF Web site at: http://www.qualityforum.org/QPS/0674. 
Updated specifications and details regarding the changes made to 
further harmonize this measure across PAC settings are located at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/index.html.
    We proposed that data for this proposed quality measure be 
collected using the LTCH CARE Data Set, with submission through the 
QIES ASAP system. For more information on LTCH QRP reporting through 
the QIES ASAP system, we refer readers to the CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html. Data 
collected through a revised LTCH CARE Data Set would be used to 
calculate this quality measure. Consistent with the LTCH CARE Data Set 
reporting requirements, the application of the Percent of Residents 
Experiencing One or More Falls with Major Injury (Long Stay) (NQF 
#0674) measure would apply to all patients discharged from LTCHs. Data 
items in the revised LTCH CARE Data Set version 3.00 would include: 
J1800, Any Falls Since Admission; and J1900, Number of Falls Since 
Admission.
    The calculation of the proposed application of the measure would be 
based on item J1900C, Number of Falls with Major Injury Since 
Admission. The measure specifications for the Percent of Residents 
Experiencing One or More Falls with Major Injury (Long Stay) (NQF 
#0674) measure are available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/index.html. We refer readers to section VIII.C.9.b. of the preamble of 
this final rule for more information on the data collection and 
submission timeline for this proposed quality measure.
    We invited public comment on our proposal to adopt an application 
of the Percent of Residents Experiencing One or More Falls with Major 
Injury (Long Stay) (NQF #0674) measure, with data collection beginning 
on April 1, 2016 for the FY 2018 payment determination and subsequent 
years to fulfill the requirements in the IMPACT Act.
    Comment: One commenter supported the proposal to implement an 
application of the Percent of Residents Experiencing One or More Falls 
with Major Injury (Long Stay) (NQF #0674) measure to fulfill the 
requirements of the IMPACT Act.
    Response: We thank the commenter for their support of our proposal.
    Comment: Several commenters supported the Application of the 
Percent of Residents Experiencing One or More Falls with Major Injury 
(Long Stay) (NQF #0674) measure in concept, but suggested that risk 
adjustment is necessary to ensure reliable and valid comparisons across 
settings and to account for factors outside of the control of providers 
for public reporting purposes. One commenter stated that risk 
adjustment is important when discussing and analyzing falls risk 
factors in other PAC settings. The commenters also noted that the NQF 
MAP conditionally supported the falls measure if risk-adjustment were 
performed.
    Response: We appreciate the commenters' concerns that the proposed 
application of the quality measure, the Percent of Residents 
Experiencing One or More Falls with Major Injury (Long Stay) (NQF 
#0674) should be risk-adjusted. The application of risk adjustment, as 
stated by the IMPACT Act, is ``as determined appropriate by the 
Secretary'' under section 1899B(c)(3)(B) of the Act.
    While we acknowledge that patient characteristics that elevate the 
risk for falls with major injury vary across the LTCH population, a TEP 
convened in 2009 by the measurement development contractor asserted 
that risk adjustment of this quality measure concept was inappropriate 
because it is each facility's responsibility to take steps to reduce 
the rate of injurious falls, especially since such events are 
considered to be ``never events.'' We note that the PAC PRD did not 
analyze falls with major injury, as falls with major injury was not an 
assessment item that was tested. However, as the commenter pointed out, 
the prevalence of a history of falls prior to the PAC admission did 
vary across post-acute settings (as assessed by Item B7 from the CARE 
tool: ``History of Falls. Has the patient had two or more falls in the 
past year or any fall with injury in the past year?''). Nonetheless, we 
believe that as part of best clinical practice, LTCHs should assess 
residents for falls risk and take steps to prevent future falls with 
major injury.
    A TEP of LTCH experts convened in 2011 agreed that falls with major 
injury are very important to track in LTCHs and did not recommend risk 
adjustment for this measure. The numerator, denominator, and exclusions 
definitions provided to the TEP in 2015 are virtually identical to the 
specifications we proposed to adopt for this measure, and did not 
include risk adjustment. Two out of 11 members of the 2015 TEP 
supported risk adjustment of the falls measure. For more information on 
the 2015 TEP, please visit http://

[[Page 49738]]

www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-
Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/SUMMARY-OF-
FEEDBACK-FROM-THE-TECHNICAL-EXPERT-PANEL-TEP-REGARDING-CROSS-SETTING-
MEASURES-ALIGNED-WITH-THE-IMPACT-ACT-OF-2014-Report.pdf.
    We believe factors that increase the risk of falling, such as 
cognitive impairment, should be included by facilities in their risk 
assessment to support proper care planning. As cited in the proposed 
rule, research suggests that 78 percent of falls are anticipated falls, 
occurring in individuals who could have been identified as at-risk for 
a fall using a risk-assessment scale. Risk adjusting for falls with 
major injury could unintentionally lead to insufficient risk prevention 
by the provider. As required by the DRA, the Hospital Acquired 
Conditions-Present On Admission (HAC-POA) Indicator Reporting provision 
requires a quality adjustment in the Medicare Severity-Diagnosis 
Related Groups (MS-DRG) payments for certain Hospital Acquired 
Conditions (HACs), which include falls and trauma, and these payment 
reductions are not risk adjusted. The need for risk assessment, based 
on varying risk factors among patients, does not remove the obligation 
of providers to minimize that risk.
    With regard to the MAP recommendation to risk adjust this measure 
cited by the commenter, the MAP feedback regarding risk adjustment for 
this quality measure applied to the home health setting, not to the SNF 
setting. We also refer readers to a more recent Cochrane review of 60 
randomized controlled trials, which found that within care facilities, 
multifactorial interventions have the potential to reduce rates of 
falls and risk of falls.\323\
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    \323\ Cameron ID, Gillespie LD, Robertson MC, Murray GR, Hill 
KD, Cumming RG, Kerse N. Interventions for preventing falls in older 
people in care facilities and hospitals. Cochrane Database of 
Systematic Reviews 2012, Issue 12. Art. No.: CD005465. DOI: 10.1002/
14651858.CD005465.pub3.
---------------------------------------------------------------------------

    Comment: One commenter stated that data collection and abstraction 
from the medical record for this measure would pose a burden on LTCHs 
because of separate systems for gathering data for such events.
    Response: We appreciate the concerns related to any undue burden, 
including data collection, documentation, and reporting and we take 
such concerns under consideration when selecting measures for the LTCH 
QRP. The Percent of Residents Experiencing One or More Falls with Major 
Injury (Long Stay) (NQF #0674) measure includes the following two data 
elements in the LTCH CARE Data Set version 3.00: J1800, Any Falls Since 
Admission, and J1900, Number of Falls Since Admission. If the provider 
answers ``No'' to J1800, Any Falls Since Admission, then J1900, Number 
of Falls Since Admission, may be skipped. Based on evidence and 
rationale we presented in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50874 through 50877) to support our selection and finalization of our 
proposal to adopt this measure for the LTCH QRP, we believe the impact 
this measure could have on quality of care and patient outcomes in the 
LTCH setting justifies additional resources needed for measure data 
collection and data submission.
    In addition, we note that this measure was previously finalized for 
use in the LTCH QRP through the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50874 through 50877), and our proposal of this previously adopted 
measure to establish its cross-setting use, in order to address the 
domain of incidence of major falls to meet the requirements of the 
IMPACT Act, does not add any additional burden for LTCHs.
    Comment: Several commenters recommended re-specifying and testing 
the measure in the LTCH setting and obtaining NQF endorsement 
specifically for the LTCH setting prior to implementation in the LTCH 
QRP.
    Response: We appreciate the commenters' recommendations regarding 
NQF endorsement in the LTCH setting and recognize that it is an 
important step in the measure development process. However, because 
falls with major injury is an important patient safety concern in 
LTCHs, and because of the lack of availability of NQF-endorsed measures 
for the LTCH setting or measures endorsed by any other consensus 
organizations, we proposed this measure under the exception authority 
provided in section 1899B(e)(2)(B) of the Act, which allows us to apply 
a measure to the LTCH setting that is not NQF-endorsed as long as due 
consideration is given to measures that have been endorsed or adopted 
by a consensus organization.
    There is no difference between this measure and the measure we 
previously adopted through the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50874 through 50877).
    We also are clarifying that while this measure is currently 
endorsed for the nursing home setting, we believe the data collection 
items, measure definition, and measure specifications are applicable 
across multiple PAC settings, including the LTCH setting (78 FR 50876). 
With regard to the adequacy of the measure's testing, the item-level 
testing during the development of the MDS 3.0 (data elements in the 
LTCH CARE Data Set were adapted from MDS 3.0) showed near-perfect 
inter-rater reliability for the MDS item (J1900C) used to identify 
falls with major injury. The NQF measure evaluation criteria do not 
require measure-level reliability if item reliability is high. However, 
we believe that, given the overlap in the populations and item-level 
testing results, the application of this measure for LTCH patients will 
be reliable. In addition, we intend to test the measure for the LTCH 
setting once data collection begins as part of LTCH QRP and as part of 
ongoing maintenance of the measure for NQF endorsement.
    In addition, our measure development contractor convened a TEP in 
2011 that supported the importance of a quality measure to address 
falls with a major injury in the LTCH setting. This measure on reports 
falls with major injuries which is an important patient safety concern 
for LTCH patients. For the reasons listed above, we have concluded that 
this measure is appropriate for LTCH patients.
    Comment: One commenter stated that the falls measure is not fully 
specified as a cross-setting measure. This commenter suggested that CMS 
needs to more clearly specify the numerator, denominator and 
exclusions, including risk adjustment for this quality measure. 
Therefore, this measure should not be implemented as proposed since the 
specifications in the proposed rule differ from those in referenced 
documents, NQF applications for the measures, and the IRF and SNF 
proposed rules.
    Response: This quality measure was proposed and specified as a 
cross-setting measure for LTCH, IRF, and SNF settings. The Application 
of the Percent of Residents Experiencing One or More Falls with Major 
Injury (Long Stay) (NQF #0674) measure is the same measure for each 
setting. Additional details on the measure specifications for the 
application of this measure to the LTCH setting in order to harmonize 
this measure across LTCH, IRF, and SNF settings to meet the IMPACT Act 
requirements are available for download at: http://cms.hhs.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/index.html.
    With regard to the measure specifications posted on the NQF Web 
site, the most up-to-date version of the measure specifications were 
posted for stakeholder review at the time of the

[[Page 49739]]

proposed rule on the CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/Downloads/Skilled-Nursing-Facility-Quality-Reporting-Program-Quality-Measure-Specifications-for-FY-2016-Notice-of-Proposed-Rule-Making-report.pdf. The specifications currently posted on 
the NQF Web site are computationally equivalent and have the same 
measure components as those posted on the CMS Web site at the time of 
the proposed rule. However, we provided more detail in the 
specifications posted with the proposed rule, in an effort to more 
clearly explain aspects of the measure that were not as clear in the 
NQF specifications. In addition, we clarified language to make phrasing 
more parallel across settings, and updated item numbers and labels to 
match the 2016 data sets (MDS 3.0, LTCH CARE Data Sets, and IRF-PAI). 
We are working closely with NQF to make updates and ensure that the 
most current language and clearest version of the specifications are 
available on the NQF Web site.
    After consideration of the public comments we received, we are 
finalizing our proposal to adopt the application of the Percent of 
Residents Experiencing One or More Falls with Major Injury (Long Stay) 
(NQF #0674) measure, with data collection beginning on April 1, 2016, 
for the FY 2018 payment determination and subsequent years to fulfill 
the requirements in the IMPACT Act.
d. Finalized Measure To Address the IMPACT Act: Quality Measure 
Addressing the Domain of Functional Status, Cognitive Function, and 
Changes in Function and Cognitive Function: Application of Percent of 
LTCH Patients with an Admission and Discharge Functional Assessment and 
a Care Plan That Addresses Function (NQF #2631; endorsed on 07/23/2015)
    Section 1899B(c)(1) of the Act directs the Secretary to specify 
quality measures on which PAC providers are required under the 
applicable reporting provisions to submit standardized patient 
assessment data and other necessary data specified by the Secretary 
with respect to five quality domains, one of which is functional 
status, cognitive function, and changes in function and cognitive 
function. The specified application date by which the Secretary must 
specify quality measures to address this domain for IRFs and SNFs is 
October 1, 2016, for LTCHs is October 1, 2018, and for HHAs is January 
1, 2019. To satisfy these requirements, in the FY 2016 IPPS/LTCH PPS 
proposed rule (80 FR 24602 through 24605), we proposed to adopt an 
application of the Percent of LTCH Patients with an Admission and 
Discharge Functional Assessment and a Care Plan that Addresses Function 
(NQF #2631; endorsed on 07/23/2015) measure that we have already 
adopted in the LTCH QRP as a cross-setting quality measure that 
addresses the domain of functional status, cognitive function, and 
changes in function and cognitive function. The reporting of data for 
this measure would affect the payment determination for FY 2018 and 
subsequent years. This quality measure reports the percent of patients 
with both an admission and a discharge functional assessment and a goal 
that addresses function.
    The National Committee on Vital and Health Statistics, Subcommittee 
on Health,\324\ noted: ``[i]nformation on functional status is becoming 
increasingly essential for fostering healthy people and a healthy 
population. Achieving optimal health and well-being for Americans 
requires an understanding across the life span of the effects of 
people's health conditions on their ability to do basic activities and 
participate in life situations, in other words, their functional 
status.'' This statement is supported by research showing that patient 
functioning is associated with important patient outcomes, such as 
discharge destination and length of stay in inpatient settings,\325\ as 
well as the risk of nursing home placement and hospitalization of older 
adults living in the community.\326\ Functioning is important to 
patients and their family members.327 328 329
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    \324\ Subcommittee on Health National Committee on Vital 
Statistics, ``Classifying and Reporting Functional Status'' (2001).
    \325\ Reistetter TA, Graham JE, Granger CV, Deutsch A, 
Ottenbacher KJ.: Utility of Functional Status for Classifying 
Community Versus Institutional Discharges after Inpatient 
Rehabilitation for Stroke. Archives of Physical Medicine and 
Rehabilitation, 2010; 91:345-350.
    \326\ Miller EA, Weissert WG.: Predicting Elderly People's Risk 
for Nursing Home Placement, Hospitalization, Functional Impairment, 
and Mortality: A Synthesis. Medical Care Research and Review, 57; 3: 
259-297.
    \327\ Kurz, A. E., Saint-Louis, N., Burke, J. P., & Stineman, M. 
G.: Exploring the personal reality of disability and recovery: a 
tool for empowering the rehabilitation process. Qual Health Res, 
18(1), 90-105 (2008).
    \328\ Kramer, A. M. (1997). Rehabilitation care and outcomes 
from the patient's perspective. Med Care, 35(6 Suppl), JS48-57.
    \329\ Stineman, M. G., Rist, P. M., Kurichi, J. E., & Maislin, 
G.: Disability meanings according to patients and clinicians: 
imagined recovery choice pathways. Quality of Life Research, 18(3), 
389-398 (2009).
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    The majority of patients who receive PAC services, such as care 
provided by SNFs, HHAs, IRFs and LTCHs, have functional limitations, 
and many of these patients are at risk for further decline in function 
due to limited mobility and ambulation.\330\ The patient and resident 
populations treated by SNFs, HHAs, IRFs and LTCHs vary in terms of 
their functional abilities at the time of the PAC admission and their 
goals of care. For IRF patients and many SNF residents, treatment goals 
may include fostering the patient's ability to manage his or her daily 
activities so that the patient can complete self-care and/or mobility 
activities as independently as possible, and, if feasible, return to a 
safe, active, and productive life in a community-based setting. For HHA 
patients, achieving independence within the home environment and 
promoting community mobility may be the goal of care. For other HHA 
patients, the goal of care may be to slow the rate of functional 
decline in order to allow the person to remain at home and avoid 
institutionalization.\331\
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    \330\ Kortebein P, Ferrando A, Lombebeida J, Wolfe R, Evans WJ.: 
Effect of 10 days of bed rest on skeletal muscle in health adults. 
JAMA; 297(16):1772-4.
    \331\ Ellenbecker CH, Samia L, Cushman MJ, Alster K: Patient 
safety and quality in home health care. Patient Safety and Quality: 
An Evidence-Based Handbook for Nurses. Vol 1.
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    Lastly, in addition to having complex medical care needs for an 
extended period of time, LTCH patients often have limitations in 
functioning because of the nature of their conditions, as well as 
deconditioning due to prolonged bed rest and treatment requirements 
(for example, ventilator use). The clinical practice guideline 
Assessment of Physical Function \332\ recommends that clinicians should 
document functional status at baseline and over time to validate 
capacity, decline, or progress. Therefore, assessment of functional 
status at admission and discharge and establishing a functional goal 
for discharge as part of the care plan (that is, treatment plan) is an 
important aspect of patient care in all of these PAC settings.
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    \332\ Kresevic DM.: Assessment of physical function. In: Boltz 
M, Capezuti E, Fulmer T, Zwicker D, editor(s). Evidence-based 
geriatric nursing protocols for best practice. 4th ed. New York 
(NY): Springer Publishing Company; 2012. p. 89-103.
---------------------------------------------------------------------------

    Given the variation in patient and resident populations across the 
PAC settings, the functional activities that are typically assessed by 
clinicians for each type of PAC provider may vary. For example, the 
activity of rolling left and right in bed is an example of a functional 
activity that may be most relevant for low-functioning patients or 
residents who are chronically critically

[[Page 49740]]

ill. Managing a full flight of stairs may be assessed for higher 
functioning patients or residents. However, certain functional 
activities, such as eating, oral hygiene, lying to sitting on the side 
of the bed, toilet transfers, and walking or wheelchair mobility, are 
important activities for patients in each PAC setting.
    Although functional assessment data are currently collected by 
SNFs, HHAs, IRFs and LTCHs, this data collection has employed different 
assessment instruments, scales, and item definitions. The data 
collected cover similar topics, but are not standardized across PAC 
settings. Further, the different sets of functional assessment items 
are coupled with different rating scales, making communication about 
patient functioning challenging when patients transition from one type 
of setting to another. Collection of standardized functional assessment 
data across SNFs, HHAs, IRFs and LTCHs, using common data items, would 
establish a common language for patient functioning, which may 
facilitate communication and care coordination as patients transition 
from one type of provider to another. The collection of standardized 
functional status data may also help improve patient or resident 
functioning during an episode of care by ensuring that basic daily 
activities are assessed at the start and end of each episode of care 
with the aim of determining whether at least one functional goal has 
been established.
    The functional assessment items included in the proposed functional 
status quality measure were originally developed and tested as part of 
the Post-Acute Care Payment Reform Demonstration (PAC PRD) version of 
the Continuity Assessment Record and Evaluation (CARE) Item Set, which 
was designed to standardize the assessment of patients' status across 
acute care and PAC settings, including SNFs, HHAs, IRFs and LTCHs. The 
functional status items on the CARE Item Set are daily activities that 
clinicians typically assess at the time of admission and/or discharge 
in order to determine patients' or residents' needs, evaluate patient 
progress and prepare patients or residents and families for a 
transition to home or to another setting.
    The development of the CARE Item Set and a description and 
rationale for each item is described in a report entitled ``The 
Development and Testing of the CARE Item Set: Final Report on the 
Development of the CARE Item Set: Volume 1 of 3.'' \333\ Reliability 
and validity testing were conducted as part of CMS' PAC PRD, and we 
concluded that the functional status items have acceptable reliability 
and validity. A description of the testing methodology and results are 
available in several reports, including the report entitled ``The 
Development and Testing of the CARE Item Set: Final Report On 
Reliability Testing: Volume 2 of 3'' \334\ and the report entitled 
``The Development and Testing of The CARE Item Set: Final Report on 
Care Item Set and Current Assessment Comparisons: Volume 3 of 3.'' 
\335\ The reports are available on our Post-Acute Care Quality 
Initiatives Web page at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/CARE-Item-Set-and-B-CARE.html.
---------------------------------------------------------------------------

    \333\ Barbara Gage et al: ``The Development and Testing of the 
Continuity Assessment Record and Evaluation (CARE) Item Set: Final 
Report on the Development of the CARE Item Set'' (RTI, 
International, 2012).
    \334\ Ibid.
    \335\ Ibid.
---------------------------------------------------------------------------

    The cross-setting function quality measure we proposed to adopt for 
the FY 2018 payment determination and subsequent years to meet the 
IMPACT Act requirements is a process measure that is an application of 
the Percent of LTCH Patients with an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function (NQF #2631; endorsed 
on 07/23/2015) measure. This quality measure was developed by the CMS. 
It reports the percent of patients with both an admission and a 
discharge functional assessment and a treatment goal that addresses 
function. The treatment goal provides documentation that a care plan 
with a goal has been established for the patient.
    We proposed to use the data that will be collected and submitted 
using the LTCH CARE Data Set version 3.00 for the Percent of LTCH 
Patients with an Admission and Discharge Functional Assessment and a 
Care Plan That Addresses Function (NQF #2631; endorsed on 07/23/2015) 
measure starting April 1, 2016 in order to calculate this cross-setting 
application of the Percent of LTCH Patients with an Admission and 
Discharge Functional Assessment and a Care Plan That Addresses Function 
(NQF #2631; endorsed on 07/23/2015) quality measure. The items in the 
cross-setting application of the Percent of LTCH Patients with an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function (NQF #2631; endorsed on 07/23/2015) measure are a 
subset of the items included in the Percent of LTCH Patients with an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function (NQF #2631; endorsed on 07/23/2015) measure, which 
was finalized in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50291 
through 50298). Therefore, the adoption of this quality measure to 
satisfy the requirements of the IMPACT Act would not result in the 
addition of new items to the LTCH CARE Data Set version 3.00 and, 
therefore, would not result in additional burden for data collection 
and data submission to LTCHs.
    This process measure requires the collection of functional status 
admission and discharge assessment data using standardized clinical 
assessment items, or data elements that assess specific functional 
activities, that is, self-care, mobility activities. The self-care and 
mobility function activities on the LTCH CARE Data Set version 3.00 are 
coded using a 6-level rating scale that indicates the patient's level 
of independence with the activity; higher scores indicate more 
independence. For this quality measure, documentation of a goal for one 
of the function items reflects that the patient's care plan addresses 
function. The function goal is recorded at admission for at least one 
of the standardized self-care or mobility function items using the 6-
level rating scale.
    To the extent that a patient had an incomplete stay (for example, 
for the purpose of being admitted to an acute care facility), 
collection of discharge functional status data might not be feasible. 
Therefore, for patients with incomplete stays, admission functional 
status data and at least one treatment goal would be required; however, 
discharge functional status data would not be required to be reported.
    A TEP convened by our measure development contractor provided input 
on the technical specifications of this quality measure, as well as the 
feasibility of implementing the measure across PAC settings, including 
the LTCH setting. The TEP supported the implementation of this measure 
across PAC settings and also supported our efforts to standardize this 
measure for cross-setting use.
    In addition, the MAP met on February 9, 2015, and provided input to 
CMS on the measure. The MAP conditionally supported the use of an 
application of the Percent of LTCH Patients with an Admission and 
Discharge Functional Assessment and a Care Plan That Addresses Function 
(NQF #2631; endorsed on 07/23/2015) measure for use in the LTCH QRP as 
the cross-setting measure. The conditions stated

[[Page 49741]]

by the MAP included that the measure should be endorsed by the NQF. 
Finally, the MAP reiterated its support for adding measures addressing 
function, noting the group's special interest in this PAC/LTC core 
concept. More information about the MAP's recommendations for this 
measure is discussed in The MAP Off-Cycle Deliberations 2015: Measures 
under Consideration to Implement Provisions of the IMPACT Act: Final 
Report which is available at: http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx.
    The measure we proposed is an Application of the Percent of Long-
Term Care Hospital Patients with an Admission and Discharge Functional 
Assessment and a Care Plan that Addresses Function (NQF #2631: endorsed 
on 07/23/2015). The proposed measure is derived from the Percent of 
LTCH Patients with an Admission and Discharge Functional Assessment and 
a Care Plan that Addresses Function quality measure. The specifications 
are available for review at the LTCH QRP Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    We reviewed the NQF's consensus endorsed measures and were unable 
to identify any NQF-endorsed cross-setting quality measures focused on 
assessment of function for PAC patients. We are also unaware of any 
other cross-setting quality measures for functional assessment that 
have been endorsed or adopted by another consensus organization. 
Therefore, we proposed to adopt this functional assessment measure for 
use in the LTCH QRP for the FY 2018 payment determination and 
subsequent years under the Secretary's authority to select non-NQF-
endorsed measures.
    As discussed previously, we proposed that this cross-setting 
quality measure use a subset of data collected for Percent of LTCH 
Patients with an Admission and Discharge Functional Assessment and a 
Care Plan That Addresses Function (NQF #2631; endorsed on 07/23/2015) 
using the LTCH CARE Data Set, with submission through the QIES ASAP 
system. For more information on LTCH QRP reporting through the QIES 
ASAP system, we refer readers to the CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html.
    We described the measure calculation algorithm for this measure in 
the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24605).
    This measure is calculated at two points in time, at admission and 
discharge (we refer readers to section VIII.C.9.b. of the preamble of 
this final rule, Form, Manner and Timing of Quality Data Submission, 
for more information on the proposed data collection and submission 
timeline for this proposed quality measure).
    The items would assess specific self-care and mobility activities, 
and would be based on functional items included in the PAC PRD version 
of the CARE Item Set. The items have been developed and tested for 
reliability and validity in SNFs, HHAs, IRFs, and LTCHs. More 
information pertaining to item testing is available on our Post-Acute 
Care Quality Initiatives Web page at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/CARE-Item-Set-and-B-CARE.html.
    We invited public comments on our proposal to adopt the Application 
of the Percent of LTCH Patients with an Admission and Discharge 
Functional Assessment and a Care Plan That Addresses Function (NQF 
#2631; endorsed on 07/23/2015) measure that we have already adopted in 
the LTCH QRP as a cross-setting quality measure that addresses the 
domain of functional status, cognitive function, and changes in 
function and cognitive function to satisfy the requirement of the 
IMPACT Act, with data collection starting on April 1, 2016, for the FY 
2018 payment determination and subsequent years. Further, we invited 
public comments on our proposal to use a subset of data collected for 
the Percent of LTCH Patients with an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function (NQF #2631; endorsed 
on 07/23/2015) measure to meet the requirements for this cross-setting 
quality measure that addresses the domain of functional status, 
cognitive function, and changes in function and cognitive function to 
satisfy the requirement of the IMPACT Act.
    Comment: MedPAC did not support the adoption of the function 
process measure in the LTCH QRP, NQF #2631; endorsed on 07/23/2015 and 
urged CMS to adopt outcomes measures focused on changes in patient 
physical and cognitive functioning while under a provider's care.
    Response: We appreciate MedPAC's preference for moving toward the 
use of functional outcome measures in order to assess the patient's 
physical and cognitive functioning under a provider's care. We believe 
that the use of this process measures at this time will give us the 
data we need to develop a more robust outcome-based quality measure on 
this topic in the future. The proposed function quality measure, an 
Application of Percent of LTCH Patients with an Admission and Discharge 
Functional Assessment and a Care Plan That Addresses Function (NQF 
#2631; endorsed on 07/23/2015), has attributes to enable outcomes-based 
evaluation by the provider. Such attributes include the assessment of 
functional status at two points in time, admission and discharge, 
enabling the provider to identify, in real time, changes, improvement 
or decline, as well as maintenance. In addition, the proposed quality 
measure requires that the provider indicate at least one functional 
goal associated with a functional activity, and the provider can 
calculate the percent of patients who meet goals. Such real time use 
enables providers to engage in person-centered goal setting and the 
ability to use the data for quality improvement efforts.
    In addition, we note that for the LTCH QRP, in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50301), we adopted an outcome measure, 
Functional Outcome Measure: Change in Mobility Among LTCH Patients 
Requiring Ventilator Support (NQF #2632; endorsed on 07/23/2015), for 
implementation starting April 1, 2016.
    Comment: One commenter supported inclusion of the quality measure 
an Application of Percent of LTCH Patients with an Admission and 
Discharge Functional Assessment and a Care Plan That Addresses Function 
(NQF #2631; endorsed on 07/23/2015). The commenter noted that this 
cross-setting measure, which is focused on function, addresses measure 
shortcomings in the LTCH QRP and other QRPs.
    Response: We appreciate the commenter's support of this measure. We 
agree that patient functioning is an important area of quality in PAC 
settings, including the LTCH setting.
    Comment: Several commenters expressed concern related to undue 
burden associated with data documentation for the functional status 
quality measure, an Application of Percent of LTCH Patients with an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function (NQF #2631; endorsed on 07/23/2015).
    Response: We appreciate the concerns related to any undue burden, 
including documentation, and take such concerns under consideration 
when selecting measures for the LTCH QRP. We aim to adopt quality 
measures that rely on data

[[Page 49742]]

that is already collected in clinical practice.
    To reduce potential burden associated with collecting additional 
items, we have included several mechanisms in Section GG of the LTCH 
CARE Data Set that allow the clinician to skip questions in the data 
set that are not appropriate for an individual patient in order to 
reduce burden. We have instituted skip options so that the final number 
of items assessed per patient is limited depending on their complexity 
and capabilities. Therefore, although all of the items are available 
for assessment, we have built in mechanism that enables the assessor to 
include assessment information as, and when, appropriate.
    We further note that there is no new burden associated with this 
process measure since it will utilize data elements in the LTCH CARE 
Data Set that are already collected for the previously adopted measure, 
Percent of LTCH Patients with an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function (NQF #2631; endorsed 
on 07/23/2015).
    Comment: Several commenters noted that the measure, an Application 
of Percent of LTCH Patients with an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function (NQF #2631; endorsed 
on 07/23/2015), does not capture functional outcomes. One commenter 
encouraged CMS to propose functional outcome measures for LTCHs, SNFs 
and HHAs in future rulemaking for quality of care and payment.
    Response: We recognize stakeholder concerns for the development of 
outcome-based quality measures. We point out that we previously adopted 
the functional outcome measure Functional Status Outcome Measure: 
Change in Mobility Among LTCH Patients Requiring Ventilator Support 
(NQF #2632; endorsed on 07/23/2015) in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50301), and data collection for this outcome measure begins 
on April 1, 2016.
    Further, as discussed above, the measure has attributes within the 
assessment and data collection that enables outcomes-based evaluation 
by the provider.
    As discussed above, this function quality measure, NQF #2631; 
endorsed on 07/23/2015, has attributes within the assessment and data 
collection that enables outcomes-based evaluation by the provider.
    The IMPACT Act specifically mentions goals of care as an important 
aspect of the use of standardized assessment data, quality measures, 
and resource use to inform discharge planning and incorporate patient 
preference. We are currently developing functional outcome measures, 
specifically self-care and mobility quality measures, which may be 
considered in the future for use in the LTCH setting as part of the 
LTCH QRP. These outcome function quality measures are being designed to 
use the same standardized functional assessment items that are included 
in the cross-setting person and family-centered function process 
measure in order to capitalize on the data collected for this process 
measure (that is, an Application of the Percent of LTCH Patients with 
an Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function (NQF #2631; endorsed on 07/23/2015)), which will 
inform further development, while allowing for the consideration of 
limited additional burden.
    Comment: One commenter noted that the measure, an Application of 
Percent of LTCH Patients with an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function (NQF #2631; endorsed 
on 07/23/2015), includes reporting of only one goal, even though 
patients often have multiple functional goals. The commenter indicated 
that goals may be to improve function or to maintain function.
    Response: The quality measure requires a minimum of one goal per 
patient stay; however, clinicians can report goals for each self-care 
and mobility item included in Section GG of the LTCH CARE Data Set 
version 3.00.
    We believe that assessing patient function goals should be part of 
clinical care and builds upon the conditions of participation (CoPs) 
for LTCH providers. The IMPACT Act also specifically mentions goals of 
care as an important aspect of the use of standardized assessment data, 
quality measures, and resource use to inform discharge planning and 
incorporate resident preference. We agree that, for many PAC patients, 
the goal of therapy is to improve function, and we also recognize that, 
for some patients, delaying decline may be the goal. We believe that 
individual, person-centered goals exist in relation to individual 
preferences and needs. We will provide instructions about reporting of 
goals in a training manual and in training sessions to better clarify 
that goals set at admission may be focused on improvement of function 
or maintenance of function.
    Comment: One commenter noted that goal data was not included in the 
PAC PRD and expressed concerns about reliability and validity of these 
items. The commenter requested clarification on how CMS plans to use 
goal data.
    Response: The function measure calls for documentation of a goal as 
evidence that there is a care plan with a goal in place for each 
patient. CMS will use the variable of patient goals for data collection 
and monitoring. By using the data collected in this quality measure, 
LTCHs can internally monitor functional outcomes, specifically the 
percent of patients who meet or exceed their discharge functional 
status goals, as established at admission in conjunction with the 
patient and family.
    Comment: Several commenters expressed concern regarding the use of 
the CARE Tool (Item Set) as the data source for the functional status 
quality measures due to limited testing in LTCHs and reliability 
testing results. The commenters noted that several self-care and 
mobility items have Kappa statistics categorizing inter-rater 
reliability as ``fair'' or ``moderate,'' and were based on a small 
sample of 46 LTCH patients. The commenters stated that ``fair'' or 
``moderate'' reliability, while acceptable for exploratory studies or 
internal quality improvement efforts, is insufficient for national use 
in the LTCH QRP. Commenters recommended that CMS explain the low Kappa 
statistics and/or re-test these items in significantly more LTCHs to 
address reliability issues. The commenters noted that measure testing 
should be oriented towards the intended setting of use of the measure 
and suggested additional testing in the LTCH setting be conducted.
    Response: The reliability study results mentioned by these 
commenters were only one of several reliability analyses conducted as 
part of the PAC PRD. The referenced result was a reflection of the 
small sample size available for analysis. In addition to the inter-
rater reliability study mentioned by these commenters, we also 
examined: (1) Inter-rater reliability of the CARE items using 
videotaped case studies, which included 114 LTCH assessments from three 
LTCHs; and (2) internal consistency of the function data, which 
included more than 7,700 assessments from 28 LTCHs. The results of 
these analyses indicate moderate to substantial agreement on the CARE 
Tool (Item Set) items. The report describing these additional analyses 
and an interpretation of the Kappa statistics results is available at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-
Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/The-
Development-and-Testing-of-the-

[[Page 49743]]

Continuity-Assessment-Record-and-Evaluation-CARE-Item-Set-Final-Report-
on-Reliability-Testing-Volume-2-of-3.pdf.
    In addition to the PAC PRD analyses, as part of the NQF application 
process, we conducted additional analyses focused on the six submitted 
IRF and LTCH function quality measures, including item-level, scale-
level and facility-level analyses testing the reliability and validity 
of the CARE function data. The members of this panel reviewed this 
measure and concluded that the measure does meet the scientific 
acceptability requirements at a moderate level. A description of the 
analyses and the results are available on the NQF Web site's Person- 
and Family-Centered Care project at: http://www.qualityforum.org/ProjectMeasures.aspx?projectID=73867. Therefore, given the overall 
findings of the reliability and validity analysis, we believe these 
CARE items provide a scientifically sound set to measure quality for 
the LTCH QRP.
    We understand the importance of education in assisting providers to 
collect accurate data, and we have worked in the past with public 
outreach including training sessions, training manuals, Webinars, open 
door forums and help desk support. Further, we note that, as part of 
the LTCH QRP, we intend to evaluate the national-level data for this 
quality measure submitted by LTCHs to CMS. These data will inform 
ongoing measure development and maintenance efforts, including further 
analysis of reliability and validity of the data elements and the 
quality measure. Finally, we agree that ongoing reliability and 
validity testing is critical for all items used to calculate quality 
measures.
    Comment: One commenter suggested that several of the functional 
status assessment items had low or nonresponse rates and missing data 
when used as part of PAC PRD. The commenter requested that CMS provide 
additional information on how the measure has been updated to address 
these low response rates.
    Response: With respect to the comments that some items had low 
response rates (defined as the utilization of coding responses for when 
a patient does not or cannot attempt a daily activity, the activity did 
not occur), the assessor appropriately reported a code indicating the 
reason that the activity was not attempted (for example, due to a 
medical condition or due to patient refusal). This is a good practice 
to ensure that bias is not introduced through missing data not 
otherwise specified. With some populations, there was a high use of the 
letter codes indicating that the activity was not able to be coded or 
collected at the time of the assessment due to patient condition, but 
there was a very low percentage of missing data.
    While activities such as ``toileting hygiene'' and ``walking'' may 
have high rates of ``activity not attempted'' codes at the time of 
admission for LTCH patients, these activities are completed more often 
at discharge. Assessment of these activities is particularly important 
to assess for LTCH patients returning to their home. Using national 
Medicare FFS claims data from 2010 through 2013, we examined the 
percentage of LTCH patients who were admitted from an acute hospital 
and discharged home. The national percentage of LTCH patients 
discharged home was 40.1 percent in 2010, 39.5 percent in 2011, 38.4 
percent in 2012, and 37.5 percent in 2013. These findings demonstrate 
that a large proportion of LTCH patients are discharged home directly 
from the LTCH setting. These data strongly support the importance of 
functional assessment in the LTCH setting, and ensuring patient safety 
from a functional perspective prior to discharge. Assessment of a 
patient's level of independence and safety in performing functional 
activities such as walking is critical for a safe patient transition 
from the LTCH to the home setting.
    Public input and a TEP in 2013 provided feedback to CMS pertaining 
to the pattern of scores including that of letter codes. TEP members 
included experts from LTCHs, as well as IRFs and SNFs. A report 
summarizing recent TEP meetings focused on functional status quality 
measures titled ``Summary of Feedback from TEP on the Development of 
Cross-Setting Functional Status Quality Measures'' is available at: 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/. The functional status quality 
measure development built on work conducted as part of a project funded 
by ASPE, and that project also included a cross-setting function 
quality measure TEP, which was held on August 15, 2012. A report 
summarizing that meeting is available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/ASPE-Report-Analysis-of-Crosscutting-Medicare-Functional-Status-Quality-Metrics-Using-the-Continuity-and-Assessment-Record-and-Evaluation-CARE-Item-Set-Final-Report.pdf.
    Comment: A few commenters noted that the proposed quality measure 
is an application of the LTCH measure under review at NQF, and that 
fewer functional assessment items are in the proposed measure when 
compared to the LTCH process measure. Therefore, the commenters believe 
the items in the LTCH CARE Data Set are limited, and functional issues 
addressed by clinicians may not be represented in this data set.
    Response: The quality measure under NQF review, the Percent of LTCH 
Patients with an Admission and Discharge Functional Assessment and a 
Care Plan That Addresses Function (NQF #2631; endorsed on 07/23/2015), 
was adopted for FY 2018 payment determination and subsequent years as 
part of the LTCH QRP in the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50298). In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24602 through 
24605), we proposed an application of this previously adopted quality 
measure. That is, the quality measure, an Application of the Percent of 
LTCH Patients with an Admission and Discharge Functional Assessment and 
a Care Plan That Addresses Function (NQF #2631; endorsed on 07/23/
2015), is a cross-setting measure that is standardized across multiple 
settings (LTCHs, IRFs, SNFs). This quality measure includes only 
selected function items from the previously adopted quality measure.
    We believe that standardization of assessment items across the 
spectrum of PAC settings is an important goal. In the cross-setting 
process measure, there is a common core subset of function items that 
will allow tracking of patients' functional status across settings. We 
recognize that there are some differences in patients' clinical 
characteristics, including medical acuity, across the LTCH, SNF and IRF 
settings, and that certain functional items may be more relevant for 
certain patients. Decisions regarding item selection for each quality 
measure were based on our review of the literature, input from a TEP 
convened by our measure contractor, our experiences and review of data 
in each setting from the PAC PRD, and public comments.
    To clarify which specific items are included in each function 
measure for each QRP, we added a table to the document entitled, LTCH 
QRP: Specifications of Quality Measures Adopted in the FY 2016 Final 
Rule, which identifies which functional assessment items are used in 
the cross-setting process measure, as well as the setting-specific IRF 
and LTCH outcome quality measures. The document is available for 
download at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-
Assessment-

[[Page 49744]]

Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-
Information.html.
    Comment: Several commenters noted that only a few standardized 
assessment items were proposed by CMS in Section GG of the LTCH CARE 
Data Set version 3.00 and that the items proposed deviated from the 
original set of CARE items tested in the PAC PRD. One of these 
commenters noted the importance of consistent items and assessment 
instructions across the settings. The commenters also were concerned 
that the items proposed for IRFs, SNFs and LTCHs were not the same set 
of items. Some of the commenters questioned the validity of including 
only a subset of items from the CARE Tool (Item Set) tested in the PAC 
PRD, diminishing the comparability of the data.
    Response: For this quality measure, a core set of function items 
are included in Section GG of the LTCH CARE Data Set version 3.00 for 
LTCHs. This core set of function items are also included in Section GG 
of the IRF-PAI for IRFs and Section GG of the MDS 3.0 for SNFs, 
respectively. This core set of items selected for cross-setting use 
were chosen for their applicability across all PAC settings, guided by 
the TEP convened by our measure development contractor. The core set of 
items nested in the Section GG were chosen from the set of function-
related items tested in the PAC PRD.
    The PAC PRD tested a range of items, some of which were 
duplicative, to identify the best performing items in each domain. 
Select items were removed from the item set where testing results and 
clinician feedback suggested the need for fewer items to be included in 
a particular measure or scale. We also received feedback on the items 
from a cross-setting TEP convened by our measure development 
contractor, RTI International. The measure is based on analyses which 
are available on our Web site at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Reports/Research-Reports-Items/PAC_Payment_Reform_Demo_Final.html.
    We chose from this subset of data items to develop the function-
based CARE measures, such as the Percent of LTCH Patients with an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function (NQF #2631; endorsed on 07/23/2015) measure. 
Additional function items are included on the LTCH CARE Data Set due to 
the adoption of additional outcome-based quality measure (Functional 
Status Outcome Measure: Change in Mobility Among LTCH Patients 
Requiring Ventilator Support, NQF #2632; endorsed on 07/23/2015) in the 
LTCH setting. Therefore, we believe that the core set of items in 
Section GG are standardized to one another by item and through the use 
of the standardized 6-level rating scale. Further, we will continue to 
work to harmonize the assessment instructions to better guide the 
coding of the assessment, as we believe that this will lead to accurate 
and reliable data, allowing us to compare the data within each setting. 
We also believe that the assessment of these activities is part of 
routine clinical care at a minimum at the start of care and at the end 
of care.
    We recognize that there are some differences in patients' clinical 
characteristics, including medical acuity across the SNF, LTCH and IRF 
settings, and that certain functional items may be more relevant for 
certain patients. For example, one item, ``Wash Upper Body'' is 
included in the LTCH quality measure, Percent of LTCH Patients with an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function (NQF #2631; endorsed on 07/23/2015), but is not 
included in the IRF outcome measures or the cross-setting measure, an 
Application of Percent of LTCH Patients with an Admission and Discharge 
Functional Assessment and a Care Plan That Addresses Function (NQF 
#2631; endorsed on 07/23/2015), because this item overlaps with the 
item ``Bathe/Shower Self,'' which focused on washing the entire body. 
For the LTCH setting, where patients are chronically critically ill, 
bathing the upper body is more likely to occur than washing the entire 
body. In IRFs and SNFs, clinicians typically assess showering or 
bathing of the entire body.
    To clarify which function items are included in each function 
measure for each QRP, we added a table to the document entitled, LTCH 
QRP: Specifications of Quality Measures Adopted in the FY 2016 Final 
Rule, which identifies which functional assessment items are used in 
the cross-setting process measure, as well as the setting-specific IRF 
and LTCH outcome quality measures. The document is available at: 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    Comment: One commenter noted there may be a challenge in 
determining the baseline cognitive function of LTCH patients, which is 
one of the items needed for the quality measure, Application of the 
Percent of LTCH Patients with an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function (NQF #2631; endorsed 
on 07/23/2015).
    Response: We appreciate the commenter's feedback pertaining to the 
quality measure, an Application of the Percent of LTCH Patients with an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function (NQF #2631; endorsed on 07/23/2015). We are 
clarifying that the Confusion Assessment Method (CAM(copyright)), which 
includes the item focused on baseline cognitive function, is not 
required as part of this cross-setting measure. It is required as part 
of the Percent of LTCH Patients with an Admission and Discharge 
Functional Assessment and a Care Plan That Addresses Function (NQF 
#2631; endorsed on 07/23/2015), which was adopted into the LTCH QRP in 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50298). We have added a 
table entitled ``Long-Term Care Hospital Quality Reporting Program--
Specifications for the Quality Measures Adopted through the FY 2016 
IPPS/LTCH PPS final rule'' to the CMS Web site to clarify which items 
are required for each functional quality measure, which is available 
at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    We have addressed similar concerns with training in the past with 
public outreach including training sessions, training manuals, 
Webinars, open door forums, help desk support, and a Web site that 
hosts training information (http://www.youtube.com/user/CMSHHSgov). We 
plan to conduct such activities to support the April 1, 2016 
implementation for the new items included in the LTCH CARE Data Set 
version 3.00.
    Comment: Several commenters expressed concern about the lack of 
risk-adjustment of this measure.
    Response: The function quality measure, an Application of the 
Percent of LTCH Patients with an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function (NQF #2631; endorsed 
on 07/23/2015), is a process measure that focuses on the clinical 
process of completion of functional assessments and a care plan 
addressing function. Although the IMPACT Act requires that the cross-
setting quality measures be risk-adjusted as determined appropriate by 
the Secretary, it does not limit the Secretary to adopting outcome 
measures. Some process measures are

[[Page 49745]]

risk adjusted.\336\ In the development of an application of the 
measure, the Percent of LTCH Patients with an Admission and Discharge 
Functional Assessment and a Care Plan that Addresses Function (NQF 
#2631; awaiting NQF endorsement), the TEP considered, but did not 
recommend, the application of a risk adjustment model. We agree with 
that conclusion because the completion of a functional assessment, 
which includes the use of ``activity not attempted'' codes, is not 
affected by the medical and functional complexity of the resident. 
Therefore, we believe that risk adjustment of this quality measure is 
not warranted.
---------------------------------------------------------------------------

    \336\ For example, in the NQF-endorsed process measure Percent 
of Residents Who Have/Had a Catheter Inserted and Left in Their 
Bladder (long stay) (NQF#0686) for which we are the steward, 
resident[hyphen]level limited covariates (Frequent bowel 
incontinence, or always incontinent on prior assessment; and 
Pressure ulcers at stages II, III, or IV on prior assessment) are 
used in a logistic regression model to calculate a 
resident[hyphen]level expected quality measure score.
---------------------------------------------------------------------------

    Comment: One commenter was concerned that the measure, an 
Application of Percent of LTCH Patients with an Admission and Discharge 
Functional Assessment and a Care Plan That Addresses Function (NQF 
#2631; endorsed on 07/23/2015) was not NQF-endorsed.
    Response: We agree that the NQF endorsement is an important part of 
measure development process. We have proposed an application of the 
quality measure, the Percent of Long-Term Care Hospital Patients with 
an Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function. This quality measure has been has been endorsed by 
NQF on July 23, 2015. We have a rigorous process of construct testing 
and measure selection, guided by the TEPs, public comments from 
stakeholders, and recommendations by the PAC/LTC MAPs.
    Comment: Several commenters expressed concern that the proposed 
function process measure, an Application of the Percent of LTCH 
Patients with an Admission and Discharge Functional Assessment and a 
Care Plan That Addresses Function (NQF #2631; endorsed on 07/23/2015), 
does not meet the requirements of the IMPACT Act, because measures must 
be outcome-based. One commenter asserted that the proposed measure did 
not satisfy the specified IMPACT Act domain, as the measure is not able 
to report on changes in function, and one other commenter claimed that 
the measure does not satisfy the reporting of data on functional 
status. One commenter suggested that the measure does not meet the 
mandate, as the measure does not have appropriate numerator, 
denominator, and exclusions specifications, it lacks NQF endorsement, 
the proposed quality measure fails to be based on a common standardized 
assessment tool, and the proposed quality measure lacks evidence that 
associates the measure with improved outcomes. One commenter claimed 
that because the specifications for the proposed measure are 
inconsistent with the measure specifications posted by the NQF for the 
measure that is under endorsement review, CMS failed to meet the 
requirements under the IMPACT Act to provide measure specifications to 
the public, further asserting that one cannot determine the 
specifications that are associated with the proposed measure, which is 
an application of the NQF version of the measure. Response: We agree 
that the use of outcome measures is important. We believe that the 
proposed function measure meets the requirements of the IMPACT Act. The 
statute requires, among other things, the submission of data on the 
quality measures specified in at least the domains identified in the 
Act, but does not require a particular type of measure (for example, 
outcome or process) for each measure domain. Further, as discussed 
above, the measure has attributes within the assessment and data 
collection that enables outcomes-based evaluation by the provider.
    We also disagree with the comment that we failed to provide the 
specifications to the proposed measure. The proposed function process 
quality measure is an application of the measure, the Percent of LTCH 
Patients with an Admission and Discharge Functional Assessment and a 
Care Plan that Addresses Function (NQF #2631; endorsed on 7/23/2015). 
The quality measure was endorsed by NQF on July 23, 2015 and was 
proposed and finalized in the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50291 through 50298) for adoption in the LTCH QRP. An application of 
this measure was proposed in the FY 2016 SNF QRP proposed rule, and 
similarly it was proposed in the FY 2016 IPPS/LTCH PPS proposed rule 
and the FY 2016 IRF PPS proposed rule. We proposed the cross-setting 
version, an application of the LTCH QRP quality measure, based on 
guidance from multiple TEPs convened by our measure contractor, RTI 
International. The specifications for this measure are located on the 
LTCH Quality Reporting Program Measures Information Web page at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html. These specifications were posted at the time we 
issued the proposed rule.
    As discussed in section VIII.C.6.c. of the preamble of this rule, 
prior to our consideration to propose this measure's use in the LTCH 
QRP, we reviewed the NQF's endorsed measures and were unable to 
identify any NQF-endorsed, cross-setting or standardized quality 
measures focused on assessment of function for PAC patients/residents. 
We were also unaware of any other cross setting quality measures for 
functional assessment that have been endorsed or adopted by another 
consensus organization. Therefore, we proposed a modified version of 
the quality measure, the Percent of LTCH Patients with an Admission and 
Discharge Functional Assessment and a Care Plan that Addresses Function 
(NQF #2631; endorsed on 7/23/2015), with such modifications to allow 
for its cross-setting application in the LTCH QRP for the FY 2018 
payment determination and subsequent years under the Secretary's 
authority to select a non-NQF-endorsed measure. Since the cross-setting 
measure is not identical to the measure recommended for NQF-
endorsement, it is considered an application of the measure.
    Comment: One commenter was concerned that the measure 
specifications posted with the FY 2016 IPPS/LTCH PPS proposed rule 
differ from those posted with the IRF and SNF proposed rules and that 
the public would be unable to determine which specifications CMS 
intends to use. The commenter also was concerned that these differences 
in specifications, including differences in the measure denominator 
would impede interoperability across settings. This commenter suggested 
measures include all patients across all settings, regardless of payer.
    Response: As mentioned previously, the quality measure being 
proposed as a cross-setting measure for LTCH, IRF, and SNF settings, an 
Application of the Percent of LTCH Patients With an Admission and 
Discharge Functional Assessment and a Care Plan That Addresses Function 
(NQF #2631; endorsed on 07/23/2015), is the same measure for each 
setting. Additional function items are included on the IRF-PAI and LTCH 
CARE Data Set due to the proposal or adoption of various other outcome-
based quality measures in those specific settings. The final 
specifications for this cross-setting measure are posted on the CMS Web

[[Page 49746]]

site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html. In the cross-setting process measure, there 
is a common core subset of function items that will allow tracking of 
patients' functional status across settings that are identical across 
the settings. We have updated the specifications to include a table 
indicating which functional assessment items are used in the cross-
setting process measure, as well as the setting-specific outcome 
measures.
    We appreciate the commenters' views pertaining to the differences 
in the function quality measure denominators by payer type across the 
IRF, SNF and LTCH settings. We also appreciate the commenters' 
suggested expansion of the population used to calculate all measures to 
include payer sources beyond Medicare PPS and agree that quality 
measures that include all persons treated in a facility are better able 
to capture the health outcomes of that facility's patients or 
residents, and that quality reporting on all patients or residents is a 
worthy goal. We believe that quality care is best represented through 
the inclusion of all patient data regardless of payer source and we 
agree that consistency in the data would reduce confusion in data 
interpretation and enable a more comprehensive evaluation of quality. 
We appreciate the commenter's concerns and, although we had not 
proposed all payer data collection through this current rulemaking, we 
will take into consideration the expansion of the LTCH QRP to include 
all payer sources through future rulemaking.
    Finally, we are clarifying that while the IMPACT Act requires the 
enablement of interoperability through the use of standardized data, 
there will be instances whereby some provider types may need more or 
less standardized items than other provider types.
    Comment: One commenter was concerned that no data was provided 
clearly linking improved outcomes to this process measure.
    Response: The NQF requirement for endorsing process measures is 
that the process should be evidence-based, such as processes that are 
recommended in clinical practice guidelines. As part of the NQF 
process, we submitted to the NQF several such clinical practice 
guidelines 337 338 339 to support this measure and 
referenced another cross-cutting clinical practice guideline in the 
proposed rule. Due to this, we believe that there is evidence that this 
is a best practice based on several clinical practice guidelines. The 
clinical practice guideline Assessment of Physical Function\340\ 
recommends that clinicians should document functional status at 
baseline and over time to validate capacity, decline, or progress. 
Therefore, assessment of functional status at admission and discharge 
and establishing a functional goal for discharge as part of the care 
plan (that is, treatment plan) is an important aspect of patient/
resident care for all of these PAC providers.
---------------------------------------------------------------------------

    \337\ Kresevic DM. Assessment of physical function. In: Boltz M, 
Capezuti E, Fulmer T, Zwicker D, editor(s). Evidence-based geriatric 
nursing protocols for best practice. 4th ed. New York (NY): Springer 
Publishing Company; 2012. p. 89-103. Retrieved from http://www.guideline.gov/content.aspx?id=43918.
    \338\ Centre for Clinical Practice at NICE (UK). (2009). 
Rehabilitation after critical illness (NICE Clinical Guidelines No. 
83). Retrieved from http://www.nice.org.uk/guidance/CG83.
    \339\ Balas MC, Casey CM, Happ MB. Comprehensive assessment and 
management of the critically ill. In: Boltz M, Capezuti E, Fulmer T, 
Zwicker D, editor(s). Evidence-based geriatric nursing protocols for 
best practice. 4th ed. New York (NY): Springer Publishing Company; 
2012. p. 600-27. Retrieved from http://www.guideline.gov/content.aspx?id=43919.
    \340\ Kresevic DM. Assessment of physical function. In: Boltz M, 
Capezuti E, Fulmer T, Zwicker D, editor(s). Evidence-based geriatric 
nursing protocols for best practice. 4th ed. New York (NY): Springer 
Publishing Company; 2012. p. 89-103. Retrieved from http://www.guideline.gov/content.aspx?id=43918.
---------------------------------------------------------------------------

    Comment: One commenter suggested that the PAC PRD data was 
collected only by therapists, and expressed concern that the items had 
not been tested using other care providers. In addition, this commenter 
had specific questions about scoring different assessments during the 
time frame proposed. The commenter also asked CMS to specify which 
clinicians may complete function items in Section GG.
    Response: We wish to clarify that during the PAC PRD, data were 
collected by clinicians from many different disciplines, including 
nurses, occupational therapists (OTs), physical therapists (PTs), 
speech-language pathologists (SLPs), and registered nurses (RNs). The 
reliability testing included testing by discipline, as well as testing 
by setting.
    The items were developed with the input with who would be 
performing the assessments, which included OTs, PTs, SLPs, and RNs. 
Regarding the questions about scoring assessments and staff that will 
be trained to complete functional assessments, we have historically 
provided training for providers. As we prepare for this type of 
training, we have this type of information available to the public to 
increase transparency and readiness.
    Comment: Several commenters encouraged CMS to provide standardized 
education to all providers that will be using the CARE items throughout 
the transition period. In addition, several commenters raised concerns 
about the scoring of Section GG of the LTCH CARE Data Set, and who 
would be trained to collect the items in Section GG, and how ``usual 
performance'' in the proposed Section GG is defined. The commenters 
also asked for CMS' transparency through this process.
    Response: We understand the importance of education and have worked 
in the past with public outreach including training sessions, training 
manuals, Webinars, open door forums, help desk support, and a Web site 
that hosts training information (http://www.youtube.com/user/CMSHHSgov). We plan to conduct such activities for the new items.
    Comment: Several commenters encouraged CMS to continue ongoing 
stakeholder engagement as the function quality measures evolve and as 
new function measures, including additional concepts for cognition and 
mobility, are considered.
    Response: We thank the commenters for the suggestion, and 
appreciate the continued involvement of stakeholders in all phases of 
measure development and implementation. We will continue to engage 
stakeholders as we implement the IMPACT Act.
    Comment: One commenter expressed concern about items related to 
cognitive functioning, including communication and swallowing, being 
included only as risk-adjustors. The commenter recommended that CMS 
engage stakeholders to develop future outcome measures in the area of 
cognitive function.
    Response: We are clarifying that the proposed LTCH process measure, 
an Application of the Percent of LTCH Patients with an Admission and 
Discharge Functional Assessment and a Care Plan That Addresses Function 
(NQF #2631; endorsed on 07/23/2015), is not risk adjusted. We agree 
that future development of outcome measurement should include other 
areas of function, such as cognition, expression, and swallowing. We 
will continue to engage stakeholders as we develop quality measures to 
meet the requirements of the IMPACT Act.
    After consideration of the public comments we received, we are 
finalizing our proposal to adopt the application of the Percent of LTCH 
Patients with an Admission and

[[Page 49747]]

Discharge Functional Assessment and a Care Plan That Addresses Function 
(NQF #2631; endorsed on 07/23/2015) measure for the FY 2018 payment 
determination and subsequent years to fulfill the requirements of the 
IMPACT Act.
7. LTCH QRP Quality Measures for the FY 2019 Payment Determination and 
Subsequent Years
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24605), we did 
not propose any additional LTCH QRP quality measures for the FY 2019 
payment determination and subsequent years. Under our policy discussed 
in section VIII.C.3. of the preamble of this final rule, we will retain 
all previously adopted quality measures and, the additional finalized 
measures in this FY 2016 IPPS/LTCH PPS final rule for the FY 2019 
payment determination and subsequent years.
8. LTCH QRP Quality Measures and Concepts Under Consideration for 
Future Years
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24605), we 
invited public comments on importance, relevance, appropriateness, and 
applicability of each of the quality measures and quality measure 
concepts listed in the table below for future years in the LTCH QRP. 
Specifically, we invited public comments regarding the clinical 
importance to the LTCH patient population and the feasibility of data 
collection and implementation in the LTCH setting for these measures 
and measure concepts in order to inform and improve quality of care 
delivered to LTCH patients.

  Future Measures and Measure Concepts Under Consideration for the LTCH
                                   QRP
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
National Quality Strategy (NQS) Priority: Patient Safety
    Ventilator Weaning (Liberation) Rate
    Compliance with ventilator process Elements during LTCH Stay
    Venous Thromboembolism Prophylaxis
    Medication Reconciliation *
NQS Priority: Effective Communication and Coordination of Care
    Transfer of health information and care preferences when an
     individual transitions *
    All-Condition Risk-Adjusted Potentially Preventable Hospital
     Readmission Rate *
NQS Priority: Patient- and Caregiver-Centered Care
    Discharge to community *
    Patient Experience of Care
    Percent of Patients with Moderate to Severe Pain
    Advance Care Plan
NQS Priority: Affordable Care
    Medicare Spending per Beneficiary *
------------------------------------------------------------------------
* Indicates that this is a cross-setting measure domain listed in the
  IMPACT Act.

    Comment: One commenter supported most of the measures and measure 
concepts under consideration for the LTCH QRP, as they are applicable 
to an LTCH population, clinically important, and potentially feasible 
to collect.
    Response: We appreciate the commenter's support of these future 
measures and measure concepts under consideration.
    Comment: Some commenters provided recommendations about the 
Ventilator Weaning (Liberation) Rate measure. One commenter urged CMS 
to utilize the TEP in fully testing the ventilator weaning measure 
before it is considered for inclusion in the LTCH QRP. Another 
commenter stated that this measure is an appropriate quality measure 
for LTCHs; however, it will be important to carefully specify the 
inclusion and exclusion criteria and appropriately risk adjust. This 
commenter also noted examples where patients enter an LTCH without an 
expectation of successfully weaning, such as patients with spinal cord 
injuries or ALS, and stated that, for some patients, terminal weaning 
is an appropriate outcome.
    Response: We appreciate the commenters' support and suggestions for 
this measure. We will take these into consideration to inform our 
ongoing measure development efforts. Our measure development 
contractor, RTI International, will continue to engage members of a TEP 
originally convened in April 2014 through a national call for TEP 
members. This TEP is providing ongoing advisement to our measure 
development contractor on all aspects, including this measure's 
denominator, numerator, inclusion and exclusion criteria, risk 
adjustment, as well as development and feasibility of data elements.
    Comment: One commenter expressed concerns that CMS is proposing 
Discharge to the Community, Medicare Spending per Beneficiary (MSPB), 
and All-Condition Risk-Adjusted Potentially Preventable Hospital 
Readmission Rate Hospital Readmissions as cross-cutting measures to 
fulfill the requirements of the IMPACT Act.
    Response: We are clarifying that we did not propose these measures 
in the FY 2016 IPPS/LTCH PPS proposed rule. Rather, we included these 
measures and measure concepts as measures under consideration and 
measures under development for future years of the LTCH QRP to fulfill 
the requirements of the IMPACT Act. We and our measure development 
contractors are in the early stages of development of these quality 
measures to meet the requirements of the IMPACT Act.
    Comment: One commenter expressed concern for the All-Condition 
Risk-Adjusted Potentially Preventable Hospital Readmission Rate since 
LTCH patients are at a much higher severity level and, thus, have 
higher risk of readmission than other PAC settings. The commenter 
stated that to make valid comparison across settings, it is important 
to adequately risk adjust this measure. The commenter noted that CMS 
currently uses diagnosis information on claims to risk adjust its 
readmission measures, and the ability of claims data to fully capture 
the severity of the patient populations treated by LTCHs is limited as 
demonstrated by a number of studies showing the importance of 
controlling for risk factors that do not appear on the claim when 
assessing the performance of LTCHs relative to other providers. In 
conclusion, the commenter noted that it is important to assess the 
value of incorporating assessment data for risk adjustment before using 
this measure to assess performance across settings.
    Response: We thank the commenter for its comments and suggestions. 
We agree with these comments and agree it is important to carefully 
examine and identify risk factors for the All-

[[Page 49748]]

Condition Risk-Adjusted Potentially Preventable Hospital Readmission 
Rate measure before using this measure to assess and report on 
performance of LTCHs as part of LTCH QRP as well as for valid and 
reliable comparisons across settings. We will take these comments under 
advisement as we develop the All-Condition Risk-Adjusted Potentially 
Preventable Hospital Readmission Rate measure. We will also seek input 
from a panel of experts to inform our identification of risk factors 
and approach to risk adjustment for this measure. We agree with the 
commenter's suggestion that we consider differences LTCH and other 
providers, and the implications of those differences on measure 
specification and intend to do so in our development of this measure, 
as well as for all future measures, for the LTCH QRP.
    Comment: One commenter expressed concerns regarding the Discharge 
to Community measure, particularly if used to compare PAC settings. The 
commenter noted that many LTCH patients, given their severity and 
conditions, are not appropriate for returning to the community upon 
discharge but are, appropriately, transferred to a lower-level of care 
(such as a Skilled Nursing Facility). The commenter recommended that 
sufficient risk adjustment approaches that would standardize adequately 
for patient differences across settings to permit fair comparisons on 
this quality measure across PAC settings need to be developed. The 
commenter stated that, at a minimum, this measure needs to be carefully 
assessed for validity and reliability in all PAC settings. The 
commenter stated that risk adjustment should include not only 
information available from claims data but also information from 
assessment data, including functional status, and that it may be 
necessary to stratify patients based on condition and/or functional 
status rather than grouping all patients together. The commenter 
recommended that CMS move cautiously in developing and adopting a 
discharge to the community measure that covers all PAC settings.
    This commenter also commented on the MSPB measure. The commenter 
expressed similar concerns on this measure as with the hospital 
readmission measure and discharge to the community measure. In 
addition, the commenter noted that a 30-days post-discharge episode is 
not sufficiently long to capture the consequences of receiving care in 
an LTCH. The commenter noted the importance of assessing an alternative 
definition of MSPB and the value of incorporating assessment data for 
risk adjustment before using this measure to assess performance across 
settings.
    Response: We thank the commenter for the detailed recommendations 
to inform our efforts to develop a valid, reliable, and usable measure 
of Discharge to Community and Medicare Spending per Beneficiary measure 
for PAC settings. We agree with the commenter's suggestion that we 
consider differences across PAC providers, and the implications of 
those differences on measure specifications and intend to do so in our 
development of these two measures, as well as for all future measures. 
We are at early stages of development of these measures and appreciate 
this commenter's timely inputs to inform our measure development 
processes. We remain committed to employing an environmental scan and 
engaging a TEP to identify findings from prior work for the LTCH 
setting as well as other PAC settings to inform our development of 
resource use measures, including the development of the MSPB measure 
and the Discharge to Community measure, for the LTCH setting and other 
PAC settings in order to meet the requirements of the IMPACT Act. We 
also remain committed to following the same rigorous measure 
development process as the other publicly reported measures included in 
our current Quality Reporting Programs and will involve extensive input 
by stakeholders and clinical experts as well as follow the same 
scientific approach to evaluate this measure prior to public reporting 
to ensure meaningful and valid comparisons across settings.
    Comment: One commenter encouraged CMS to consider implementing 
palliative care-related measures into the LTCH QRP. The commenter 
suggested that priority should be given to NQF-endorsed palliative care 
measures that address pain, dyspnea, patient values and goals, and care 
direction and coordination. The commenter noted that existing measures 
should be revisited and expanded to include a broader population of 
sick patients across healthcare settings. The commenter also urged CMS 
to drive the development of patient-centered measures for shared 
accountability for care coordination through transitions, advance care 
planning and goals of care conversations and structural/process 
measures related to access to quality palliative care, utilization of 
quality of palliative care, and integration/continuity of palliative 
care across settings.
    Another commenter recommended the implementation of a malnutrition 
quality measure because malnutrition is a patient safety issue which 
can negatively impact patient outcomes across healthcare settings. The 
commenter noted that early identification of patients at-risk for 
malnutrition, prompt nutrition intervention, and implementation of a 
care plan for patients diagnosed as malnourished or at-risk for 
malnutrition are critical to improve outcomes and patient safety by 
reducing complications, such as infections, falls, and pressure ulcers.
    Response: We thank the commenters for the comments and suggestions 
and will take these into consideration as we develop future measures 
for the LTCH QRP and other quality reporting programs. We agree with 
the commenter's recommendation and rationale for consideration of 
malnutrition is an important quality measure concept for the LTCH 
setting. Further, we agree that palliative care-related measures could 
be considered for the LTCH QRP and will examine the applicability, 
usability, feasibility, validity and reliability of existing quality 
measures and need for new measures of palliative care for the LTCH QRP.
    Comment: One commenter noted additional areas of function that are 
key to patients, including cognition, communication, and swallowing. 
The commenter encouraged CMS to consider cognition and expressive and 
receptive language and swallowing as items of function, and offered its 
expertise to CMS for discussions and to develop goals. The commenter 
recommended that CMS engage stakeholders to develop future outcome 
measures in the area of cognitive function.
    Response: We thank the commenter for its suggestions and expertise 
to inform our measure development efforts. We agree that future 
development of outcome measures should include other areas of function, 
such as cognition, communication, and swallowing, are important aspects 
of functional assessment and improvement for patients who receive care 
in PAC settings, including LTCHs. We will continue to engage 
stakeholders as we develop and implement quality measures to meet the 
requirements of the IMPACT Act. We will take these quality measure 
concepts into consideration for future measure selections and measure 
development activities for the LTCH QRP.
    We thank the commenters for their views and we will consider them 
as we develop future measures and future proposals.

[[Page 49749]]

9. Form, Manner, and Timing of Quality Data Submission for the FY 2016 
Payment Determination and Subsequent Years
a. Background
    Section 1886(m)(5)(C) of the Act requires that, for the FY 2014 
payment determination and subsequent years, each LTCH submit to the 
Secretary data on quality measures specified by the Secretary. In 
addition, section 1886(m)(5)(F) of the Act requires that, for the 
fiscal year beginning on the specified application date, as defined in 
section 1899B of the Act, and each subsequent year, each LTCH submit to 
the Secretary data on measures specified by the Secretary under section 
1899B of the Act. The data required under section 1886(m)(5)(C) and (F) 
of the Act must be submitted in a form and manner, and at a time, 
specified by the Secretary. As required by section 1886(m)(5)(A)(i) of 
the Act, for any LTCH that does not submit data in accordance with 
section 1886(m)(5)(C) of the Act with respect to a given rate year, any 
annual update to the standard Federal rate for discharges for the LTCH 
during the rate year must be reduced by 2 percentage points.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50857 through 50861 
and 50878 through 50881), we finalized the data submission timelines 
and submission deadlines for measures for the FY 2016 and FY 2017 
payment determinations. We refer readers to the FY 2014 IPPS/LTCH PPS 
final rule for a more detailed discussion of these timelines and 
deadlines. Specifically, we refer readers to the table at 78 FR 50878 
of the FY 2014 IPPS/LTCH PPS final rule for the data collection period 
and submission deadlines for the FY 2016 payment determination and the 
tables at 78 FR 50881 of that final rule for the data collection 
timelines and submission deadlines for the FY 2017 payment 
determination.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50307 through 
50311), we:
     Revised the previously adopted data collection period and 
submission deadlines for the Percent of Residents or Patients Who Were 
Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short 
Stay) (NQF #0680) measure for the FY 2016 payment determination and 
subsequent years;
     Adopted data submission mechanisms for the FY 2018 payment 
determination and subsequent years for new LTCH QRP quality measures 
and for revisions to previously adopted quality measures;
     Adopted data collection periods and submission deadlines 
for certain measures under the LTCH QRP for the FY 2018 payment 
determination;
     Revised data collection timelines and submission deadlines 
for the application of the Percent of Residents Experiencing One or 
More Falls with Major Injury (Long Stay) (NQF #0674) measure for the FY 
2018 payment determination and subsequent years; and
     Adopted data collection timelines and submission deadlines 
under the LTCH QRP for the FY 2019 payment determination and subsequent 
years.
b. Timing for New LTCHs to Begin Reporting Data to CMS for the FY 2017 
Payment Determination and Subsequent Years
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24606), beginning 
with the FY 2017 payment determination, we proposed that a new LTCH be 
required to begin reporting quality data under the LTCH QRP by no later 
than the first day of the calendar quarter subsequent to 30 days after 
the date on its (CCN) notification letter. For example, if an LTCH's 
CCN notification letter is dated March 15, then the LTCH would be 
required to begin reporting quality data to CMS beginning on July 1 
(March 15 + 30 days = April 14 (quarter 2)). The LTCH would be required 
to begin collecting quality data on the first day of the quarter 
subsequent to quarter 2, which is quarter 3, or July 1. The collection 
of quality data would begin on the first day of the calendar year 
quarter identified as the start date, and would include all LTCH 
admissions and subsequent discharges beginning on, and subsequent to, 
that day; however, submission of quality data would be required by 
previously finalized or newly proposed quarterly deadlines.
    In order to determine which quality measure data an LTCH would need 
to begin submitting, we refer readers to section VIII.C.9.c. of the 
preamble of this final rule, below, as it will vary depending upon the 
timing of the CY quarter identified as a start date. We also proposed 
to codify this requirement for the timing of new LTCHs to begin 
reporting for purposes of the LTCH QRP at new proposed Sec.  
412.560(a). We invited public comment on our proposals to add and 
codify this requirement for the timing of new LTCHs to begin reporting 
for purposes of the LTCH QRP.
    We did not receive any public comments on these proposals. 
Therefore, we are finalizing our proposals regarding the timing for new 
LTCHs to being reporting quality data under the LTCH QRP for the FY 
2017 payment determination and subsequent years.
c. Revisions to Previously Adopted Data Submission Timelines Under the 
LTCH QRP for the FY 2017 and FY 2018 Payment Determinations and 
Subsequent Years and Proposed Data Collection and Data Submission 
Timelines for Quality Measures Finalized in This Final Rule
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53636 through 
53637), we finalized new quarterly quality data submission deadlines 
for LTCHs. We contracted the deadlines from the original 4.5-months 
post-CY quarter submission deadlines, to 1.5 months (approximately 45 
days) deadlines. In order to align the data submission and correction 
deadlines with the IRF QRP and Hospital IQR Program as we near public 
reporting, and to meet the requirements of the IMPACT Act, in the FY 
2016 IPPS/LTCH PPS proposed rule (80 FR 24606 through 24608), we 
proposed to revise the data submission and correction deadlines for 
quality measures previously adopted for the LTCH QRP for the FY 2017 
and FY 2018 payment determinations and subsequent years.
    We proposed to adopt new deadlines that allow 4.5 months 
(approximately 135 days) after the end of each calendar year quarter 
for quality data submission, beginning with quarter 4 2015 (October 
2015 through December 2015). Under this new policy, LTCHs will have 
approximately 135 days following the end of each calendar year quarter, 
during which to submit, review, and correct their quality data for that 
CY quarter. We also proposed data collection and data submission 
timelines for quality measures that we proposed for the FY 2018 payment 
determination and subsequent years. Further, for the measures proposed 
in the proposed rule, and finalized within this final rule--Percent of 
Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short Stay) (NQF #0678), the application of Percent of Residents 
Experiencing One or More Falls with Major Injury (Long Stay) (NQF 
#0674), and the application of Percent of LTCH Patients with an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function (NQF #2631; endorsed on 07/23/2015)--we proposed 
that the data collection and data submission timelines align with the 
proposed data collection and data submission timelines for each 
respective measure starting with April 1, 2016. Because the All-Cause 
Unplanned Readmission Measure for 30 Days Post-

[[Page 49750]]

Discharge from LTCHs (NQF #2512) is a Medicare FFS claims-based 
measure, the data collection and submission timelines are not 
applicable to this measure. In addition, we note that upon further 
consideration of how this policy affects the required reporting of 
quality measures under the LTCH QRP, that the application of this 
extended deadline to the measure Influenza Vaccination Coverage Among 
Healthcare Personnel (NQF #0431), is not feasible. Data for this 
measure is only collected between the dates of October 1st and March 
31st, and is only required to be submitted to CMS via the CDC's NHSN 
once per year. Allowing the extended deadline of 135 days beyond the 
end of the data collection period for this measure would not allow the 
application of the appropriate FY APU determination, as previously 
finalized. Because of this, we are finalizing this policy with the 
exception of its application to the measures Influenza Vaccination 
Coverage Among Healthcare Personnel (NQF #0431).
    The tables below present the data collection period and data 
submission timelines for quality measures affecting the FY 2017 payment 
determination, as well as the revisions to the data collection period 
and data submission timelines for quality measures for the FY 2018 
payment determination and subsequent years.
    We would like to note that the tables below, as displayed in the 
proposed rule, contained technical errors with respect to the measure 
Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431). 
In the FY 2016 IPPS/LTCH PPS proposed rule, we accidentally omitted 
this measure from the first table below, which refers to measures 
affecting the FY 2017 payment determination. We have added this measure 
(NQF #0431) back to the first table below, including the correct 
submission deadlines, as they related to our decision to refrain from 
applying this policy to this measure. In the proposed rule we also 
listed the data submission deadlines as they pertain to this same 
measure (NQF #0431) related to the FY 2018 payment determination and 
subsequent years, but note that the data submission deadlines in table 
two have been corrected to reflect our decision to finalize this policy 
with exception of this measure.

    Details on Data Collection Period and Data Submission Timeline for Quality Measures Affecting the FY 2017
                                              Payment Determination
----------------------------------------------------------------------------------------------------------------
                                                                                 Proposed data         APU
       Quality measure           NQF ID#       Submission      Data collection     submission     Determination
                                                 method            period          deadlines         affected
----------------------------------------------------------------------------------------------------------------
Percent of Residents or              #0678  LTCH CARE Data
 Patients with Pressure                      Set/QIES ASAP
 Ulcers That Are New or                      system.
 Worsened (Short Stay).
NHSN Catheter-Associated             #0138
 Urinary Tract Infection
 (CAUTI) Outcome Measure.
NHSN Central-Line Associated         #0139  CDC NHSN........  Q1: 1/1/15-3/31/  5/15/15 (Q1)...  FY 2017.
 Bloodstream Infections                                        15.              8/15/15 (Q2)...
 (CLABSI) Outcome Measure.                                    Q2: 4/1/15-6/30/  11/15/15 (Q3)..
                                                               15.              Finalized in
                                                              Q3: 7/1/15-9/30/   this final
                                                               15.               rule: 5/15/16
                                                              Q4: 10/01/15-12/   (Q4).
                                                               31/15.
NHSN Facility-wide Inpatient         #1716
 Hospital-onset Methicillin-
 resistant Staphylococcus
 aureus (MRSA) Bacteremia
 Outcome Measure.
NHSN Facility-wide Inpatient         #1717
 Hospital-onset Clostridium
 difficile Infection (CDI)
 Outcome Measure.
                                                              10/1/15 (or when  5/15/16 **.....  FY 2017.**
                                                               vaccine becomes
                                                               available)-3/31/
                                                               16.
Influenza Vaccination                #0431  CDC NHSN........
 Coverage Among Healthcare
 Personnel.
                                                              10/1 (or when     5/15 for         Subsequent
                                                               vaccine becomes   subsequent       Years.
                                                               available)-3/31.  years.
All-Cause Unplanned                  #2512  Medicare FFS      N/A.............  N/A............  For future
 Readmission Measure for 30                  Claims Data.                                         public
 Days Post-Discharge from                                                                         reporting.
 Long-Term Care Hospitals*.
----------------------------------------------------------------------------------------------------------------
* This measure will not be used in determining compliance for the LTCH QRP because it is a claims-based measure
  and LTCHs do not report additional data to CMS.
** We are finalizing the proposed policy to extend the current quarterly data submission deadlines from 45 days
  to 135 days with the exception of this quality measure. We refer readers to section VIII.C.9.c. of the
  preamble of this final rule for further information.


[[Page 49751]]


      Details on Data Collection and Submission Timeline for Quality Measures Affecting the FY 2018 Payment
                                       Determination and Subsequent Years
----------------------------------------------------------------------------------------------------------------
                                                                                 Proposed data         APU
       Quality measure           NQF ID#       Submission      Data collection     submission     Determination
                                                 method            period          deadlines         affected
----------------------------------------------------------------------------------------------------------------
Percent of Residents or              #0678  LTCH CARE Data    Q1: 1/1/16-3/31/  8/15/16 (Q1)...  FY 2018 and
 Patients with Pressure                      Set/QIES ASAP     16.              11/15/16 (Q2)..   Subsequent
 Ulcers That Are New or                      system.          Q2: 4/1/16-6/30/  2/15/17 (Q3)...   Years.
 Worsened (Short Stay).                                        16.              5/15/17 (Q4)...
                                                              Q3: 7/1/16-9/30/
                                                               16.
                                                              Q4: 10/01/16-12/
                                                               31/16.
NHSN Catheter-Associated             #0138  CDC NHSN........  Quarterly for
 Urinary Tract Infection                                       each subsequent
 (CAUTI) Outcome Measure.                                      calendar year.
NHSN Central-Line Associated         #0139                                      Approximately
 Bloodstream Infections                                                          135 days after
 (CLABSI) Outcome Measure.                                                       the end of
                                                                                 each quarter.
NHSN Facility-wide Inpatient         #1716
 Hospital-onset Methicillin-
 resistant Staphylococcus
 aureus (MRSA) Bacteremia
 Outcome Measure.
NHSN Facility-wide Inpatient         #1717
 Hospital-onset Clostridium
 difficile Infection (CDI)
 Outcome Measure.
Percent of Residents or              #0680  LTCH CARE Data    10/1/15-12/31/15  5/15/16........  FY 2018
 Patients Who Were Assessed                  Set/QIES ASAP    1/1/16-3/31/16..  8/15/16........   Subsequent
 and Appropriately Given the                 system.          10/1-12/31......  5/15...........   Years.
 Seasonal Influenza Vaccine.                                  1/1-3/31 for      8/15 for
                                                               subsequent        subsequent
                                                               years.            years.
Influenza Vaccination                #0431  CDC NHSN........  10/1/16 (or when  5/15/17**......  FY 2018 **
 Coverage Among Healthcare                                     vaccine becomes  5/15 for          Subsequent
 Personnel.                                                    available)-3/31/  subsequent       Years.
                                                               17.               years.
                                                              10/1 (or when
                                                               vaccine becomes
                                                               available)-3/31.
All-Cause Unplanned                  #2512  Medicare FFS      N/A.............  N/A............  For future
 Readmission Measure for 30                  Claims Data.                                         public
 Days Post-Discharge from                                                                         reporting.
 Long Term Care Hospitals*.
Application of Percent of            #0674
 Residents Experiencing One
 or More Falls with Major
 Injury (Long Stay).
Percent of Long-Term Care            #2631  LTCH CARE Data    4/1/16-6/30/16..  11/15/16 (Q2)..  FY 2018
 Hospital Patients with an       (endorsed   Set/QIES ASAP    7/1/16-9/30/16..  2/15/17 (Q3)...   Subsequent
 Admission and Discharge         on 07/23/   system.          10/1/16-12/31/16  5/15/17 (Q4)...   Years.
 Functional Assessment and a         2015)
 Care Plan That Addresses
 Function.
Functional Status Outcome            #2632                    Quarterly for     Quarterly
 Measure: Change in Mobility     (endorsed                     each subsequent   approximately
 Among Long-Term Care             on 7/23/                     calendar year.    135 days after
 Hospital Patients Requiring         2015)                                       the end of
 Ventilator Support.                                                             each quarter
                                                                                 for subsequent
                                                                                 years.
                                                              1/1/16-3/31/16..  8/15/16 (Q1)...  FY 2018
                                                              4/1/16-6/30/16..  11/15/16 (Q2)..   Subsequent
                                                              7/1/16-9/30/16..  2/15/17 (Q3)...   Years.
                                                              10/1/16-12/31/16  5/15/17 (Q4)...
Ventilator Associated Event..          N/A  CDC NHSN........
                                                              Quarterly for     Quarterly
                                                               each subsequent   approximately
                                                               calendar year.    135 days after
                                                                                 the end of
                                                                                 each quarter
                                                                                 for each
                                                                                 subsequent
                                                                                 year.
Application of Percent of            #2631  LTCH CARE Data    4/1/16-6/30/16..  11/15/16 (Q2)..  FY 2018.
 Long-Term Care Hospital         (endorsed   Set/QIES ASAP    7/1/16-9/30/16..  2/15/17 (Q3)...
 Patients with an Admission       on 7/23/   system.          10/1/16-12/31/16  5/15/17 (Q4)...
 and Discharge Functional            2015)
 Assessment and a Care Plan
 That Addresses Function.

[[Page 49752]]

 
                                                              Quarterly for     Quarterly        Subsequent
                                                               each subsequent   approximately    Years.
                                                               calendar year.    135 days after
                                                                                 the end of
                                                                                 each quarter
                                                                                 for subsequent
                                                                                 years.
----------------------------------------------------------------------------------------------------------------
* This measure will not be used in determining compliance for the LTCH QRP because it is a claims-based measure
  and LTCHs do not report additional data to CMS.
** We are finalizing the proposed policy to extend the current quarterly data submission deadlines from 45 days
  to 135 days with the exception of this quality measure. We refer readers to section VIII.C.9.c.of the preamble
  of this final rule for further information.

    We invited public comments on our proposals.
    Comment: Several commenters supported the proposal to extend the 
data submission timeframes for the LTCH QRP measures from 45 days (1.5 
months) to 4.5 months (approximately 135 days) from the end of a 
calendar year quarter for the FY 2017 and FY 2018 payment 
determinations and subsequent years. The commenters agreed that this 
change would align data submission and correction deadlines with other 
quality reporting programs and facilitate public reporting.
    Response: We appreciate commenters' support of this proposal.
    After consideration of the public comments we received, we are 
finalizing our proposal to revise the data submission and correction 
timelines for the FY 2017 and FY 2018 payment determinations and 
subsequent years for all measures except the Influenza Vaccination 
Coverage Among Healthcare Personnel (NQF #0431). For the reasons stated 
above, for the measure Influenza Vaccination Coverage Among Healthcare 
Personnel (NQF #0431), we are retaining previously finalized data 
submission timelines for the FY 2017 and FY 2018 payment determinations 
and subsequent years. We refer readers to FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50858 through 50858) for data submission deadlines for FY 
2017 payment determination for the Influenza Vaccination Coverage Among 
Healthcare Personnel (NQF #0431). We refer readers to FY 2014 IPPS/LTCH 
PPS final rule (78 FR 50882 through 50883) for data submission 
deadlines for FY 2018 payment determination for the Influenza 
Vaccination Coverage Among Healthcare Personnel (NQF #0431). We refer 
readers to FY 2015 IPPS/LTCH PPS final rule ((79 FR 50311)) for data 
submission deadlines for FY 2019 payment determination for the 
Influenza Vaccination Coverage Among Healthcare Personnel (NQF #0431).
10. Previously Adopted LTCH QRP Data Completion Thresholds for the FY 
2016 Payment Determination and Subsequent Years
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50311 through 
50314), we finalized specific LTCH QRP thresholds for completeness of 
LTCH data submissions. To ensure that LTCHs are meeting an acceptable 
standard for completeness of submitted data, we finalized the policy 
that, beginning with the FY 2016 payment determination and for each 
subsequent year, LTCHs must meet or exceed two separate data 
completeness thresholds: One threshold set at 80 percent for completion 
of quality measures data collected using the LTCH CARE Data Set and 
submitted through the QIES ASAP system; and a second threshold set at 
100 percent for quality measures data collected and submitted using the 
CDC NHSN.
    In addition, we stated that we would apply the same thresholds to 
all measures adopted as the LTCH QRP expands and LTCHs report data on 
the finalized measure sets. That is, as we finalize new measures 
through the regulatory process, LTCHs will be held accountable for 
meeting the previously finalized data completion threshold requirements 
for each measure until such time that updated threshold requirements 
are proposed and finalized through a subsequent regulatory cycle.
    Further, we finalized the requirement that a LTCH must meet or 
exceed both thresholds in order to avoid receiving a 2-percentage point 
reduction to their annual payment update for a given fiscal year, 
beginning with FY 2016 and for all subsequent payment updates. In the 
FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24608), we did not propose 
any changes to these policies. We refer readers to the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50311 through 50314) for a detailed 
discussion of the finalized data completion requirements of the LTCH 
QRP.
11. Future LTCH QRP Data Validation Process
    Historically, we have built consistency and internal validation 
checks into our data submission specifications to ensure that the data 
elements of the LTCH CARE Data Set assessments conform to requirements 
such as proper format and facility information. These internal 
consistency checks are automated and occur during the LTCH data entry 
and submission process, and help ensure the integrity of the data 
submitted by LTCHs by rejecting submissions or issuing warnings when 
LTCH data contain logical inconsistencies. These internal consistency 
checks are referred to as ``system edits'' and are further outlined in 
the LTCH Data Submission Specifications version 1.01, which are 
available for download on the LTCH Quality Reporting Technical 
Information Web page at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html.
    Validation is intended to provide added assurance of the accuracy 
of the data that will be reported to the public as required by sections 
1886(m)(5)(E) and 1899B(g) of the Act. In the FY 2015 IPPS/LTCH PPS 
proposed rule (79 FR 28275 through 28276), we proposed, for the FY 2016 
payment determination and subsequent years, to validate the data 
elements submitted to CMS for quality purposes. We also proposed 
policies regarding the application of the 2-percentage point reduction 
for LTCHs that failed to meet the data accuracy threshold.
    However, in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50314 
through 50316), we decided to further explore suggestions from 
commenters before finalizing the LTCH data validation process that we 
proposed. Therefore, we did not finalize the data validation proposals.

[[Page 49753]]

    At this time, we are continuing to explore data accuracy validation 
methods and threshold policies that will limit the amount of burden and 
cost to LTCHs, while allowing us to establish estimations of the 
accuracy of LTCH QRP data. Therefore, in the FY 2016 IPPS/LTCH PPS 
proposed rule (80 FR 24608), we did not propose any new policies 
related to data accuracy validation, but we plan to do so in future 
rulemaking cycles.
    While we did not solicit comments specifically regarding our 
policies related to data accuracy validation, we received a comment, 
which we summarize and respond to below.
    Comment: One commenter supported CMS' decision to continue to 
explore data validation methods that take provider burden into account.
    Response: We thank the commenter for its support. We will take this 
comment into consideration in future rulemaking.
12. Public Display of Quality Measure Data for the LTCH QRP
    Section 1886(m)(5)(E) of the Act requires the Secretary to 
establish procedures for making the LTCH QRP data available to the 
public. In so doing, the Secretary must ensure that LTCHs have the 
opportunity to review any such data with respect to the LTCH prior to 
its release to the public. Section 1899B(g) of the Act requires the 
Secretary to establish procedures for making available to the public 
information regarding the performance of individual PAC providers with 
respect to the measures required under section 1899B of the Act 
beginning not later than 2 years after the applicable specified 
application date. The procedures must ensure, including through a 
process consistent with the process applied under section 
1886(b)(3)(B)(viii)(VII) of the Act for similar purposes, that each PAC 
provider has the opportunity to review and submit corrections to the 
data and information that are to be made public with respect to the PAC 
provider prior to such data being made public.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24608 through 
24610), we proposed to display performance data related to the LTCH QRP 
quality measures, as applicable, required by the LTCH QRP by fall 2016 
on a CMS Web site, such as the Hospital Compare Web site (http://www.hospitalcompare.hhs.gov), after a 30-day preview period. Additional 
information about preview report content and delivery will be announced 
on the LTCH QRP Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/index.html. LTCHs would be notified via CMS listservs, CMS mass emails 
and memorandums, LTCH QRP Web site announcements and Medicare Learning 
Network announcements regarding the release of preview reports, as well 
as the timing of the posting of provider data.
    The Hospital Compare Web site is an interactive Web tool that 
assists beneficiaries by providing information on hospital quality of 
care to those who need to select a hospital. It further serves to 
encourage beneficiaries to work with their hospital to discuss the 
quality of care provided to patients, thereby providing an additional 
incentive to hospitals to improve the quality of care that they 
furnish. As we have done on some of the other CMS Compare Web sites, we 
will, at some point in the future, report public data using a quality 
rating system that gives each LTCH a rating of between one and five 
stars. Initially, however, we will not use the 5-star methodology, 
until such time that we are publicly reporting a sufficient number of 
quality metrics to allow for variation and the differentiation among 
LTCHs using this methodology. Decisions regarding how the rating system 
will determine an LTCH's star rating and methods used for calculations, 
as well as a proposed timeline for implementation, will be announced 
via regular LTCH communication channels, including listening sessions, 
memos, email notification, provider association calls, open door 
forums, and Web postings.
    The initial display of information would contain performance data 
on four quality measures: (1) NHSN CAUTI Outcome Measure (NQF #0138); 
(2) NHSN CLABSI Outcome Measure (NQF #0139); (3) Percent of Residents 
or Patients with Pressure Ulcers That Are New or Worsened (Short Stay) 
(NQF #0678); and (4) All-Cause Unplanned Readmission Measure for 30 
Days Post-Discharge from LTCHs (NQF #2512). We proposed to publicly 
report data beginning with data collected on these measures for the 
first quarter of 2015, or discharges beginning January 1, 2015, with 
exception of the All-Cause Unplanned Readmission Measure for 30 Days 
Post-Discharge from LTCHs (NQF #2512). Rates would be displayed based 
on four (4) rolling quarters of data and would use discharges from 
January 1, 2015 through December 31, 2015 (CY 2015), for calculation, 
with exception of the measure All-Cause Unplanned Readmission Measure 
for 30 Days Post-Discharge from LTCHs (NQF #2512). With respect to LTCH 
performance related to the All-Cause Unplanned Readmission Measure for 
30 Days Post-Discharge from LTCHs (NQF #2512), proposed to publicly 
report readmission rates beginning with Medicare FFS claims data for 
patient discharges starting with January 1, 2013. Readmission rates 
will be calculated using Medicare FFS claims data for two consecutive 
years (for example, readmission rates will be calculated using Medicare 
FFS claims data for January 1, 2013 through December 31, 2014 (CY 2013 
and CY 2014)) and displayed on a calendar year basis.
    Calculations for the CAUTI and CLABSI measures adjust for 
differences in the characteristics of hospitals and patients using a 
Standardized Infection Ratio (SIR). The SIR is a summary measure that 
takes into account differences in the types of patients that a hospital 
treats. The SIR may take into account the type of patient care 
location, laboratory methods, hospital affiliation with a medical 
school, bed size of the hospital, patient age, and American Society of 
Anesthesiologists' classification of physical health. It compares the 
actual number of HAIs in a facility or State to a national benchmark 
based on previous years of reported data and adjusts the data based on 
several factors. A confidence interval with a lower and upper limit is 
displayed around each SIR to indicate that there is a high degree of 
confidence that the true value of the SIR lies within that interval. A 
SIR with a lower limit that is greater than 1.0 means that there were 
more HAIs in a facility or State than were predicted, and the facility 
is classified as ``Worse than the U.S. National Benchmark.'' If the SIR 
has an upper limit that is less than 1, the facility had fewer HAIs 
than were predicted and is classified as ``Better than the U.S. 
National Benchmark.'' If the confidence interval includes the value of 
1, there is no statistical difference between the actual number of HAIs 
and the number predicted, and the facility is classified as ``No 
Different than U.S. National Benchmark.'' If the number of predicted 
infections is less than 1, the SIR and confidence interval cannot be 
calculated.
    Calculations for the Percent of Residents or Patients with Pressure 
Ulcers That Are New or Worsened (NQF #0678) would be risk-adjusted. 
Resident- or patient-level covariate risk adjustment is performed. 
Resident- or patient-level covariates are used in a logistic regression 
model to calculate a resident- or patient-level expected quality 
measure (QM) score (the probability that the resident or patient will 
evidence the outcome, given the presence or absence of patient

[[Page 49754]]

characteristics measured by the covariates). Then, an average of all 
resident- or patient-level expected QM scores for the facility is 
calculated to create a facility-level expected QM score. The final 
facility-level adjusted QM score is based on a calculation which 
combines the facility-level expected score and the facility level 
observed score. Additional information about the covariates can be 
found at: http://www.qualityforum.org/QPS/0678.
    Finally, calculation for performance on the measure All-Cause 
Unplanned Readmission Measure for 30 Days Post-Discharge from LTCHs 
(NQF #2512) will also be risk-adjusted. The risk adjustment methodology 
is available, along with the specifications for this measure, on our 
LTCH Quality Reporting Measures Information Web page at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    We are currently developing reports that will allow providers to 
view the data that is submitted to CMS via the QIES ASAP system and the 
CDC's NHSN (Percent of Residents or Patients with Pressure Ulcers That 
Are New or Worsened (Short Stay) (NQF #0678), the NHSN CAUTI Outcome 
Measure (NQF #0138) and the NHSN CLABSI Outcome Measure (NQF #0139), 
respectively). These reports, although not initially, will also include 
provider performance on any currently reported quality measure that is 
calculated based on CMS claims data that we plan on publicly reporting 
(All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge 
from LTCHs (NQF #2512)). Although real time results will not be 
available, the report will refresh all of the data submitted at least 
once a month.
    We proposed a process to give providers an opportunity to review 
and correct data submitted to the QIES ASAP system or to the CDC's NHSN 
by utilizing that report. Under this proposed process, providers would 
to have the opportunity to review and correct data they submit on all 
assessment-based measures. Providers can begin submitting data on the 
first admission of any reporting quarter. Providers are encouraged to 
submit data early in the submission schedule so that they can identify 
errors and resubmit data before the quarterly submission deadline. The 
data would be populated into reports that are updated at least once a 
month with all data that have been submitted. That report would contain 
the provider's performance on each measure calculated based on 
assessment submissions to the QIES ASAP system or CDC NHSN. We believe 
that the submission deadline timeframe, which we proposed in the 
proposed rule to extend from the current 1.5 month policy to 4.5 months 
beyond the end of each calendar year quarter, is sufficient time for 
providers to be able to submit, review data, make corrections to the 
data, and view their data. We proposed that once the provider has an 
opportunity to review and correct quarterly data related to measures 
submitted via the QIES ASAP system or CDC NHSN, we would consider the 
provider to have been given the opportunity to review and correct this 
data. We would not allow patient-level data correction after the 
submission deadline or for previous years. This is because we must set 
a deadline to ensure timely computation of measure rates and payment 
adjustment factors. Before we display this information, providers will 
be permitted 30 days to review their information as recorded in the 
QIES ASAP system or CDC NHSN.
    We invited public comment on these proposals.
    Comment: Several commenters supported the proposal to publicly 
report LTCH quality data beginning in fall 2016, although some urged 
that CMS allow for correction of LTCH data during the 30-day preview 
period. Other commenters supported the proposal but recommended that 
CMS set up a separate LTCH Compare Web site so that LTCHs are only 
compared to other LTCHs and the public can make an informed comparison 
without unnecessary confusion.
    Response: We thank the commenters for their comments and support of 
our proposal to publicly report LTCH quality data beginning in fall 
2016. In our proposal we note that we have extended the post-calendar 
year (CY) quarter submission deadlines from the current 45 days beyond 
the end of each quarter to 135 days beyond the end of each quarter. We 
believe that this timeframe allows LTCHs sufficient time to submit, 
review, and correct their data prior to public reporting of that data. 
We have designed and will be issuing provider reports immediately 
following the end of each CY quarter, which will allow LTCHs to see the 
data they have submitted to CMS to date. LTCHs will then have the 
additional 135 days beyond the end of each CY quarter to correct any 
data they feel has been submitted in error, or is missing. While many 
LTCHs use the current post-CY quarter timeframe as an extended 
submission timeframe, the original intent of the post-CY quarter 
timeframe was to allow LTCHs to review and correct any data they had 
submitted for that particular CY quarter.
    We have continually urged LTCHs to submit their quality data as 
soon as possible, thus allowing ample time for review and correction. 
We will not allow any correction of patient-level data during the 30-
day preview period. We will issue a preview report at the beginning of 
this period that contains provider performance data, and LTCHs will 
have 30 days during which to refute any quality measure calculations 
they feel have been made in error. This policy aligns with that of the 
Hospital IQR Program and the IRF QRP. Allowing for patient level data 
correction at this time would have the effect of negating our data 
submission deadlines.
    Regarding the comment that we should develop a separate LTCH 
Compare Web site, as opposed to posting LTCH QRP performance data on 
Hospital Compare, we would like to clarify that should we choose to 
post this data on Hospital Compare, it would be under its own separate 
tab/Web page, and would be clearly separate from acute care hospital 
data. Because we have not made any final decision regarding this issue, 
we will take this comment into consideration as we move forward with 
the development of the Web site.
    After consideration of the public comments we received, we are 
finalizing our proposals to display performance data for the quality 
beginning in fall 2016 on a CMS Web site, such as the Hospital Compare 
Web site (http://www.hospitalcompare.hhs.gov), after a 30-day preview 
period, and to give providers an opportunity to review and correct data 
submitted to the QIES ASAP system or to the CDC NHSN.
    In addition to our proposal to publicly display LTCH performance 
data on the required quality measures under the LTCH QRP, we also 
proposed to publish a list of LTCHs that successfully meet the 
reporting requirements for the applicable payment determination on the 
LTCH QRP Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/. We proposed to 
update the list after reconsideration requests are processed on an 
annual basis. We proposed to codify the policy to publish a list of 
compliant LTCHs on the LTCH QRP Web site at new proposed Sec.  
412.560(d)(3).
    We invited public comment on these proposals.
    We did not receive any public comments on our proposals to publish 
a list of LTCHs that successfully meet

[[Page 49755]]

the reporting requirements for each applicable payment determination on 
the LTCH QRP Web site, update the list after reconsideration requests 
are processed on an annual basis, and codify the policy to publish a 
list of compliant LTCHs on the LTCH QRP Web site at new proposed Sec.  
412.560(d)(3). Therefore, we are finalizing these proposals.
13. Previously Adopted and Finalized LTCH QRP Reconsideration and 
Appeals Procedures for the FY 2017 Payment Determination and Subsequent 
Years
    At the conclusion of each fiscal year reporting cycle, we review 
the data received from each LTCH to determine if the LTCH met the 
reporting requirements set forth for that reporting cycle. LTCHs that 
are found to be noncompliant will receive a reduction in the amount of 
2 percentage points to their annual payment update for the applicable 
fiscal year. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50317 
through 50318), we described and adopted an updated process that 
enables an LTCH to request a reconsideration of our initial 
noncompliance decision in the event that an LTCH believes that it was 
incorrectly identified as being subject to the 2-percentage point 
reduction to its annual payment due to noncompliance with the LTCH QRP 
reporting requirements for a given reporting period.
    We are clarifying that any LTCH that wishes to submit a 
reconsideration request must do so by submitting an email to CMS 
containing all of the requirements listed on the LTCH QRP Web site at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Reconsideration-and-Exception-and-Extension.html. Email sent to 
[email protected] is the only form of submission that 
will be accepted from an LTCH provider requesting reconsideration. Any 
reconsideration requests received through another channel, including 
the U.S. Postal Service (USPS) or telephone, will not be considered as 
a valid reconsideration request.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24610 through 
24611), we proposed to continue using the LTCH QRP reconsideration and 
appeals procedures that were adopted in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50317 through 50318) and that have been posted on the LTCH 
QRP Web site for the FY 2017 payment determination and subsequent 
years, with an exception regarding the way in which noncompliant LTCHs 
are notified of this determination.
    Previously, only LTCHs found to be noncompliant with the reporting 
requirements set forth for a given payment determination received a 
notification of this finding along with instructions for requesting 
reconsideration in the form of a certified letter via the USPS. In an 
effort to communicate as quickly, efficiently, and broadly as possible 
with LTCHs regarding annual compliance, we proposed changes to our 
communications method regarding annual notification of reporting 
compliance in the LTCH QRP. In addition to sending a letter via regular 
USPS mail, beginning with the FY 2016 payment determination and for 
subsequent fiscal years, we proposed the QIES ASAP system as a 
mechanism to communicate to LTCHs regarding their compliance with the 
reporting requirements for the given reporting cycle.
    We note that all LTCHs have been required to use the QIES ASAP 
system in order to report on required LTCH QRP measures since October 
1, 2012. Therefore, we proposed that all Medicare-certified LTCH 
compliance letters be uploaded into the QIES ASAP system for each LTCH 
to access. Instructions to download files from QIES ASAP system may be 
found on the Web site at: https://www.qtso.com/LTCH.html. We proposed 
to disseminate communications regarding the availability of compliance 
reports in LTCHs' QIES ASAP system files through routine channels to 
LTCHs and vendors, including, but not limited to, issuing memos, 
emails, Medicare Learning Network announcements, and notices on the 
LTCH QRP Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
    The purpose of the compliance letter is to notify an LTCH that it 
has been identified as either being compliant or noncompliant with the 
LTCH QRP reporting requirements for the given reporting cycle. If the 
LTCH is determined to be noncompliant, the notification would indicate 
that the LTCH is scheduled to receive a 2 percentage point reduction to 
its upcoming annual payment update and that it may file a 
reconsideration request if it disagrees with this finding. LTCHs may 
request a reconsideration of a noncompliance determination through the 
CMS reconsideration request process.
    We also proposed that the notification of our decision regarding 
received reconsideration requests will be made available through the 
QIES ASAP system. We did not propose to change the process or 
requirements for requesting reconsideration, and we refer readers to 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50317 through 50318) for a 
discussion of the LTCH QRP reconsideration and appeals procedures.
    We also proposed to publish a list of LTCHs that successfully meet 
the reporting requirements for the applicable payment determination on 
the LTCH QRP Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/. We 
proposed updating the list after reconsideration requests are processed 
on an annual basis.
    We proposed to codify the LTCH QRP reconsideration and appeal 
procedures at new proposed Sec. Sec.  412.560(d) and (e).
    We invited public comment on the proposals to change the 
communication mechanism to the QIES ASAP system for the dissemination 
of compliance notifications and reconsideration decisions, to publish a 
list of compliant LTCHs on the LTCH QRP Web site, and to codify these 
processes at new proposed Sec. Sec.  412.560(d)(1) and (d)(3).
    Comment: A few commenters supported the proposal to codify the 
reconsideration and appeals policy, although stated that CMS should 
clarify the exact requirements LTCHs need to meet to be in compliance 
with the LTCH QRP.
    Response: We thank the commenters for their comments and support. 
While we appreciate the commenters' concern that the requirements be 
listed in one place, we note that the reconsideration and appeals 
policy will be codified and that additional technical details will be 
listed on our LTCH QRP Web site, on which we post guidance documents 
that are updated regularly. LTCHs can access the CMS LTCH QRP Web site 
at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/index.html?redirect=/LTCH-Quality-
Reporting/.
    After consideration of the public comments we received, we are 
finalizing our proposals to change the communication mechanism to the 
QIES system for the dissemination of compliance notifications and 
reconsideration decisions, to publish a list of compliant LTCHs on the 
LTCH QRP Web site, to update the list after reconsideration requests 
are processed on an annual basis, and to codify the requirements for 
reconsideration and appeals, as proposed.

[[Page 49756]]

14. Previously Adopted and Proposed LTCH QRP Submission Exception and 
Extension Requirements for the FY 2017 Payment Determination and 
Subsequent Years
    We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50883 through 50885) and the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50316 through 50317) for a detailed discussion of the LTCH QRP 
Submission Exception and Extension requirements. In the FY 2016 IPPS/
LTCH PPS proposed rule (80 FR 24611), for the FY 2017 payment 
determination and subsequent years, we did not propose any changes to 
the LTCH QRP requirements that we adopted in these final rules. 
However, we proposed to codify the LTCH QRP Submission Exception and 
Extension Requirements at new Sec. Sec.  412.560(c) and (d).
    We remind readers that, in the FY 2015 IPPS/LTCH PPS final rule (79 
FR 50316 through 50317), we stated that LTCHs must submit request an 
exception or extension by submitting a written request along with all 
supporting documentation to CMS via email to the LTCH mailbox at 
[email protected]. We further stated that exception 
or extension requests sent to CMS through any other channel would not 
be considered as a valid request for an exception or extension from the 
LTCH QRP's reporting requirements for any payment determination. In 
order to be considered, a request for an exception or extension must 
contain all of the requirements as outlined on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Reconsideration-and-Disaster-Waiver-Requests.html.
    We invited public comments on our proposal to codify the LTCH QRP 
submission exception and extension requirements.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our proposal to codify the LTCH QRP submission 
exception and extension requirements at new Sec. Sec.  412.560(c) and 
(d).

D. Clinical Quality Measurement for Eligible Hospitals and Critical 
Access Hospitals (CAHs) Participating in the EHR Incentive Programs in 
2016

1. Background
    The HITECH Act (Title IV of Division B of the ARRA, together with 
Title XIII of Division A of the ARRA) authorizes incentive payments 
under Medicare and Medicaid for the adoption and meaningful use of 
certified electronic health record (EHR) technology (CEHRT). Eligible 
hospitals and CAHs may qualify for these incentive payments under 
Medicare (as authorized under sections 1886(n) and 1814(l) of the Act, 
respectively) if they successfully demonstrate meaningful use of CEHRT, 
which includes reporting on clinical quality measures (CQMs) using 
CEHRT.
    Sections 1886(b)(3)(B) and 1814(l) of the Act also establish 
downward payment adjustments under Medicare, beginning with FY 2015, 
for eligible hospitals and CAHs that are not meaningful users of CEHRT 
for certain associated reporting periods. Section 1903(a)(3)(F)(i) of 
the Act establishes 100 percent Federal financial participation (FFP) 
to States for providing incentive payments to eligible Medicaid 
providers (described in section 1903(t)(2) of the Act) to adopt, 
implement, upgrade and meaningfully use CEHRT.
    Under sections 1886(n)(3)(A) and 1814(l)(3)(A) of the Act and the 
definition of ``meaningful EHR user'' under 42 CFR 495.4, eligible 
hospitals and CAHs must report on CQMs selected by CMS using CEHRT, as 
part of being a meaningful EHR user under the Medicare EHR Incentive 
Program. The set of CQMs from which eligible hospitals and CAHs will 
report under the EHR Incentive Program beginning in FY 2014 is listed 
in Table 10 of the EHR Incentive Program Stage 2 final rule (77 FR 
54083).
    In the EHR Incentive Program Stage 3 proposed rule \341\ (80 FR 
16769), to further our alignment goal among CMS quality reporting 
programs for eligible hospitals and CAHs and avoid redundant or 
duplicative reporting among hospital programs, we stated our intent to 
address CQM reporting requirements for the Medicare and Medicaid EHR 
Incentive Program for eligible hospitals and CAHs for 2016, 2017, and 
future years in the IPPS rulemaking. We further stated our belief that 
receiving and reviewing public comments for various CMS quality 
programs at one time and finalizing the requirements for these programs 
simultaneously would allow us to better align these programs for 
eligible hospitals and CAHs, allow more flexibility into the Medicare 
and Medicaid EHR Incentive Programs, and add overall value and 
consistency by providing us the opportunity to address public comments 
that affect multiple programs at one time.
---------------------------------------------------------------------------

    \341\ Medicare and Medicaid Programs: Electronic Health Record 
Incentive Program--Stage 3; proposed rule (80 FR 16731 through 
16804) (``EHR Incentive Program Stage 3 proposed rule'').
---------------------------------------------------------------------------

    ONC, in its 2015 Edition proposed rule (80 FR 16844), also 
indicated that it intends to propose certification policy for the 
reporting of CQMs for eligible hospitals and CAHs in or with annual 
IPPS rulemaking to better align with the reporting goals of other CMS 
programs.
2. CQM Reporting for the Medicare and Medicaid EHR Incentive Programs 
in 2016
a. Background
    In the EHR Incentive Program Stage 2 final rule, we outlined the 
CQMs available for use in the EHR Incentive Programs beginning in 2014 
for eligible hospitals and CAHs in Table 10 at 77 FR 54083 through 
54087, as well as the form and method for submission at 77 FR 54087 
through 54089. In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24611 
through 24613), for CQM reporting for the EHR Incentive Programs in 
2016, we proposed to maintain the existing requirements established in 
earlier rulemaking for the reporting of CQMs, unless indicated 
otherwise in the proposed rule. These requirements include reporting on 
16 CQMs covering at least 3 NQS domains for eligible hospitals and CAHs 
(77 FR 54079).
    As we expand the current measures to align with the National 
Quality Strategy and the CMS Quality Strategy \342\ and incorporate 
updated standards and terminologies in current CQMs, including updating 
the electronic specifications for these CQMs, and creating de novo 
CQMs, we plan to expand the set of CQMs available for reporting under 
the EHR Incentive Programs in CY 2017 and subsequent years. We will 
continue to engage stakeholders to provide input on future proposals 
for CQMs as well as requesting comment on future electronic 
specifications for new and updated CQMs.
---------------------------------------------------------------------------

    \342\ Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.html.
---------------------------------------------------------------------------

b. CQM Reporting Period for the Medicare and Medicaid EHR Incentive 
Programs in CY 2016
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50319 through 
50321), we began to shift CQM reporting to a calendar year basis for 
eligible hospitals and CAHs for the Medicare EHR Incentive Program. We 
established that, for eligible hospitals and CAHs that submit CQMs 
electronically in 2015, the reporting period is one calendar quarter

[[Page 49757]]

from Q1, Q2, or Q3 of CY 2015 (79 FR 50321). Section 1886(n)(3)(B)(iii) 
of the Act requires that, in selecting measures for eligible hospitals 
and CAHs for the Medicare EHR Incentive Program, and establishing the 
form and manner for reporting measures, the Secretary shall seek to 
avoid redundant or duplicative reporting with reporting otherwise 
required, including reporting under section 1886(b)(3)(B)(viii) of the 
Act, the Hospital IQR Program.
    In the Electronic Health Record Incentive Program--Modifications to 
Meaningful Use in 2015 Through 2017 proposed rule (80 FR 20353), 
beginning in 2015, we proposed to change the definition of ``EHR 
reporting period'' in Sec.  495.4 for EPs, eligible hospitals, and CAHs 
such that the EHR reporting period would begin and end in relation to a 
calendar year. In connection with that proposal, in the FY 2016 IPPS/
LTCH PPS proposed rule (80 FR 24611 through 24612), we proposed that 
the reporting period for CQMs in 2016 for eligible hospitals and CAHs 
for the Medicare and Medicaid EHR Incentive Programs also would be 
based on the calendar year. We stated that we believe it is important 
to continue our goal of aligning the EHR Incentive Program with the 
Hospital IQR Program because alignment of these programs will serve to 
reduce hospital reporting burden and encourage the adoption and 
meaningful use of CEHRT by eligible hospitals and CAHs.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24581 through 
24582), we proposed to require quarterly reporting and submission 
periods of CQMs for the 3rd and 4th CY quarters of 2016 (for the FY 
2018 payment determination) of the Hospital IQR Program. We also stated 
that we believe it is important for us to maintain our goal of 
alignment between the Hospital IQR and EHR Incentive Programs. 
Therefore, we proposed to align the reporting period in CY 2016 for 
eligible hospitals and CAHs that report CQMs electronically for the 
Medicare EHR Incentive Program with that of the Hospital IQR Program 
and require quarterly reporting and submission periods for CQMs in the 
3rd and 4th CY quarters. We refer readers to section VIII.A.8.c. of the 
preamble of this final rule for further discussion of the proposals and 
our finalized policies for the Hospital IQR Program.
    In addition, in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24587 through 24588), we proposed to change the Hospital IQR Program's 
submission period for CQMs from annual to quarterly submission, and 
proposed to change the submission deadline from November 30, 2015 to 
ending 2 calendar months after the close of the reporting CY quarter 
(for CY 2016/FY 2018 payment determination, the proposed deadlines are 
November 30, 2016 for Q3 and February 28, 2017 for Q4). We refer 
readers to the Hospital IQR Program discussion in section 
VIII.A.10.d.(3) of the preamble of this final rule for more information 
about these proposals. Therefore, to coincide with the submission 
period in the Hospital IQR Program, we also proposed to align the 
Medicare EHR Incentive Program submission period for CY 2016 with the 
submission period proposed for the Hospital IQR Program.
    We proposed the following CQM reporting periods and submission 
deadlines for eligible hospitals and CAHs participating in the Medicare 
EHR Incentive Program in CY 2016:
     Eligible hospitals and CAHs Reporting CQMs by Attestation
    ++ For eligible hospitals and CAHs demonstrating meaningful use for 
the first time in 2016, any continuous 90-day reporting period within 
CY 2016; or one full calendar year reporting period for CY 2016. 
Attestation by February 28, 2017.
    ++ For eligible hospitals and CAHs that demonstrated meaningful use 
in any year prior to 2016, one full calendar year reporting period for 
CY 2016. Attestation by February 28, 2017.
     Eligible hospitals and CAHs Reporting CQMs Electronically 
--Two full quarters of data (Q3 and Q4 of CY 2016) submitted via 
electronic reporting within 2 months after the close of each quarter 
(Q3 by November 30, 2016; Q4 by February 28, 2017).
    We also proposed that the CQM reporting period for eligible 
hospitals and CAHs participating in the Medicaid EHR Incentive Program 
would be any continuous 90-day reporting period within CY 2016 for 
eligible hospitals and CAHs demonstrating meaningful use for the first 
time; and one full calendar year reporting period of CY 2016 for 
eligible hospitals and CAHs that demonstrated meaningful use in any 
year prior to 2016. Providers should refer to their State Medicaid 
program for requirements on submission methods and deadlines.
    We note that, beginning in CY 2017 and in subsequent years, we 
proposed in the EHR Incentive Program Stage 3 proposed rule (80 FR 
16739 through 16740) to require a reporting period of one full calendar 
year for CQM reporting for all providers participating in the EHR 
Incentive Programs, with a limited exception for Medicaid providers 
demonstrating meaningful use for the first time.
    We invited public comment on these proposals.
    Comment: A few commenters supported the proposal to maintain the 
existing CQM requirement to report on 16 CQMs covering at least 3 NQS 
domains. Many commenters expressed concern that hospitals are not 
prepared to submit electronic CQMs. Several commenters noted that 
electronic CQM reporting is difficult for hospitals due to the 
complexities involved in implementing EHRs. As a result of these 
concerns, many commenters requested an extension in the roll-out of 
this requirement, if finalized, in order to allow hospitals time to 
prepare to meet reporting requirements and to allow more time to 
overcome the challenges associated with electronic reporting. Many of 
these commenters supported CMS' goal to move towards electronic 
reporting, but specifically requested that CMS delay a requirement for 
hospitals to report CQMs electronically until CY 2018, in order to 
align with the EHR Incentive Program proposals in the Stage 3 proposed 
rule. Some commenters recommended that CMS require electronic CQM 
reporting no sooner than CY 2017.
    Response: We appreciate the commenters' support of our proposal to 
maintain the existing CQM requirement to report on 16 CQMs covering at 
least 3 NQS domains. In addition, we recognize the challenges 
associated with electronic reporting and appreciate the comments we 
received. In this final rule, we are modifying the proposed requirement 
for electronically submitted CQMs for the reporting period in CY 2016. 
In an effort to align with the Hospital IQR Program and reduce the 
burden for hospitals, rather than reporting on a minimum of 16 CQMs 
covering at least 3 NQS domains as proposed, we are requiring hospitals 
that submit CQMs electronically for the Medicare EHR Incentive Program 
to report on a minimum of 4 CQMs for the reporting period in 2016 with 
no NQS domain distribution requirement. This reduction from a minimum 
of 16 CQMs to a minimum of 4 CQMs and the elimination of the NQS domain 
distribution requirement only apply for hospitals that choose to report 
CQMs through electronic submission. Hospitals that choose to report 
CQMs by attestation for the reporting period in 2016 are required to 
report on a minimum of 16 CQMs covering at least 3 NQS domains. 
Further, we are modifying our proposed requirement for hospitals 
reporting CQMs through electronic submission to report two full 
quarters of data (Q3 and Q4 of CY 2016) within 2 months after the close 
of each

[[Page 49758]]

quarter. Instead, we are requiring only one full quarter of data 
(either Q3 or Q4 of CY 2016), with a submission deadline of February 
28, 2017, to allow more time for hospitals to implement their EHR 
programs and overcome the challenges associated with electronic 
reporting of CQMs. We believe electronic reporting of CQMs is an 
important next step in the meaningful use of certified EHR technology, 
and anticipate that this lower reporting threshold and extended 
submission deadline for electronically submitted CQMs will reduce 
burden and encourage eligible hospitals and CAHs to report 
electronically for 2016. We also anticipate increasing this number in 
future rules to retain the 16 measure requirement. We believe that a 
full year should be adequate time for hospitals to address their 
mapping issues and that it is important to continue to make progress 
towards electronic reporting.
    We refer readers to the Hospital IQR Program discussion in section 
VIII.A.8.c. of the preamble of this final rule for further discussion 
of these and other related comments and our responses.
    Comment: Several commenters supported the proposal to base the 
reporting period on the calendar year. Other commenters supported the 
proposal to require quarterly reporting and submission periods for 
electronically submitted CQMs as well as to change the submission 
period for CQMs from annual to quarterly submission. The commenters 
generally supported the alignment efforts between the EHR Incentive 
Program and the Hospital IQR Program. One commenter suggested that the 
submission timeline be extended to one full quarter instead of the 
proposed 2 calendar months.
    Response: We refer readers to the Hospital IQR Program discussion 
in section VIII.A.10.d.(3) of the preamble of this final rule for 
further discussion of these and other related comments and our 
responses.
    After consideration of the public comments we received, and with 
further consideration of the discussion in sections VIII.A.8.c. and 
VIII.A.10.d.(3) of the preamble of this final rule, we are aligning our 
reporting periods and requirements for electronically submitted CQMs 
for the Medicare EHR Incentive Program with the reporting periods and 
requirements for electronically submitted CQMs for the Hospital IQR 
Program. Specifically, we are not finalizing our proposals to require 
16 CQMs across three NQS domains reported quarterly for Q3 and Q4 of 
2016. Instead, for hospitals that choose to report CQMs electronically 
for the Medicare EHR Incentive Program for the reporting period in CY 
2016, we are requiring a minimum of 4 electronically submitted CQMs in 
either Q3 or Q4 of CY 2016, with a submission deadline of February 28, 
2017. We note that this final policy does not change the reporting 
periods or requirements for the meaningful use objectives and 
associated measures under 42 CFR part 495 or apply for CQMs that are 
reported by attestation via the Registration and Attestation System. We 
further note that providers should refer to their State Medicaid 
program for requirements on submission methods and deadlines for the 
Medicaid EHR Incentive Program.
c. CQM Reporting Form and Method for the Medicare EHR Incentive Program 
in 2016
    In the EHR Incentive Program Stage 2 final rule (77 FR 54087 
through 54089), we finalized the reporting methods for eligible 
hospitals and CAHs for the Medicare EHR Incentive Program, which 
included reporting electronically or by attestation. We finalized that 
eligible hospitals and CAHs that are beyond their first year of 
meaningful use will be required to electronically submit the selected 
16 CQMs. Subsequent to the Stage 2 final rule, we determined that 
electronic submission of aggregate-level data using QRDA-III would not 
be feasible in 2014 and 2015, and thus, eligible hospitals and CAHs 
would have the option to continue to report aggregate CQM results 
through attestation for the reporting periods in 2014 and 2015 (78 FR 
50904 through 50905; 79 FR 50321 through 50322).
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24612 through 
24613), we proposed to continue our existing policy that eligible 
hospitals and CAHs in any year of participation in the Medicare EHR 
Incentive Program in 2016 may report CQMs by attestation or 
electronically using the options previously outlined for electronic 
reporting either for single program participation in the Medicare EHR 
Incentive Program, or for participation in multiple programs if the 
requirements of the aligned quality program are met. The options for 
CQM submission for eligible hospitals and CAHs in the Medicare EHR 
Incentive Program are as follows:
     Eligible hospital and CAH options for Medicare EHR 
Incentive Program participation (single program participation)
    ++ Option 1: Attest to CQMs through the EHR Registration & 
Attestation System.
    ++ Option 2: Electronically report CQMs through QualityNet Portal.
     Eligible hospital and CAH options for electronic reporting 
for multiple programs (for example: EHR Incentive Program plus Hospital 
IQR Program participation)--Electronically report through QualityNet 
Portal.
    For the Medicaid EHR Incentive Program, States will continue to be 
responsible for determining whether and how electronic reporting of 
CQMs would occur, or if they wish to allow reporting through 
attestation. Any changes that States make to their CQM reporting 
methods must be submitted through the State Medicaid Health IT Plan 
(SMHP) process for CMS review and approval prior to being implemented.
    We proposed to continue our policy that electronic submission of 
CQMs will require the use of the most recent release of the CQM version 
for each CQM to which the EHR is certified. For electronic reporting in 
2016, this means eligible hospitals and CAHs would be required to use 
the Spring 2015 release of the CQMs available at the CMS eCQM Library 
(http://cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/eCQM_Library.html). We noted that an EHR certified 
for CQMs under the 2014 Edition certification criteria does not need to 
be recertified each time it is updated to a more recent version of the 
CQMs. (For further information on CQM reporting, we refer readers to 
the EHR Incentive Program Web site where guides and tip sheets are 
available for each reporting option (www.CMS.gov/ehrincentiveprograms).) However, we stated that we encourage EHR 
developers to test any updates, including any changes to the CQMs and 
changes to the CMS reporting requirements based on the CMS QRDA 
implementation guide, on an annual basis.
    The form and method of electronic submission are further explained 
in subregulatory guidance and the certification process. For example, 
the following documents are updated annually to reflect the most recent 
CQM electronic specifications: The CMS QRDA Implementation Guide; 
program specific performance calculation guidance; and CQM electronic 
specifications and guidance documents. These documents are located on 
the CMS eCQM Library (http://www.cms.gov/Regulations-and-Guidance/
Legislation/EHRIncentivePrograms/eCQM_Library.html).
    We invited public comments on this proposal.
    Comment: Several commenters supported the proposal to allow 
eligible hospitals and CAHs to report CQMs by

[[Page 49759]]

attestation or electronically. A few commenters stated that they would 
prefer to attest to their CQMs than to submit them electronically.
    Response: We appreciate the commenters' support of our proposal.
    Comment: Some commenters noted that the Hospital IQR Program is not 
required for CAHs, and requested clarification on how the alignment 
between the Hospital IQR Program and the EHR Incentive Program for 
electronically submitted CQMs and the method of reporting would impact 
CAHs seeking to electronically submit their CQM data.
    Response: We agree that the Hospital IQR Program is not required 
for CAHs. Only subsection (d) hospitals are subject to the requirements 
and payment reductions of the Hospital IQR Program. For the EHR 
Incentive Program, CAHs may continue to report their CQM data by 
attestation in CY 2016. However, we encourage CAHs to submit their CQMs 
electronically through the QualityNet portal. We believe electronic 
submission of CQMs is an important next step in the meaningful use of 
certified EHR technology, and encourage CAHs to begin submitting CQMs 
electronically in 2016. We further note that, in the Stage 3 proposed 
rule (80 FR 16770), CMS has proposed to require electronic submission 
of CQMs starting in 2018 and thus encourage CAHs to begin 
electronically reporting CQMs as soon as feasible.
    Comment: Several commenters expressed concerns regarding the timing 
of the annual update cycle for CQMs and stated that EHR vendors need 
more time to update their EHRs. Some commenters suggested that updates 
be minimal, or that the new specifications for CQMs be released well in 
advance of their implementation.
    Response: We appreciate the commenters' concerns, and note that the 
CQM electronic specifications are posted at least 6 months prior to the 
reporting period. We believe it is important to reflect the most recent 
clinical guidance in CQMs, and therefore seek to find an appropriate 
balance between the timing of the posting of CQM electronic 
specifications and the reporting period for those CQMs.
    Comment: Several commenters again requested clarification as to 
whether vendors would be required to recertify their EHRs when CQMs are 
updated. A few commenters suggested that recertification be required 
with each update to the CQMs.
    Response: We appreciate this feedback and note that, under our 
policy stated in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50323), an 
EHR certified for CQMs under the 2014 Edition certification criteria 
does not need to be recertified each time it is updated to a more 
recent version of the CQMs. However, we encourage EHR developers to 
test any updates, including any changes to the CQMs and changes to the 
CMS reporting requirements based on the CMS QRDA implementation guide, 
on an annual basis.
    After consideration of the public comments we received, we are 
finalizing our proposals to allow eligible hospitals and CAHs in any 
year of participation in the Medicare EHR Incentive Program in 2016 to 
report CQMs by attestation or electronically, and to continue our 
policy that electronic submission of CQMs will require the use of the 
most recent release of the CQM version. We note that an EHR certified 
for CQMs under the 2014 Edition certification criteria does not need to 
be recertified each time it is updated to a more recent version of the 
CQMs.
    Several commenters sought clarification regarding the requirement 
to submit QRDA-I data, and asking whether the QRDA-III option would be 
available to eligible hospitals and CAHs for reporting to the EHR 
Incentive Program and the Hospital IQR Programs. We note that, in the 
EHR Incentive Program Stage 3 proposed rule (80 FR 16771), we proposed 
to remove the QRDA-III option for eligible hospitals and CAHs. 
Therefore, we refer readers to that proposed rule for further 
discussion of this proposal. Due to the timing of the expected 
publication of the Stage 3 final rule and the questions raised 
concerning this topic in the public comments on the FY 2016 IPPS/LTCH 
PPS proposed rule, we are addressing our proposal to remove the QRDA-
III option in this FY 2016 IPPS/LTCH PPS final rule instead of in the 
upcoming Stage 3 final rule. We note the public comment period for the 
Stage 3 proposed rule ended on May 29, 2015 (80 FR 16732). Below is a 
summary of the public comments we received in response to our proposal 
in the Stage 3 proposed rule to remove the QRDA-III option, as well as 
comments received on this topic in response to the FY 2016 IPPS/LTCH 
PPS proposed rule.
    Comment: Many commenters stated concerns over patient privacy using 
the QRDA-I submission method and stated that no personally identifiable 
information should be collected for quality reporting purposes.
    Response: While we appreciate the commenters' concerns, we believe 
patient privacy is protected through the security precautions put in 
place to collect QRDA-I data. With the QualityNet Secure Portal's 
release in July 2014, CMS complied with OMB Memorandum 04-04, which 
requires all Federal systems that collect Protected Health Information 
(PHI) and are accessed electronically to implement identity management 
processes, which include both identity proofing and user 
authentication. Identity proofing and user authentication also are 
requirements of the Federal Information Security Management Act (FISMA) 
and National Institute of Standards and Technology (NIST), as well as 
the HIPAA Security Rule. In addition, the system is required to have 
multi-factor authentication which provides unambiguous identification 
of users by means of the combination of two different components. The 
use of two-factor authentication (a type of multifactor authentication) 
to prove one's identity is based on the premise that an unauthorized 
actor is unlikely to be able to supply both factors required for 
access. If, in an authentication attempt, at least one of the 
components is missing or supplied incorrectly, the user's identity is 
not established with sufficient certainty and access to the asset (for 
example, data) being protected by two-factor authentication then 
remains blocked.
    Comment: Several commenters were concerned about the complexity of 
coding and build efforts of the QRDA-I functionality. The commenters 
stated that the development and implementation effort of the QRDA-I was 
more complex than QRDA-III. Some commenters stated that EHR vendors 
were not prepared to produce QRDA-I files. Some commenters requested 
that CMS maintain the QRDA-III format for hospital quality reporting. A 
few commenters outlined the benefits of the QRDA-III format, and stated 
that it is easier to implement than QRDA-I, less time-consuming to 
submit, provides transparency, and is a more mature standard.
    Response: We understand and appreciate that some commenters prefer 
the QRDA-III over the QRDA-I. However, the QRDA-I provides patient-
centric data and measure calculations independent of the EHR Incentive 
Program, which allows CMS to verify the data for future use in the 
Hospital VBP Program.
    After consideration of the public comments we received, and in 
consideration of the limitations outlined above, we are finalizing our 
proposal to remove the QRDA-III as an option for reporting under the 
Medicare EHR Incentive Program. For 2016 and future

[[Page 49760]]

years, we are requiring QRDA-I for CQM electronic submissions for the 
Medicare EHR Incentive Program. We note that QRDA-I data are essential 
for data verification for the Hospital VBP Program, and are protected 
by CMS privacy standards. We also note that States would continue to 
have the option, subject to our prior approval, to allow or require 
QRDA-III for CQM reporting.
3. ``CQMs--Report'' Certification Criterion in ONC's 2015 Edition 
Proposed Rule
    In the 2015 Edition proposed rule (80 FR 16814), ONC proposed a 
2015 Edition certification criterion for ``CQMs--report'' \343\ at 
proposed new 45 CFR 170.315(c)(3) as part of the proposed 2015 Edition 
of certification criteria that would require a certified Health IT 
Module to enable a user to electronically create a data file for 
transmission of clinical quality measurement data using the ``base'' 
HL7 (that is, industry-wide, non-program-specific) QRDA Category I and 
Category III standards, at a minimum. ONC also proposed to allow 
optional certification for EHRs according to the CMS ``form and 
manner'' requirements defined in CMS' QRDA Implementation Guide \344\ 
as part of this proposed criterion. We reiterate that this proposed 
certification criterion would apply to EPs, eligible hospitals, and 
CAHs.
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    \343\ As noted in the 2015 Edition proposed rule, ONC proposed 
to title proposed new Sec.  170.315(c)(3) ``CQMs--report'' to better 
align with the use of the term ``report'' throughout the 2015 
Edition. Also, ONC proposed to discontinue to reference 
``electronic'' in the title of certification criteria as it is 
assumes that all functions performed by certified health IT are done 
electronically. See 80 FR 16844.
    \344\ The CMS QRDA Implementation Guide can be accessed at 
http://www.cms.gov/Regulations-and-Guidance/Legislation/
EHRIncentivePrograms/eCQM_Library.html.
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    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24613 through 
24614), for the requirements for the 2015 Edition certification 
criteria, ONC proposed the following at proposed new Sec.  
170.315(c)(3) for clinical quality measurement to state that technology 
certified to the 2015 Edition must enable a user to electronically 
create a data file for transmission of clinical quality measurement 
data which is:
     At a minimum, in accordance with the standards specified 
in Sec.  170.205(h) and Sec.  170.205(k); and
     Optionally, can be electronically accepted by CMS.
    As detailed in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24613 
through 24614), ONC solicited public comment on the versions of the 
Quality Reporting Document Architecture--Category I standard that 
should be adopted under Sec.  170.205(h) and the versions of the 
Quality Reporting Document Architecture--Category III standard that 
should be adopted under Sec.  170.205(k) for individual patient level 
and aggregate level reports, respectively. In order to give full 
consideration to the public comments received on the versions of the 
standards that should be adopted under Sec.  170.205(h) and (k), we are 
not finalizing the ``CQMs-report'' certification criterion in this FY 
2016 IPPS/LTCH PPS final rule. We anticipate finalizing both the 
certification criterion and the versions of the standards that should 
be adopted for this criterion in a subsequent final rule later this 
year. We also intend to address public comments received on both the 
proposed ``CQMs-report'' certification criterion and the versions of 
the standards that should be adopted for this criterion in that same 
rule.
4. CQM Development and Certification Cycle
    We stated in the EHR Incentive Program Stage 2 final rule (77 FR 
54055) that we do not intend to use notice-and-comment rulemaking as 
the means to update or modify CQM specifications. Given the necessity 
to update CQM specifications after they have been published to ensure 
their continued clinical relevance, accuracy, and validity, we publish 
annual updates to the electronic specifications for EHR submission. 
Although we require eligible hospitals and CAHs to submit the most 
updated versions of CQMs when reporting electronically, CEHRT is not 
required to be recertified on annual basis. CMS and ONC understand that 
standards for electronically representing CQMs continue to evolve, and 
believe there may be value in retesting certified Health IT Modules 
(including CEHRT) periodically to ensure that CQMs are being accurately 
calculated and represented, and that they can be reported to CMS in the 
``form and manner'' required for the Hospital IQR Program and EHR 
Incentive Program. As mentioned previously, CMS and ONC encourage 
health IT developers to retest their certified technology annually, and 
solicited public comments on the appropriate frequency for requiring 
retesting and recertification to the most updated versions of CQMs and 
most recent ``form and manner'' reporting requirements.
    However, given the continuing evolution of technology and clinical 
standards, as well as the need for a predictable cycle from measure 
development to provider data submission, CMS intends to publish a 
request for information (RFI) on the establishment of an ongoing cycle 
for the introduction and certification of new measures, the testing of 
updated measures, and the testing and certification of submission 
capabilities. We encourage readers to submit their insights and 
recommendations for our consideration upon publication of that RFI.
    Comment: Several commenters noted the upcoming RFI and stated their 
intention to comment further when that RFI becomes available.
    Response: We look forward to the comments submitted via the 
upcoming RFI, and note that we will consider all comments before 
proposing a change to our policies.
    Comment: Some commenters expressed concern with the timing of the 
annual update, stating that the publication date of the IPPS final rule 
in late summer, with an implementation date of the updates of January 
1, does not allow adequate time to implement the CQM changes in the 
annual update. Some commenters stated that there should be a minimum of 
18 months between the time of the annual update and when the updates 
need to be implemented. Some commenters suggested that CQMs changes in 
the annual update be limited only to nonsubstantive changes and those 
changes that do not require a change to provider work flows.
    Response: We appreciate these comments and feedback. CQMs are 
updated routinely to account for changes, including, but not limited 
to, changes in billing and diagnosis codes and changes in medical 
practices. In order for CQMs to remain current and clinically valid, 
the specifications must be updated on a regular basis. We note that CQM 
electronic specifications are posted at least 6 months prior to the 
start of the reporting period, and well in advance of the submission 
window. While we understand that this does not allow the suggested 18 
months for vendors to update their EHR products, we believe this 
timeframe allows an adequate amount of time to make those updates while 
ensuring that the CQMs are still current and clinically valid once 
implemented.
    Comment: Several commenters suggested that use of the most recent 
CQM electronic specifications not be required unless EHR vendors also 
are required to update and recertify their EHR products.
    Response: We appreciate the commenters' feedback. However, we note 
that it is not technically feasible for CMS to accept multiple versions 
of the

[[Page 49761]]

CQM specifications. In addition, we note that the most recent version 
of the CQM electronic specifications is required to ensure that the 
most current and clinically valid version of the CQM is being 
implemented and used. We also have received feedback from stakeholders 
regarding the difficulty and expense of having to test and recertify 
CEHRT products to the most recent version of the electronic 
specifications for the CQMs. While we still believe that vendors should 
test and certify their products to the most recent version of the 
electronic specifications for the CQMs when feasible, we understand the 
burdens associated with this requirement and therefore do not require 
that CEHRT products be recertified to the most recent version of the 
electronic specifications for the CQMs with the annual update.

IX. MedPAC Recommendations

    Under section 1886(e)(4)(B) of the Act, the Secretary must consider 
MedPAC's recommendations regarding hospital inpatient payments. Under 
section 1886(e)(5) of the Act, the Secretary must publish in the annual 
proposed and final IPPS rules the Secretary's recommendations regarding 
MedPAC's recommendations. We have reviewed MedPAC's March 2015 ``Report 
to the Congress: Medicare Payment Policy'' and have given the 
recommendations in the report consideration in conjunction with the 
policies set forth in this final rule. MedPAC recommendations for the 
IPPS for FY 2016 are addressed in Appendix B to this final rule.
    For further information relating specifically to the MedPAC reports 
or to obtain a copy of the reports, contact MedPAC at (202) 653-7226, 
or visit MedPAC's Web site at: http://www.medpac.gov.

X. Other Required Information

A. Requests for Data From the Public

    In order to respond promptly to public requests for data related to 
the prospective payment system, we have established a process under 
which commenters can gain access to raw data on an expedited basis. 
Generally, the data are now available on compact disc (CD) format. 
However, many of the files are available on the Internet at: http://
www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/
AcuteInpatientPPS/index.html. We listed the data files and the cost for 
each file, if applicable, in the FY 2016 IPPS/LTCH PPS proposed rule 
(80 FR 24615 through 24616).
    Commenters interested in discussing any data used in constructing 
this final rule should contact Chioma Obi at (410) 786-6050.

B. Collection of Information Requirements

1. Statutory Requirement for Solicitation of Comments
    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    In the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24616 through 
24621), we solicited public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements (ICRs).
2. ICRs for Add-On Payments for New Services and Technologies
    Sections II.I.1. of the preambles of the proposed rule (80 FR 24418 
through 24463) and this final rule discuss add-on payments for new 
services and technologies. Specifically, this section states that 
applicants for add-on payments for new medical services or technologies 
for FY 2017 must submit a formal request. A formal request includes a 
full description of the clinical applications of the medical service or 
technology and the results of any clinical evaluations demonstrating 
that the new medical service or technology represents a substantial 
clinical improvement. In addition, the request must contain a 
significant sample of the data to demonstrate that the medical service 
or technology meets the high-cost threshold.
    We believe the burden associated with this requirement is exempt 
from the PRA under 5 CFR 1320.3(c), which defines the agency collection 
of information subject to the requirements of the PRA as information 
collection imposed on 10 or more persons within any 12-month period. 
This information collection does not impact 10 or more entities in a 
12-month period. For FYs 2008, 2009, 2010, 2011, 2012, 2013, 2014, 
2015, and 2016, we received 1, 4, 5, 3, 3, 5, 5, 7, and 9 applications, 
respectively. We note that two of the nine applications received for FY 
2016 were withdrawn after publication of the proposed rule, as 
indicated in section III.I. of the preamble of this final rule.
    We did not receive any public comments regarding this information 
collection.
3. ICRs for the Occupational Mix Adjustment to the FY 2016 Wage Index 
(Hospital Wage Index Occupational Mix Survey)
    Sections III.E. and F. of the preambles of the proposed rule (80 FR 
24465 through 24467) and this final rule discuss the occupational mix 
adjustment to the proposed and final FY 2016 wage index, respectively. 
While the preambles of these rules do not contain any new ICRs, we note 
that there is an OMB approved information collection request associated 
with the hospital wage index.
    Section 304(c) of Public Law 106-554 amended section 1886(d)(3)(E) 
of the Act to require CMS to collect data at least once every 3 years 
on the occupational mix of employees for each short-term, acute care 
hospital participating in the Medicare program in order to construct an 
occupational mix adjustment to the wage index. We collect the data via 
the occupational mix survey.
    The burden associated with this information collection requirement 
is the time and effort required to collect and submit the data in the 
Hospital Wage Index Occupational Mix Survey to CMS. The aforementioned 
burden is subject to the PRA; it is currently approved under OMB 
control number 0938-0907.
    We did not receive any public comments regarding this information 
collection.
4. Hospital Applications for Geographic Reclassifications by the MGCRB
    Sections III.J.2. of the preambles of the proposed rule (80 FR 
24470 through 24471) and this final rule discuss proposed and finalized 
changes to the wage index based on hospital reclassifications, 
respectively. As stated in those sections, under section 1886(d)(10) of 
the Act, the MGCRB has the authority to accept short-term IPPS hospital 
applications requesting geographic reclassification for wage

[[Page 49762]]

index and to issue decisions on these requests by hospitals for 
geographic reclassification for purposes of payment under the IPPS.
    The burden associated with this application process is the time and 
effort necessary for an IPPS hospital to complete and submit an 
application for reclassification to the MGCRB. The burden associated 
with this requirement is subject to the PRA. It is currently approved 
under OMB control number 0938-0573.
    We did not receive any public comments regarding this information 
collection.
5. Simplified Cost Allocation Methodology for Hospitals
    In sections IV.H. of the preamble of the proposed rule (80 FR 24514 
through 24515), we discussed our proposal to amend the regulations at 
42 CFR 412.302(d)(4) to limit a hospital's ability to elect the 
simplified cost allocation methodology under the terms and conditions 
provided in the instructions for CMS Form 2552 to cost reporting 
periods beginning before October 1, 2015. After consideration of the 
public comments we received, we are not finalizing our proposal to 
limit the election of the simplified cost allocation methodology in 
this final rule. Instead, we are retaining the simplified cost 
allocation methodology with some modifications to afford hospitals 
using the simplified cost allocation methodology flexibility to obtain 
approval from their MACs to use dollar value as an alternative 
statistical basis to square footage for capital-related moveable 
equipment. Based on FY 2013 HCRIS data, less than 100 hospitals have 
elected to use the simplified cost allocation methodology.
    Although we are not finalizing our proposal to eliminate the 
simplified cost allocation methodology for hospitals, but instead are 
affording hospitals greater flexibility to obtain approval from their 
MAC to use dollar value as an alternative statistical basis to square 
footage for capital related moveable equipment, we believe the 
currently approved burden estimates for the Hospital and Health Care 
Complex Cost Report (OMB control number 0938-0050) are still applicable 
to hospitals completing the Hospital and Health Care Complex Cost 
Report. The time required to address this revision will be subsumed in 
the total burden estimate for an entity to comply with all of the 
requirements in the cost report.
    We did not receive any public comments regarding this information 
collection.
6. ICRs for the Hospital Inpatient Quality Reporting (IQR) Program
    The Hospital IQR Program (formerly referred to as the Reporting 
Hospital Quality Data for Annual Payment (RHQDAPU) Program) was 
originally established to implement section 501(b) of the MMA, Public 
Law 108-173. This program expanded our voluntary Hospital Quality 
Initiative. The Hospital IQR Program originally consisted of a 
``starter set'' of 10 quality measures. The collection of information 
associated with the original starter set of quality measures was 
previously approved under OMB control number 0938-0918. All of the 
information collection requirements previously approved under OMB 
control number 0938-0918 have been combined with the information 
collection request previously approved under OMB control number 0938-
1022. We no longer use OMB control number 0938-0918.
    We added additional quality measures to the Hospital IQR Program 
and submitted the information collection request to OMB for approval. 
This expansion of the Hospital IQR Program measures was part of our 
implementation of section 5001(a) of the DRA. Section 
1886(b)(3)(B)(viii)(III) of the Act, added by section 5001(a) of the 
DRA, requires that the Secretary expand the ``starter set'' of 10 
quality measures that were established by the Secretary as of November 
1, 2003, to include measures that the Secretary determines to be 
appropriate for the measurement of the quality of care furnished by 
hospitals in inpatient settings. The burden associated with these 
reporting requirements is currently approved under OMB control number 
0938-1022.
    In section VIII.A.6. of the preamble of this final rule, we are 
finalizing modified versions of our proposed refinements to expand the 
measure cohorts for: (1) The Hospital 30-Day All-Cause, Risk-
Standardized Mortality Rate (RSMR) following Pneumonia Hospitalization 
measure (NQF #0468); and (2) the Hospital 30-Day All-Cause, Risk-
Standardized Readmission Rate (RSRR) following Pneumonia 
Hospitalization measure (NQF #0506). Expanding the measure cohorts to 
include a broader population of patients adds a large number of 
patients, as well as additional hospitals, to these measures. However, 
this expansion will not affect the hospitals' burden because these 
measures are claims-based and, therefore, require no additional effort 
on hospitals' part to submit the required data.
    In section VIII.A.7. of the preamble of this final rule, we are 
finalizing seven of the eight additional proposed measures to the 
Hospital IQR Program measure set. The seven new measures are: (1) 
Hospital Survey on Patient Safety Culture (structural); (2) Kidney/UTI 
Clinical Episode-Based Payment (claims-based); * (3) Cellulitis 
Clinical Episode-Based Payment (claims-based); * (4) Gastrointestinal 
Hemorrhage Clinical Episode-Based Payment (claims-based); * (5) 
Hospital-Level, Risk-Standardized Payment Associated with an Episode-
of-Care for Primary Elective THA/TKA (claims-based); (6) Excess Days in 
Acute Care after Hospitalization for Acute Myocardial Infarction 
(claims-based); and (7) Excess Days in Acute Care after Hospitalization 
for Heart Failure (claims-based). We are not finalizing our proposal to 
add the Lumbar Spine Fusion/Refusion Clinical Episode-Based Payment 
(claims-based) measure. Four of these seven measures are being 
finalized for the FY 2018 payment determination and subsequent years as 
proposed; however, the other three measures, addressing clinical 
episode-based payments and denoted with an (*), are being finalized for 
the FY 2019 payment determination and subsequent years--a modification 
to what was proposed.
    One new measure is structural; the remaining six new measures are 
claims-based. The burden associated with collecting information on the 
structural measure we are finalizing, Hospital Survey on Patient Safety 
Culture, is expected to be minimal, as it involves filling out a one-
time form to report on this measure for a given performance period; 
therefore, its addition will not result in a significant burden 
increase. In total, we estimate a burden of 15 minutes per hospital to 
complete other forms such as the ECE and Measure Exception form, and to 
report structural measures. The estimate of 15 minutes includes all 
previously finalized and newly required structural measures. Because 
the remaining measures we are finalizing are claims-based measures and 
can be calculated based on data that are already reported to the 
Medicare program for payment purposes, we believe no additional 
information collection will be required from the hospitals for the six 
newly finalized claims-based measures.
    We also are finalizing our proposals to remove nine measures. We 
believe that there will be a reduction in collection of information 
burden for hospitals due to our removal of seven of these nine 
measures, which are chart-abstracted: (1) STK-01 Venous Thromboembolism

[[Page 49763]]

Prophylaxis (NQF #0434); (2) STK-06: Discharged on Statin Medication ** 
(NQF #0439); (3) STK-08: Stroke Education ** (NQF endorsement removed); 
(4) VTE-1: Venous Thromboembolism Prophylaxis ** (NQF #0371); (5) VTE-
2: Intensive Care Unit Venous Thromboembolism Prophylaxis ** (NQF 
#0372); (6) VTE-3: Venous Thromboembolism Patients with Anticoagulation 
Overlap Therapy ** (NQF #0373); and (7) AMI-7a Fibrinolytic Therapy 
Received Within 30 Minutes of Hospital Arrival ** (NQF #0164). (A 
double asterisk (**) indicates that we finalized our proposal to retain 
the measure as an electronic clinical quality measure for the FY 2018 
payment determination and subsequent years in section VIII.A.8. of the 
preamble of this final rule.) Due to the burden associated with the 
collection of chart-abstracted data, we estimate that the removal of 
AMI-7a will result in a burden reduction of approximately 219,000 hours 
across all hospitals. In addition, we estimate that the removal of 6 
VTE and STK chart-abstracted measures will result in an information 
collection burden reduction of approximately 522,000 hours across all 
hospitals.
    The remaining two of the nine measures finalized for removal have 
been previously suspended from the Hospital IQR Program. Therefore, 
their removal will not affect information collection burden to 
hospitals. These measures are: IMM-1 Pneumococcal Immunization (NQF 
#1653); and SCIP-Inf-4 Cardiac Surgery Patients with Controlled 
Postoperative Blood Glucose (NQF #0300). The suspension of IMM-1 is 
currently reflected under OMB control number 0938-1022. The suspension 
of SCIP-Inf-4, which was formalized on January 9, 2015,\345\ will be 
reflected in the PRA package being submitted this year under OMB 
control number 0938-1022. In total, we estimate that the removal of 9 
measures will result in a total information collection burden reduction 
of approximately 741,000 hours for the FY 2018 payment determination 
across all hospitals.
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    For the FY 2018 payment determination, we also are finalizing a 
modification of our proposals regarding electronic clinical quality 
measures. Instead of requiring hospitals to report 16 electronic 
clinical quality measures, we are requiring a minimum of 4 electronic 
clinical quality measures. Under this modified policy, no NQS domain 
distribution will be required. In addition, for the FY 2018 payment 
determination, instead of requiring two quarters of data, we are 
requiring that hospitals submit only one quarter of eCQM data (either 
Q3 or Q4) of CY 2016, by February 28, 2017. We also anticipate 
increasing the number of required electronic clinical quality measures 
in future rules to propose a 16 measure requirement. We believe that a 
full year should be enough time for hospitals to address their mapping 
issues and that it is important to continue to make progress towards 
electronic reporting.
    Lastly, in response to comments suggesting that QRDA I be required 
and other comments requesting clarification on our QRDA requirement, we 
are finalizing a modification of our proposal modifying our electronic 
clinical quality measure reporting requirements to include the a policy 
requirement that hospitals must report via QRDA I. We believe the 
delayed reporting period and submission deadlines finalized will 
provide hospitals with adequate time to prepare to report using QRDA I.
    We believe that the total information collection burden associated 
with the electronic clinical quality measure reporting proposal can be 
drawn from the burden outlined for hospitals in the EHR Incentive 
Program Stage 2 final rule (77 FR 54126 through 54133). In that final 
rule, the burden estimate for a hospital to attest and report 16 
electronic clinical quality measures is 2 hours and 40 minutes per 
quarter (77 FR 54132). In total, we expect the burden associated with 
our finalized policy to require hospitals to report 4 electronic 
clinical quality measures for one quarter of data to be 40 minutes per 
hospital, and 2,200 hours total across the approximately 3,300 
hospitals participating in the Hospital IQR Program. We do not 
anticipate any observed change in burden as it relates to the reporting 
via QRDA I.
    We estimate that reporting these electronic clinical quality 
measures can be accomplished by staff with a mean hourly wage of $16.42 
per hour.\346\ 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.\347\ 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) and a total 
cost of $49,214 (2,200 hours x $22.37 per hour) across approximately 
3,300 hospitals participating in the Hospital IQR Program to report 4 
electronic clinical quality measures for either Q3 or Q4 of CY 2016.
---------------------------------------------------------------------------

    \346\ http://www.bls.gov/ooh/healthcare/medical-records-and-health-information-technicians.html.
    \347\ http://www.whitehouse.gov/omb/circulars_a076_a76_incl_tech_correction.
---------------------------------------------------------------------------

    We are finalizing our proposal to change the requirements for 
population and sampling such that hospitals will be required to submit 
population and sample size data only for those measures that a hospital 
submits as chart-abstracted measures under the Hospital IQR Program. We 
believe this finalized proposal will result in a minimal decrease in 
information collection burden as hospitals will not have to report 
population and sample size if they electronically report any of the 
measures that can be reported either as an electronic clinical quality 
measure or via chart-abstraction.
    We also are finalizing our proposal to modify the existing 
processes for validation of chart-abstracted Hospital IQR Program data 
to remove one stratum. We anticipate that if there is any affect, it 
will be that this modification will minimally reduce hospital burden 
regarding the collection of information. For validation of chart-
abstracted data for the FY 2018 payment determination and subsequent 
years, we require hospitals to provide 72 charts per hospital per year 
(with an average page length of 1,500), including 40 charts for HAI 
validation and 32 charts for clinical process of care validation, for a 
total of 108,000 pages per hospital per year. We reimburse hospitals at 
12 cents per photocopied page (79 FR 50346) for a total per hospital 
cost of $12,960. For hospitals providing charts digitally via a re-
writable disc, such as encrypted CD-ROMs, DVDs, or flash drives, we 
will reimburse hospitals at a rate of 40 cents per disc. We do not 
believe any additional burden is associated with data submitting this 
information via Web portal or PDF.
    Under OMB number 0938-1022, we estimated that the total burden 
associated with collection of information and with other activities 
such as sampling and validation for the FY 2017 payment determination 
was 1,781 hours per hospital and 5.9 million hours across approximately 
3,300 hospitals participating in the Hospital IQR Program. Using data 
on chart-abstracted measures from the 3rd quarter in 2013 through the 
2nd quarter in 2014, we have revised our burden estimate to include 
updates to the number of records reported per measure set, as well as 
the time associated with

[[Page 49764]]

data collection. Considering the proposals finalized in this final 
rule, as well as our updated estimates for the number of records 
reported and the time associated with data reporting activities, we 
estimate a total burden of 2,289 hours per hospital and 7.6 million 
hours across approximately 3,300 hospitals participating in the 
Hospital IQR Program for the FY 2018 payment determination. Of the 7.6 
million hours estimated for the total burden, 7.4 million hours are 
associated with collection of information activities and 0.2 million 
hours are associated with other activities such as population and 
sampling, and validation. This burden estimate includes the full 
measure set finalized for the Hospital IQR Program FY 2018 payment 
determination and accounts for burden changes associated with all newly 
finalized measures as well as measures finalized for removal, as 
discussed above in this section.
    This burden estimate accounts for other activities such as 
population and sampling, reviewing reports for claims-based measure 
sets, HAI validation templates, as well as all other forms and 
structural measures. The estimate excludes the burden associated with 
the NHSN and HCAHPS measures, both of which are submitted under 
separate information collection requests and are approved under OMB 
control numbers 0920-0666 and 0938-0981, respectively. The burden 
estimates in this final rule are the estimates for which we are 
requesting OMB approval.
7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) 
Program
    As discussed in sections VIII.B. of the preambles of the proposed 
rule (80 FR 24590) and this final rule, section 1866(k)(1) of the Act 
requires, for purposes of FY 2014 and each subsequent fiscal year, that 
a hospital described in section 1886(d)(1)(B)(v) of the Act (a PPS-
exempt cancer hospital, or a PCH) submit data in accordance with 
section 1866(k)(2) of the Act with respect to such fiscal year.
    In section VIII.B.3. of the preamble of this final rule, we are 
finalizing our policy that PCHs must submit data on three additional 
measures beginning with the FY 2018 program: (1) CDC NHSN Facility-Wide 
Inpatient Hospital-Onset Methicillin-Resistant Staphylococcus aureus 
(MRSA) Bacteremia Outcome Measure (NQF #1716); (2) CDC NHSN Facility-
Wide Inpatient Hospital-Onset Clostridium difficile Infection (CDI) 
Outcome Measure (NQF #1717); and (3) CDC NHSN Influenza Vaccination 
Coverage Among Healthcare Personnel (HCP) Measure (NQF #0431). In 
conjunction with finalizing our policy in section VIII.B.2. of the 
preamble of this final rule to remove the six SCIP measures from the 
PCHQR Program beginning with fourth quarter (Q4) 2015 discharges and 
for subsequent years, the PCHQR measure set will consist of 16 measures 
beginning with the FY 2018 program.
    With respect to finalizing our policy to add three measures 
beginning with the FY 2018 program, this estimate excludes the burden 
associated with two of these measures (the CDC NHSN MRSA measure and 
the CDC NHSN CDI measure), both of which are submitted under separate 
information collection requests and are approved under a separate OMB 
control number (0920-0666).\348\ Using the same methodology as the FY 
2015 IPPS/LTCH PPS final rule,\349\ for the third finalized new measure 
(CDC NHSN HCP measure), we estimate that it will take 10 minutes 
annually per PCH, or an additional 1.83 hours for all PCHs annually to 
report the measure.\350\
---------------------------------------------------------------------------

    \348\ OMB Control Number History. Available at: http://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=0920-0666.
    \349\ FY 2015 IPPS/LTCH PPS final rule (79 FR 50443 through 
50444).
    \350\ Ibid.
---------------------------------------------------------------------------

    Our finalized policy to remove six SCIP measures will reduce the 
burden experienced by PCHs. We estimate a reduction in hourly burden of 
6,468 \351\ hours per year beginning with Q4 2015 and for subsequent 
program years across the 11 PCHs.
---------------------------------------------------------------------------

    \351\ [(49 cases per measure x 4 quarters) + 0.5 (abstraction/
training time)] x 11 PCHs = 6,468 hours per year.
---------------------------------------------------------------------------

    In summary, as a result of our finalized policies, we estimate a 
reduction of 6,466.17 \352\ hours of burden per year associated with 
the reporting for all 11 PCHs beginning with the FY 2018 program. 
Coupled with our estimated salary costs,\353\ we estimate that these 
changes will result in a reduction in annual labor costs of $426,767.22 
beginning with the FY 2018 PCHQR Program.
---------------------------------------------------------------------------

    \352\ 6,468 hours - 1.83 hours = 6,466.17 hours.
    \353\ 6,466.17 hours * $66/hour. [We are now estimating an 
hourly salary of $33 (http://swz.salary.com/salarywizard/Staff-Nurse-RN-Hourly-Salary-Details.aspx). After accounting for employee 
benefits and overhead, this results in a total cost of $66 per labor 
hour].
---------------------------------------------------------------------------

    Comment: One commenter supported CMS' efforts to reduce reporting 
burden. However, the commenter stated that CMS had not considered the 
total burden associated with data collection for the hospital-wide 
surveillance efforts, the development of technical infrastructure, and 
resources to ensure consistent application of measures specifications.
    Response: We appreciate the commenter's support. Because we are 
leveraging the CDC NHSN system in data collection, we confirmed with 
the CDC that all burden associated with the three measures (CDC NHSN 
MRSA, CDC NHSN CDI, and CDC NHSN HCP measures) that we are finalizing, 
including the burden associated with the activities mentioned by the 
commenter, has been accounted for under the OMB control number 0920-
0666.
8. ICRs for the Hospital Value-Based Purchasing (VBP) Program
    In sections IV.F. of the preamble of the proposed rule (80 FR 24498 
through 24509) and this final rule, we discuss requirements for the 
Hospital VBP Program. Specifically, in this final rule, we are 
finalizing our proposal to adopt one new measure beginning with the FY 
2018 program year, the 3-Item Care Transition Measure (CTM-3) (NQF 
#0228). We also are finalizing our proposal to adopt one new measure 
beginning with the FY 2021 program year, the Hospital 30-Day, All-
Cause, Risk-Standardized Mortality Rate (RSMR) Following Chronic 
Obstructive Pulmonary Disease (COPD) Hospitalization Measure (NQF 
#1893) (MORT-30-COPD).
    As required under section 1886(o)(2)(A) of the Act, both of these 
additional measures are required for the Hospital IQR Program. 
Therefore, their inclusion in the Hospital VBP Program does not result 
in any additional burden because the Hospital VBP Program uses data 
that are required for the Hospital IQR Program.
9. ICRs for the Long-Term Care Hospital Quality Reporting Program (LTCH 
QRP)
    As discussed in sections VIII.C.5.a and VIII.C.5.b. of the preamble 
of this final rule, we are retaining the following 12 previously 
finalized quality measures for use in the LTCH QRP:

[[Page 49765]]



 LTCH QRP Quality Measures Previously Adopted for the FY 2015 and FY 2016 Payment Determinations and Subsequent
                                                      Years
----------------------------------------------------------------------------------------------------------------
                                                                                        Final rule(s) in which
           NQF ID                     Measure title          Payment  determination     measure was finalized
----------------------------------------------------------------------------------------------------------------
NQF #0138...................  National Healthcare Safety    FY 2015 payment          FY 2012 IPPS/LTCH PPS final
                               Network (NHSN) Catheter-      determination and        rule; updated in FY 2013
                               Associated Urinary Tract      subsequent years.        IPPS/LTCH PPS final rule.
                               Infection (CAUTI) Outcome
                               Measure.
NQF #0139...................  National Healthcare Safety    FY 2015 payment          FY 2012 IPPS/LTCH PPS final
                               Network (NHSN) Central Line-  determination and        rule; updated in FY 2013
                               Associated Blood Stream       subsequent years.        IPPS/LTCH PPS final rule.
                               Infection (CLABSI) Outcome
                               Measure.
NQF #0678...................  Percent of Residents or       FY 2015 payment          FY 2012 IPPS/LTCH PPS final
                               Patients with Pressure        determination and        rule; updated in FY 2014
                               Ulcers That Are New or        subsequent years *.      IPPS/LTCH PPS final rule.
                               Worsened (Short Stay).
NQF #0680...................  Percent of Residents or       FY 2016 payment          FY 2015 IPPS/LTCH PPS final
                               Patients Who Were Assessed    determination and        rule.
                               and Appropriately Given the   subsequent years.
                               Seasonal Influenza Vaccine
                               (Short Stay).
NQF #0431...................  Influenza Vaccination         FY 2016 payment          FY 2015 IPPS/LTCH PPS final
                               Coverage Among Healthcare     determination and        rule.
                               Personnel.                    subsequent years.
----------------------------------------------------------------------------------------------------------------
* Adopted in this FY 2016 IPPS/LTCH PPS final rule for the FY 2018 payment determination and subsequent years


 LTCH QRP Quality Measures Previously Adopted for the FY 2017 and FY 2018 Payment Determinations and Subsequent
                                                      Years
----------------------------------------------------------------------------------------------------------------
                                                                                        Final rule(s) in which
           NQF ID                     Measure title          Payment  determination     measure was finalized
----------------------------------------------------------------------------------------------------------------
NQF #1716...................  National Healthcare Safety    FY 2017 and Subsequent   FY 2014 IPPS/LTCH PPS final
                               Network (NHSN) Facility-      Years.                   rule.
                               Wide Inpatient Hospital-
                               Onset Methicillin-Resistant
                               Staphylococcus aureus
                               (MRSA) Bacteremia Outcome
                               Measure.
NQF #1717...................  National Healthcare Safety    FY 2017 payment          FY 2014 IPPS/LTCH PPS final
                               Network (NHSN) Facility-      determination and        rule.
                               Wide Inpatient Hospital-      subsequent years.
                               Onset Clostridium difficile
                               Infection (CDI) Outcome
                               Measure.
NQF #2512...................  All-Cause Unplanned           FY 2017 payment          FY 2014 IPPS/LTCH PPS final
                               Readmission Measure for 30    determination and        rule.
                               Days Post[dash]Discharge      subsequent years **.
                               from Long-Term Care
                               Hospitals **.
Application of NQF #0674....  Percent of Residents          FY 2018 payment          FY 2014 IPPS/LTCH PPS final
                               Experiencing One or More      determination and        rule.
                               Falls with Major Injury       subsequent years **.
                               (Long Stay).
NQF #2631 *.................  Percent of Long-Term Care     FY 2018 payment          FY 2015 IPPS/LTCH PPS final
                               Hospital Patients with an     determination and        rule.
                               Admission and Discharge       subsequent years.
                               Functional Assessment and a
                               Care Plan That Addresses
                               Function.
NQF #2632 *.................  Functional Status Outcome     FY 2018 payment          FY 2015 IPPS/LTCH PPS final
                               Measure: Change in Mobility   determination and        rule.
                               Among Long-Term Care          subsequent years.
                               Hospital Patients Requiring
                               Ventilator Support.
Not NQF endorsed............  National Healthcare Safety    FY 2018 payment          FY 2015 IPPS/LTCH PPS final
                               Network (NHSN) Ventilator-    determination and        rule.
                               Associated Event (VAE)        subsequent years.
                               Outcome Measure.
----------------------------------------------------------------------------------------------------------------
* Endorsed on July 23, 2015. We refer readers to: http://www.qualityforum.org/ProjectMeasures.aspx?projectID=73867, NQF #2631 and NQF #2632.
** Adopted in this FY 2016 IPPS/LTCH PPS final rule for the FY 2018 payment determination and subsequent years.

    As discussed in sections VIII.C.6.a. through c. of the preamble of 
this final rule, we are finalizing our proposal to use three previously 
finalized quality measures in the LTCH QRP for the FY 2018 payment 
determination and subsequent years. We are finalizing our proposal to 
use two of these measures in order to establish their use as cross-
setting measures that satisfy the required addition of quality measures 
under the domains of skin integrity and incidence of major falls, as 
mandated by section 1899B of the Act, as added by the IMPACT Act: 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (Short Stay) (NQF #0678), and an Application of Percent of 
Residents Experiencing One or More Falls with Major Injury (Long Stay) 
(NQF #0674). We are finalizing our proposal to use a third previously 
finalized measure, All-Cause Unplanned Readmission Measure for 30 Days 
Post-Discharge From LTCHs (NQF #2512), in order to establish the newly 
NQF-endorsed status of this measure.
    Finally, as discussed in sections VIII.C.6.d. of the preamble of 
this final rule, for the FY 2018 payment determination and subsequent 
years, we are finalizing our proposal to add one new cross-setting 
functional status process measure quality measure to the LTCH QRP: An 
application of Percent of LTCH Patients with an Admission and Discharge 
Functional Assessment and a Care Plan That Addresses Function (NQF 
#2631; endorsed on 07/23/2015). This measure satisfies the addition of 
a quality measure under the third initially

[[Page 49766]]

required domain of functional status, as mandated by section 1899B of 
the Act as added by the IMPACT Act.
    Six of the measures being retained in this FY 2016 IPPS/LTCH PPS 
final rule are currently collected via the CDC NHSN. The NHSN is a 
secure, Internet-based HAI tracking system maintained and managed by 
the CDC. NHSN data collection occurs via a Web-based tool hosted by the 
CDC and provided free of charge to facilities. In this final rule, we 
have not adopted any new quality measures that are collected via the 
CDC's NHSN. Therefore, at this time, there is no additional burden 
related to this submission method. Any burden related to NHSN-based 
quality measures we have retained in this final rule, has been 
previously discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50443 through 50445), and has been previously approved under OMB 
control number 0920-0666, with an expiration date of November, 31, 
2016.
    The All-Cause Unplanned Readmission Measure for 30 Days Post-
Discharge from LTCHs (NQF #2512), which we have finalized in this final 
rule, is a Medicare FFS claims-based measure. Because claims-based 
measures can be calculated based on data that are already reported to 
the Medicare program for payment purposes, we believe no additional 
information collection will be required from the LTCHs.
    The remaining 6 measures will be collected utilizing the LTCH CARE 
Data Set. The LTCH CARE Data Set, in its current form (version 2.01), 
has been approved under OMB control number 0938-1163. Version 2.01 of 
the LTCH CARE Data Set contains data elements related to patient 
demographic data, various voluntary questions, as well as data elements 
related to the following quality measures:
     Percent of Residents or Patients with Pressure Ulcers That 
Are New or Worsened (Short Stay) (NQF #0678)
     Percent of Residents or Patients Who Were Assessed and 
Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF 
#0680)
    The LTCH CARE Data Set Version 3.00 is available for download at 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html and contains those data elements included in version 
2.01, as well as additional data elements in order to allow for the 
collection of data associated with the following quality measures:
     Application of Percent of Residents Experiencing One or 
More Falls with Major Injury (Long Stay) (NQF #0674) (previously 
finalized in the FY 2015 IPPS/LTCH PPS final rule)
     Application of Percent of LTCH Patients with an Admission 
and Discharge Functional Assessment and a Care Plan That Addresses 
Function (NQF #2631; endorsed on 07/23/2015) (previously finalized in 
the FY 2015 IPPS/LTCH PPS final rule)
     Functional Status Outcome Measure: Change in Mobility 
Among LTCH Patients Requiring Ventilator Support (NQF #2632, endorsed 
on 07/23/2015) (previously finalized in the FY 2015 IPPS/LTCH PPS final 
rule)
    Each time we add new data elements to the LTCH CARE Data Set 
related to newly proposed or finalized LTCH QRP quality measures, we 
are required by the Paperwork Reduction Act (PRA) to submit the 
expanded data collection instrument to OMB for review and approval. 
Section 1899B(m) of the Act, as added by IMPACT Act, provides that the 
PRA requirements do not apply to section 1899B of the Act and the 
sections referenced in subsection 1899B(a)(2)(B) of the Act that 
require modifications in order to achieve the standardization of 
patient assessment data. We believe that version 3.00 of the LTCH CARE 
Data Set falls under the PRA provisions in 1899B(m) of the Act. We 
believe that all additional data elements added to version 3.00 of the 
LTCH CARE Data Set are for the purpose of standardizing patient 
assessment data, as required under section 1899B(a)(1)(B) of the Act.
    A comprehensive list of all data elements included in version 3.00 
of the LTCH CARE Data Set will be made available in the LTCH QRP 
Manual, as will be a change table outlining the differences between 
version 2.01 and version 3.00 of the LTCH CARE Data Set. The LTCH QRP 
Manual is accessible on the following LTCH Quality Reporting Measures 
Information Web page: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html. For a discussion of burden related 
to version 3.00 of the LTCH CARE Data Set, we refer readers to section 
I.M. of Appendix A of this final rule.
    While the reporting of quality measures is an information 
collection, the PRA does not apply in accordance with the amendments to 
the Act made by IMPACT Act. More specifically, section 1899B(m) of the 
Act provides that the PRA requirements do not apply to section 1899B of 
the Act and the sections referenced in subsection 1899B(a)(2)(B) of the 
Act that require modifications in order to achieve the standardization 
of patient assessment data.
    We did not receive public comments specific to this section of the 
FY 2016 IPPS/LTCH PPS proposed rule. However, we did receive several 
public comments related to the burden associated with specific proposed 
quality measures. Those comments and our responses are found in 
sections VIII.C.6.a. through VIII.C.6.d. of the preamble of this final 
rule.
10. ICRs for the Electronic Health Record (EHR) Incentive Program and 
Meaningful Use
    In section VIII.D. of the preamble of this final rule, we discuss 
our proposals to align the Medicare EHR Incentive Program reporting and 
submission timelines for electronically submitted clinical quality 
measures for eligible hospitals and CAHs with the Hospital IQR 
Program's reporting and submission timelines for 2016. Because these 
proposals for data collection which we are finalizing in this final 
rule will align with the reporting requirements in place for the 
Hospital IQR Program and eligible hospitals and CAHs still have the 
option to submit their clinical quality measures via attestation for 
the Medicare EHR Incentive Program, we do not believe there is any 
additional burden for this collection of information.

List of Subjects in 42 CFR Part 412

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

    For the reasons stated in the preamble, the Centers for Medicare & 
Medicaid Services is amending 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 Public Law 106-113 (113 Stat. 
1501A-332), sec. 1206 of Public Law 113-67, and sec. 112 of Public 
Law 113-93.


0
2. Section 412.23 is amended by--
0
a. In paragraph (e)(3)(i), removing the cross-reference ``paragraphs 
(e)(3)(ii) through (v)'' wherever it appears and adding in its place 
the cross-reference ``paragraphs (e)(3)(ii) through (vi)''.
0
b. Adding new paragraph (e)(3)(vi).
0
c. Revising paragraph (e)(6)(ii) introductory text.

[[Page 49767]]

    The addition and revision reads as follows:


Sec.  412.23  Excluded hospitals: Classifications.

* * * * *
    (e) * * *
    (3) * * *
    (vi) For cost reporting periods beginning on or after October 1, 
2015, the Medicare inpatient days and discharges that are paid at the 
site neutral payment rate specified at Sec.  412.522(c)(1) or paid 
under a Medicare Advantage plan (Medicare Part C) will not be included 
in the calculation of the Medicare inpatient average length of stay 
specified under paragraph (e)(2)(i) of this section. The provisions of 
this paragraph (e)(3)(vi) only apply to a hospital that is classified 
as of December 10, 2013, as a long-term care hospital (as defined in 
this section) for purposes of determining whether the requirements of 
paragraph (e)(2)(i) or (e)(2)(ii) of this section are met.
* * * * *
    (6) * * *
    (ii) Exception. The moratorium specified in paragraph (e)(6)(i) of 
this section is not applicable to the establishment and classification 
of a long-term care hospital that meets the requirements of paragraphs 
(e) introductory text and (e)(1) through (e)(5) of this section, or a 
long-term care hospital satellite facility that meets the requirements 
of Sec.  412.22(h), if the long-term care hospital or long-term care 
satellite facility meets one or more of the following criteria on or 
before December 27, 2007, or prior to April 1, 2014, as applicable:
* * * * *

0
3. Section 412.64 is amended by revising paragraphs (d)(1)(vi), (h)(4) 
introductory text, and (h)(4)(vi) introductory text, to read as 
follows:


Sec.  412.64  Federal rates for inpatient operating costs for Federal 
fiscal year 2005 and subsequent fiscal years.

* * * * *
    (d) * * *
    (1) * * *
    (vi) For fiscal years 2015 and 2016, the percentage increase in the 
market basket index (as defined in Sec.  413.40(a)(3) of this chapter) 
for prospective payment hospitals, subject to the provisions of 
paragraphs (d)(2) and (3) of this section, less a multifactor 
productivity adjustment (as determined by CMS) and less 0.2 percentage 
point.
* * * * *
    (h) * * *
    (4) For discharges on or after October 1, 2004 and before October 
1, 2016, CMS establishes a minimum wage index for each all-urban State, 
as defined in paragraph (h)(5) of this section. This minimum wage index 
value is computed using the following methodology:
* * * * *
    (vi) For discharges on or after October 1, 2012 and before October 
1, 2016, the minimum wage index value for the State is the higher of 
the value determined under paragraph (h)(4)(iv) of this section or the 
value computed using the following alternative methodology:
* * * * *

0
4. Section 412.101 is amended by revising paragraphs (b)(2)(i), 
(b)(2)(ii), (c)(1), (c)(2) introductory text, and (d) to read as 
follows:


Sec.  412.101  Special treatment: Inpatient hospital payment adjustment 
for low-volume hospitals.

* * * * *
    (b) * * *
    (2) * * *
    (i) For FY 2005 through FY 2010 and FY 2018 and subsequent fiscal 
years, a hospital must have fewer than 200 total discharges, which 
includes Medicare and non-Medicare discharges, during the fiscal year, 
based on the hospital's most recently submitted cost report, and be 
located more than 25 road miles (as defined in paragraph (a) of this 
section) from the nearest ``subsection (d)'' (section 1886(d) of the 
Act) hospital.
    (ii) For FY 2011 through FY 2017, a hospital must have fewer than 
1,600 Medicare discharges, as defined in paragraph (a) of this section, 
during the fiscal year, based on the hospital's Medicare discharges 
from the most recently available MedPAR data as determined by CMS, and 
be located more than 15 road miles, as defined in paragraph (a) of this 
section, from the nearest ``subsection (d)'' (section 1886(d) of the 
Act) hospital.
* * * * *
    (c) * * *
    (1) For FY 2005 through FY 2010 and FY 2018 and subsequent fiscal 
years, the adjustment is an additional 25 percent for each Medicare 
discharge.
    (2) For FY 2011 through FY 2017, the adjustment is as follows:
* * * * *
    (d) Eligibility of new hospitals for the adjustment. For FYs 2005 
through 2010 and FY 2018 and subsequent fiscal years, a new hospital 
will be eligible for a low-volume adjustment under this section once it 
has submitted a cost report for a cost reporting period that indicates 
that it meets discharge requirements during the applicable fiscal year 
and has provided its Medicare administrative contractor with sufficient 
evidence that it meets the distance requirement, as specified under 
paragraph (b)(2) of this section.

0
5. Section 412.106 is amended by revising paragraph (g)(1)(iii)(C) to 
read as follows:


Sec.  412.106  Special treatment: Hospitals that serve a 
disproportionate share of low-income patients.

* * * * *
    (g) * * *
    (1) * * *
    (iii) * * *
    (C) For fiscal years 2014 and 2015, CMS will base its estimates of 
the amount of hospital uncompensated care on the most recent available 
data on utilization for Medicaid and Medicare SSI patients, as 
determined by CMS in accordance with paragraphs (b)(2)(i) and (b)(4) of 
this section. For fiscal year 2016, CMS will base its estimates of the 
amount of hospital uncompensated care on utilization data for Medicaid 
and Medicare SSI patients, as determined by CMS in accordance with 
paragraphs (b)(2)(i) and (b)(4) of this section, using data on Medicaid 
utilization from 2012 or 2011 cost reports from the most recent HCRIS 
database extract, the 2012 cost report data submitted to CMS by IHS 
hospitals, and the most recent available data on Medicare SSI 
utilization.
* * * * *


Sec.  412.108  [Amended]

0
6. In Sec.  412.108, paragraph (a)(1) introductory text and paragraph 
(c)(2)(iii) introductory text, remove the date ``April 1, 2015'' and 
add in its place the date ``October 1, 2017''.

0
7. Section 412.503 is amended by adding a definition of ``Subsection 
(d) hospital'' in alphabetical order, to read as follows:


Sec.  412.503  Definitions.

* * * * *
    Subsection (d) hospital means, for purposes of Sec.  412.526, a 
hospital defined in section 1886(d)(1)(B) of the Social Security Act 
and includes any hospital that is located in Puerto Rico and that would 
be a subsection (d) hospital as defined in section 1886(d)(1)(B) of the 
Social Security Act if it were located in one of the 50 States.
* * * * *

0
8. Section 412.507 is revised to read as follows:


Sec.  412.507  Limitation on charges to beneficiaries.

    (a) Prohibited charges. Except as provided in paragraph (b) of this 
section, a long-term care hospital may not charge a beneficiary for any 
covered

[[Page 49768]]

services for which payment is made by Medicare, even if the hospital's 
costs of furnishing services to that beneficiary are greater than the 
amount the hospital is paid under the prospective payment system. If 
Medicare has paid at the full LTCH prospective payment system standard 
Federal payment rate, that payment applies to the hospital's costs for 
services furnished until the high-cost outlier threshold is met. If 
Medicare pays less than the full LTCH prospective payment system 
standard Federal payment rate and payment was not made at the site 
neutral payment rate, that payment only applies to the hospital's costs 
for those costs or days used to calculate the Medicare payment. If 
Medicare has paid at the full site neutral payment rate, that payment 
applies to the hospital's costs for services furnished until the high-
cost outlier is met.
    (b) Permitted charges. (1) A long-term care hospital that receives 
a payment at the full LTCH prospective payment system standard Federal 
payment rate or the site neutral payment rate may only charge the 
Medicare beneficiary for the applicable deductible and coinsurance 
amounts under Sec. Sec.  409.82, 409.83, and 409.87 of this chapter, 
and for items and services as specified under Sec.  489.20(a) of this 
chapter.
    (2) A long-term care hospital that receives a payment at less than 
the full LTCH prospective payment system standard Federal payment rate 
for a short-stay outlier case, in accordance with Sec.  412.529 (which 
would not include any discharge paid at the site neutral payment rate), 
may only charge the Medicare beneficiary for the applicable deductible 
and coinsurance amounts under Sec. Sec.  409.82, 409.83, and 409.87 of 
this chapter, for items and services as specified under Sec.  489.20(a) 
of this chapter, and for services provided during the stay that were 
not the basis for the short-stay adjusted payment.

0
9. Section 412.517 is amended by adding paragraph (c) to read as 
follows:


Sec.  412.517  Revision of LTC-DRG group classifications and weighting 
factors.

* * * * *
    (c) Beginning in FY 2016, the annual recalibration of the weighting 
factors described in paragraph (a) of this section is determined using 
long-term care hospital discharges described in Sec.  412.522(a)(2) (or 
that would have been described in such section had the application of 
the site neutral payment rate been in effect at the time of the 
discharge).

0
10. Section 412.521 is amended by revising paragraph (a)(2) to read as 
follows:


Sec.  412.521  Basis of payment.

    (a) * * *
    (2) Except as provided for in Sec.  412.526, the amount of payment 
under the prospective payment system is based on either the long-term 
care hospital prospective payment system standard Federal payment rate 
established in accordance with Sec.  412.523, including adjustments 
described in Sec.  412.525, or the site neutral payment rate 
established in accordance with Sec.  412.522(c), or, if applicable 
during a transition period, the blend of the LTCH PPS standard Federal 
payment rate and the applicable site neutral payment rate described in 
Sec.  412.522(c)(3).
* * * * *

0
11. Section 412.522 is added to read as follows:


Sec.  412.522  Application of site neutral payment rate.

    (a) General. For discharges in cost reporting periods beginning on 
or after October 1, 2015--
    (1) Except as provided for in paragraph (b) of this section, all 
discharges are paid based on the site neutral payment rate as 
determined under the provisions of paragraph (c) of this section.
    (2) Discharges that meet the criteria for exclusion from site 
neutral payment rate specified in paragraph (b) of this section are 
paid based on the standard Federal prospective payment rate established 
under Sec.  412.523.
    (b) Criteria for exclusion from the site neutral payment rate--(1) 
General. A discharge that meets the following criteria is excluded from 
the site neutral payment rate specified under this section.
    (i) The discharge from the long-term care hospital does not have a 
principal diagnosis relating to a psychiatric diagnosis or to 
rehabilitation based on the LTC-DRG assignment of the discharge under 
Sec.  412.513; and
    (ii) The admission to the long-term care hospital was immediately 
preceded by a discharge from a subsection (d) hospital and meets either 
the intensive care unit criterion specified in paragraph (b)(2) of this 
section or the ventilator criterion specified in paragraph (b)(3) of 
this section. In order for an admission to a long-term care hospital to 
be considered immediately preceded for purposes of this section, the 
patient discharged from the subsection (d) hospital must be directly 
admitted to the long-term care hospital.
    (2) Intensive care unit criterion. In addition to meeting the 
requirements of paragraph (b)(1) of this section, the discharge from 
the subsection (d) hospital that immediately preceded the admission to 
the long-term care hospital includes at least 3 days in an intensive 
care unit (as defined in Sec.  413.53(d) of this chapter), as evidenced 
by at least one of the revenue center codes on the claim for the 
discharge that indicate such services were provided for the requisite 
number of days during the stay.
    (3) Ventilator criterion. In addition to meeting the requirements 
of paragraph (b)(1) of this section, the discharge from the long-term 
care hospital is assigned to a LTC-DRG based on the patient's receipt 
of ventilator services of at least 96 hours, as evidenced by the 
procedure code on the discharge bill indicating such services were 
provided during the stay.
    (c) Site neutral payment rate--(1) General. Subject to the 
provisions of paragraph (c)(2) of this section, the site neutral 
payment rate is the lower of--
    (i) The inpatient hospital prospective payment system comparable 
per diem amount determined under Sec.  412.529(d)(4), including any 
applicable outlier payments specified in Sec.  412.525(a); or
    (ii) 100 percent of the estimated cost of the case determined under 
the provisions of Sec.  412.529(d)(2). The provisions for cost-to-
charge ratios at Sec.  412.529(f)(4)(i) through (iii) apply to the 
calculation of the estimated cost of the case under this paragraph.
    (2) Adjustments. CMS adjusts the payment rate determined under 
paragraph (c)(1) of this section to account for--
    (i) Outlier payments, by applying a reduction factor equal to the 
estimated proportion of outlier payments under Sec.  412.525(a) payable 
for discharges from a long-term care hospital described in paragraph 
(a)(1) of this section to total estimated payments under the long-term 
care hospital prospective payment system to discharges from a long-term 
care hospital described in paragraph (a)(1) of this section. The 
adjustment under this paragraph (c)(2)(i) does not include the portion 
of the blended payment rate described in paragraph (c)(3)(ii) of this 
section.
    (ii) A 3-day or less interruption of a stay and a greater than 3-
day interruption of a stay, as provided for in Sec.  412.531. For 
purposes of the application of the provisions of Sec.  412.531 to 
discharges from a long-term care hospital described under paragraph 
(a)(1) of this section, the long-term care hospital prospective payment 
system

[[Page 49769]]

standard Federal payment-related terms, such as ``LTC-DRG payment,'' 
``full Federal LTC-DRG prospective payment,'' and ``Federal prospective 
payment,'' mean the site neutral payment rate calculated under 
paragraph (c) of this section.
    (iii) The special payment provisions for long-term care hospitals-
within-hospitals and satellite facilities of long-term care hospitals 
specified in Sec.  412.534.
    (iv) The special payment provisions for long-term care hospitals 
and satellite facilities of long-term care hospitals that discharged 
Medicare patients admitted from a hospital not located in the same 
building or on the same campus as the long-term care hospital or 
satellite facility of the long-term care hospital, as provided in Sec.  
412.536.
    (3) Transition. For discharges in cost reporting periods beginning 
on or after October 1, 2015 and on or before September 30, 2017, 
payment for discharges under paragraph (c)(1) of this section are made 
using a blended payment rate, which is determined as--
    (i) 50 percent of the site neutral payment rate amount for the 
discharge as determined under paragraph (c)(1) of this section; and
    (ii) 50 percent of the standard Federal prospective payment rate 
amount for the discharge as determined under Sec.  412.523.
    (d) Discharge payment percentage. (1) For purposes of this section, 
the discharge payment percentage is a ratio, expressed as a percentage, 
of Medicare discharges that meet the criteria for exclusion from the 
site neutral payment rate as described under paragraph (a)(2) of this 
section to total Medicare discharges paid under this subpart during the 
cost reporting period.
    (2) CMS will inform each long-term care hospital of its discharge 
payment percentage, as determined under paragraph (d)(1) of this 
section, for each cost reporting period beginning on or after October 
1, 2015.

0
12. Section 412.523 is amended by adding paragraph (c)(3)(xii) and 
revising paragraph (d)(1) to read as follows:


Sec.  412.523  Methodology for calculating the Federal prospective 
payment rates.

* * * * *
    (c) * * *
    (3) * * *
    (xii) For long-term care hospital prospective payment system fiscal 
year beginning October 1, 2015, and ending September 30, 2016. The LTCH 
PPS standard Federal payment rate for the long-term care hospital 
prospective payment system beginning October 1, 2015, and ending 
September 30, 2016, is the standard Federal payment rate for the 
previous long-term care hospital prospective payment system fiscal year 
updated by 1.7 percent, and further adjusted, as appropriate, as 
described in paragraph (d) of this section.
* * * * *
    (d) * * *
    (1) Outlier payments. CMS adjusts the LTCH PPS standard Federal 
payment rate by a reduction factor of 8 percent, the estimated 
proportion of outlier payments under Sec.  412.525(a) payable for 
discharges described in Sec.  412.522(a)(2).
* * * * *

0
13. Section 412.525 is amended by revising paragraphs (a)(1), (2), and 
(3) and adding paragraph (a)(5), to read as follows:


Sec.  412.525  Adjustments to the Federal prospective payment.

    (a) * * *
    (1) CMS provides for an additional payment to a long-term care 
hospital if its estimated costs for a patient exceed the applicable 
long-term care hospital prospective payment system payment plus an 
applicable fixed-loss amount. For each long-term care hospital 
prospective payment system payment year, CMS annually establishes a 
fixed-loss amount that is the maximum loss that a long-term care 
hospital would incur under the long-term care hospital prospective 
payment system for a case with unusually high costs before receiving an 
additional payment.
    (2) The fixed-loss amount for discharges from a long-term care 
hospital described under Sec.  412.522(a)(2) is determined for the 
long-term care hospital prospective payment system payment year, using 
the LTC-DRG relative weights that are in effect at the start of the 
applicable long-term care hospital prospective payment system payment 
year.
    (3) The additional payment equals 80 percent of the difference 
between the estimated cost of the patient's care (determined by 
multiplying the hospital-specific cost-to-charge ratio by the Medicare 
allowable covered charge) and the sum of the applicable long-term care 
hospital prospective payment system payment and the applicable fixed-
loss amount.
* * * * *
    (5) For purposes of this paragraph (a)--
    (i) Applicable long-term care hospital prospective payment system 
payment means--
    (A) The site neutral payment rate established under Sec.  
412.522(c) for long-term care hospital discharges described under Sec.  
412.522(a)(1);
    (B) The standard Federal prospective payment rates established 
under Sec.  412.523 for long-term care hospital discharges described 
under Sec.  412.522(a)(2); or
    (C) The standard Federal prospective payment rates established 
under Sec.  412.523 for discharges occurring on or after October 1, 
2015, in a long-term care hospital cost reporting period that begins 
before October 1, 2015.
    (ii) Applicable fixed-loss amount means--
    (A) For long-term care hospital discharges described under Sec.  
412.522(a)(1), the fixed-loss amount established for such cases as 
provided at Sec.  412.522(c)(2)(i);
    (B) For long-term care hospital discharges described under Sec.  
412.522(a)(2), the fixed-loss amount established for such cases as 
provided at Sec.  412.523(e); or
    (C) For discharges occurring on or after October 1, 2015 in a long-
term care hospital cost reporting period that begins before October 1, 
2015, the fixed-loss amount payable to discharges described under Sec.  
412.522(a)(2) as set forth in paragraph (a)(5)(ii)(B) of this section.
* * * * *

0
14. Section Sec.  412.560 is added to subpart O to read as follows:


Sec.  412.560  Participation, data submission, and other requirements 
under the Long-Term Care Hospital Quality Reporting (LTCHQR) Program.

    (a) Participation in the LTCHQR Program. A long-term-care hospital 
must begin submitting quality data under the LTCHQR Program by no later 
than the first day of the calendar quarter subsequent to 30 days after 
the date on its CMS Certification Number (CCN) notification letter.
    (b) Submission of data requirements and payment impact. (1) Except 
as provided in paragraph (c) of this section, a long-term care hospital 
must submit to CMS data on measures specified under sections 
1886(m)(5)(D), 1899B(c)(1), and 1899B(d)(1) of the Act, as applicable, 
in a form and manner, and at a time, specified by CMS.
    (2) A long-term care hospital that does not submit data in 
accordance with sections 1886(m)(5)(C) and 1886(m)(5)(F) of the Act 
with respect to a given fiscal year will have its annual update to the 
standard Federal rate for discharges for the long-term care hospital 
during the fiscal year reduced by 2 percentage points.
    (c) Exception and extension request requirements. Upon request by a 
long-term care hospital, CMS may grant an exception or extension with 
respect to

[[Page 49770]]

the quality data reporting requirements, for one or more quarters, in 
the event of certain extraordinary circumstances beyond the control of 
the long-term care hospital, subject to the following:
    (1) A long-term care hospital that wishes to request an exception 
or extension with respect to quality data reporting requirements must 
submit its request to CMS within 30 days of the date that the 
extraordinary circumstances occurred.
    (2) A long-term care hospital must submit its request for an 
exception or extension to CMS via email. Email is the only form that 
may be used to submit to CMS a request for an exception or an 
extension.
    (3) The email request for an exception or extension must contain 
the following information:
    (i) The CCN for the long-term care hospital.
    (ii) The business name of the long-term care hospital.
    (iii) The business address of the long-term care hospital.
    (iv) Contact information for the long-term care hospital's chief 
executive officer or designated personnel, including the name, 
telephone number, title, email address, and physical mailing address. 
(The mailing address may not be a post office box.)
    (v) A statement of the reason for the request for the exception or 
extension.
    (vi) Evidence of the impact of the extraordinary circumstances, 
including, but not limited to, photographs, newspaper articles, and 
other media.
    (vii) The date on which the long-term care hospital will be able to 
again submit quality data under the LTCHQR Program and a justification 
for the proposed date.
    (4) CMS may grant an exception or extension to a long-term care 
hospital that has not been requested by the long-term care hospital if 
CMS determines that--
    (i) An extraordinary circumstance affects an entire region or 
locale; or
    (ii) A systemic problem with one of CMS' data collection systems 
directly affected the ability of the long-term care hospital to submit 
quality data.
    (d) Reconsiderations of noncompliance decisions--(1) Written 
notification of noncompliance decision. CMS will send a long-term care 
hospital written notification of a decision of noncompliance with the 
quality data reporting requirements for a particular fiscal year. CMS 
also will use the Quality Improvement and Evaluation system (QIES) 
Assessment Submission and Processing (ASAP) System to provide 
notification of noncompliance to the long-term care hospital.
    (2) Request for reconsideration of noncompliance decision. A long-
term care hospital may request a reconsideration of CMS' decision of 
noncompliance no later than 30 calendar days from the date of the 
written notification of noncompliance. The reconsideration request by 
the long-term care hospital must be submitted to CMS via email and must 
contain the following information:
    (i) The CCN for the long-term care hospital.
    (ii) The business name of the long-term care hospital.
    (iii) The business address of the long-term care hospital.
    (iv) Contact information for the long-term care hospital's chief 
executive officer or designated personnel, including each individual's 
name, title, email address, telephone number, and physical mailing 
address. (The physical address may not be a post office box.)
    (v) CMS's identified reason(s) for the noncompliance decision from 
the written notification of noncompliance.
    (vi) The reason for requesting reconsideration of CMS' 
noncompliance decision.
    (vii) Accompanying documentation that demonstrates compliance of 
the long-term care hospital with the quality reporting requirements. 
This documentation must be submitted electronically at the same time as 
the reconsideration request as an attachment to the email. Any 
reconsideration request that fails to provide sufficient evidence of 
compliance will not be reviewed.
    (3) CMS decision on reconsideration request. CMS will notify the 
long-term care hospital, in writing, of its final decision regarding 
any reconsideration request. CMS also will use the QIES ASAP System to 
provide notice of its final decision on the reconsideration request.
    (e) Appeals of reconsideration requests. A long-term care hospital 
that is dissatisfied with a decision made by CMS on its reconsideration 
request may file an appeal with the Provider Reimbursement Review Board 
under Part 405, Subpart R, of this chapter.

    Dated: July 27, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: July 29, 2015.
 Sylvia M. Burwell,
 Secretary, Department of Health and Human Services.

    Note: The following Addendum and Appendixes will not appear in 
the Code of Federal Regulations.

Addendum--Schedule of Standardized Amounts, Update Factors, Rate-of-
Increase Percentages Effective With Cost Reporting Periods Beginning On 
or After October 1, 2015, and Payment Rates for LTCHs Effective for 
Discharges Occurring On or After October 1, 2015

I. Summary and Background

    In this Addendum, we are setting forth a description of the methods 
and data we used to determine the prospective payment rates for 
Medicare hospital inpatient operating costs and Medicare hospital 
inpatient capital-related costs for FY 2016 for acute care hospitals. 
We also are setting forth the rate-of-increase percentage for updating 
the target amounts for certain hospitals excluded from the IPPS for FY 
2016. We note that, because certain hospitals excluded from the IPPS 
are paid on a reasonable cost basis subject to a rate-of-increase 
ceiling (and not by the IPPS), these hospitals are not affected by the 
figures for the standardized amounts, offsets, and budget neutrality 
factors. Therefore, in this final rule, we are setting forth the rate-
of-increase percentage for updating the target amounts for certain 
hospitals excluded from the IPPS that are effective for cost reporting 
periods beginning on or after October 1, 2015.
    In addition, we are setting forth a description of the methods and 
data we used to determine the standard Federal rate that will be 
applicable to Medicare LTCHs for FY 2016.
    In general, except for SCHs, MDHs, and hospitals located in Puerto 
Rico, for FY 2016, each hospital's payment per discharge under the IPPS 
is based on 100 percent of the Federal national rate, also known as the 
national adjusted standardized amount. This amount reflects the 
national average hospital cost per case from a base year, updated for 
inflation.
    SCHs are paid based on whichever of the following rates yields the 
greatest aggregate payment: The Federal national rate (including, as 
discussed in section IV.D. of the preamble of this final rule, 
uncompensated care payments under section 1886(r)(2) of the Act); the 
updated hospital-specific rate based on FY 1982 costs per discharge; 
the updated hospital-specific rate based on FY 1987 costs per 
discharge; the updated hospital-specific rate based on FY 1996 costs 
per discharge; or the updated hospital-specific rate based on FY 2006 
costs per discharge.
    We note that section 205 of the Medicare Access and CHIP 
Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10, enacted on April 
16,

[[Page 49771]]

2015) extended the MDH program (which, under previous law, was to be in 
effect for discharges on or before March 31, 2015 only) for discharges 
occurring on or after April 1, 2015, through FY 2017 (that is, for 
discharges occurring on or before September 30, 2017).
    Under section 1886(d)(5)(G) of the Act, MDHs historically were paid 
based on the Federal national rate or, if higher, the Federal national 
rate plus 50 percent of the difference between the Federal national 
rate and the updated hospital-specific rate based on FY 1982 or FY 1987 
costs per discharge, whichever was higher. However, section 5003(a)(1) 
of Public Law 109-171 extended and modified the MDH special payment 
provision that was previously set to expire on October 1, 2006, to 
include discharges occurring on or after October 1, 2006, but before 
October 1, 2011. Under section 5003(b) of Public Law 109-171, if the 
change results in an increase to an MDH's target amount, we must rebase 
an MDH's hospital-specific rates based on its FY 2002 cost report. 
Section 5003(c) of Public Law 109-171 further required that MDHs be 
paid based on the Federal national rate or, if higher, the Federal 
national rate plus 75 percent of the difference between the Federal 
national rate and the updated hospital-specific rate. Further, based on 
the provisions of section 5003(d) of Public Law 109-171, MDHs are no 
longer subject to the 12-percent cap on their DSH payment adjustment 
factor.
    For hospitals located in Puerto Rico, the payment per discharge is 
based on the sum of 25 percent of an updated Puerto Rico-specific rate 
based on average costs per case of Puerto Rico hospitals for the base 
year and 75 percent of the Federal national rate. (We refer readers to 
section II.D.2. of this Addendum for a complete description.)
    As discussed in section II. of this Addendum, we are making changes 
in the determination of the prospective payment rates for Medicare 
inpatient operating costs for acute care hospitals for FY 2016. In 
section III. of this Addendum, we discuss our policy changes for 
determining the prospective payment rates for Medicare inpatient 
capital-related costs for FY 2016. In section IV. of this Addendum, we 
are setting forth the rate-of-increase percentage for determining the 
rate-of-increase limits for certain hospitals excluded from the IPPS 
for FY 2016. In section V. of this Addendum, we discuss policy changes 
for determining the standard Federal rate for LTCHs paid under the LTCH 
PPS for FY 2016. The tables to which we refer in the preamble of this 
final rule are listed in section VI. of this Addendum and are available 
via the Internet on the CMS Web site.

II. Changes to Prospective Payment Rates for Hospital Inpatient 
Operating Costs for Acute Care Hospitals for FY 2016

    The basic methodology for determining prospective payment rates for 
hospital inpatient operating costs for acute care hospitals for FY 2005 
and subsequent fiscal years is set forth under 42 CFR 412.64. The basic 
methodology for determining the prospective payment rates for hospital 
inpatient operating costs for hospitals located in Puerto Rico for FY 
2005 and subsequent fiscal years is set forth under 42 CFR 412.211 and 
412.212. Below we discuss the factors we are using for determining the 
prospective payment rates for FY 2016.
    In summary, the standardized amounts set forth in Tables 1A, 1B, 
and 1C that are listed and published in section VI. of this Addendum 
(and available via the Internet on the CMS Web site) reflect--
     Equalization of the standardized amounts for urban and 
other areas at the level computed for large urban hospitals during FY 
2004 and onward, as provided for under section 1886(d)(3)(A)(iv)(II) of 
the Act.
     The labor-related share that is applied to the 
standardized amounts and Puerto Rico-specific standardized amounts to 
give the hospital the highest payment, as provided for under sections 
1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act. For FY 2016, depending 
on whether a hospital submits quality data under the rules established 
in accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter 
referred to as a hospital that submits quality data) and is a 
meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act 
(hereafter referred to as a hospital that is a meaningful EHR user), 
there are four possible applicable percentage increases that can be 
applied to the national standardized amount. We refer readers to 
section IV.A. of the preamble of this final rule for a complete 
discussion on the FY 2016 inpatient hospital update. Below is a table 
with these four options:

 
----------------------------------------------------------------------------------------------------------------
                                                     Hospital        Hospital      Hospital did    Hospital did
                                                     submitted       submitted      NOT submit      NOT submit
                                                   quality data    quality data    quality data    quality data
                     FY 2016                         and is a      and is NOT a      and is  a     and is NOT a
                                                  meaningful EHR  meaningful EHR  meaningful EHR  meaningful EHR
                                                       user            user            user            user
----------------------------------------------------------------------------------------------------------------
Market Basket Rate[dash]of[dash]Increase........             2.4             2.4             2.4             2.4
Adjustment for Failure to Submit Quality Data                0.0             0.0            -0.6            -0.6
 under Section 1886(b)(3)(B)(viii) of the Act...
Adjustment for Failure to be a Meaningful EHR                0.0            -1.2             0.0            -1.2
 User under Section 1886(b)(3)(B)(ix) of the Act
MFP Adjustment under Section 1886(b)(3)(B)(xi)              -0.5            -0.5            -0.5            -0.5
 of the Act.....................................
Statutory Adjustment under Section                          -0.2            -0.2            -0.2            -0.2
 1886(b)(3)(B)(xii) of the Act..................
Applicable Percentage Increase Applied to                    1.7             0.5             1.1            -0.1
 Standardized Amount............................
----------------------------------------------------------------------------------------------------------------

     An update of 1.7 percent to the Puerto Rico-specific 
standardized amount (that is, the FY 2016 estimate of the market basket 
rate-of-increase of 2.4 percent less an adjustment of 0.5 percentage 
point for MFP and less 0.2 percentage point), in accordance with 
section 1886(d)(9)(C)(i) of the Act, as amended by section 401(c) of 
Public Law 108-173, which sets the update to the Puerto Rico-specific 
standardized amount equal to the applicable percentage increase set 
forth under section 1886(b)(3)(B)(i) of the Act.
     An adjustment to the standardized amount to ensure budget 
neutrality for DRG recalibration and reclassification, as provided for 
under section 1886(d)(4)(C)(iii) of the Act.
     An adjustment to ensure the wage index changes are budget 
neutral, as

[[Page 49772]]

provided for under section 1886(d)(3)(E)(i) of the Act. We note that 
section 1886(d)(3)(E)(i) of the Act requires that when we compute such 
budget neutrality, we assume that the provisions of section 
1886(d)(3)(E)(ii) of the Act (requiring a 62 percent labor-related 
share in certain circumstances) had not been enacted.
     An adjustment to ensure the effects of geographic 
reclassification are budget neutral, as provided for under section 
1886(d)(8)(D) of the Act, by removing the FY 2015 budget neutrality 
factor and applying a revised factor.
     As discussed below and in section III.G. of the preamble 
of this final rule, an adjustment to offset the cost of the 3-year hold 
harmless transitional wage index provisions provided by CMS as a result 
of the implementation of the new OMB labor market area delineations 
(beginning with FY 2015).
     An adjustment to ensure the effects of the rural community 
hospital demonstration program required under section 410A of Public 
Law 108-173, as amended by sections 3123 and 10313 of Public Law 111-
148, which extended the demonstration program for an additional 5 
years, are budget neutral as required under section 410A(c)(2) of 
Public Law 108-173.
     An adjustment to remove the FY 2015 outlier offset and 
apply an offset for FY 2016, as provided for under section 
1886(d)(3)(B) of the Act.
     As discussed below and in section II.D. of the preamble of 
this final rule, a recoupment to meet the requirements of section 631 
of the ATRA to adjust the standardized amount to offset the estimated 
amount of the increase in aggregate payments as a result of not 
completing the prospective adjustment authorized under section 
7(b)(1)(A) of Public Law 110-90 until FY 2013.
    For FY 2016, consistent with current law, we are applying the rural 
floor budget neutrality adjustment to hospital wage indexes. Also, 
consistent with section 3141 of the Affordable Care Act, instead of 
applying a State level rural floor budget neutrality adjustment to the 
wage index, we are applying a uniform, national budget neutrality 
adjustment to the FY 2016 wage index for the rural floor. We note that, 
in section III.G.2.b. of the preamble to this final rule, we are 
extending the imputed floor policy (both the original methodology and 
alternative methodology) for another year, through September 30, 2016. 
Therefore, for FY 2016, in this final rule, we are continuing to 
include the imputed floor (calculated under the original and 
alternative methodologies) in calculating the uniform, national rural 
floor budget neutrality adjustment, which are reflected in the FY 2016 
wage index.

A. Calculation of the Adjusted Standardized Amount

1. Standardization of Base-Year Costs or Target Amounts
    In general, the national standardized amount is based on per 
discharge averages of adjusted hospital costs from a base period 
(section 1886(d)(2)(A) of the Act), updated and otherwise adjusted in 
accordance with the provisions of section 1886(d) of the Act. For 
Puerto Rico hospitals, the Puerto Rico-specific standardized amount is 
based on per discharge averages of adjusted target amounts from a base 
period (section 1886(d)(9)(B)(i) of the Act), updated and otherwise 
adjusted in accordance with the provisions of section 1886(d)(9) of the 
Act. The September 1, 1983 interim final rule (48 FR 39763) contained a 
detailed explanation of how base-year cost data (from cost reporting 
periods ending during FY 1981) were established for urban and rural 
hospitals in the initial development of standardized amounts for the 
IPPS. The September 1, 1987 final rule (52 FR 33043 and 33066) contains 
a detailed explanation of how the target amounts were determined and 
how they are used in computing the Puerto Rico rates.
    Sections 1886(d)(2)(B) and 1886(d)(2)(C) of the Act require us to 
update base-year per discharge costs for FY 1984 and then standardize 
the cost data in order to remove the effects of certain sources of cost 
variations among hospitals. These effects include case-mix, differences 
in area wage levels, cost-of-living adjustments for Alaska and Hawaii, 
IME costs, and costs to hospitals serving a disproportionate share of 
low-income patients.
    For FY 2016, we are continuing to use the national and Puerto Rico-
specific labor-related and nonlabor-related shares (which are based on 
the FY 2010-based hospital market basket) that were used in FY 2015. 
Specifically, under section 1886(d)(3)(E) of the Act, the Secretary 
estimates, from time to time, the proportion of payments that are 
labor-related and adjusts the proportion (as estimated by the Secretary 
from time to time) of hospitals' costs which are attributable to wages 
and wage-related costs of the DRG prospective payment rates. We refer 
to the proportion of hospitals' costs that are attributable to wages 
and wage-related costs as the ``labor-related share.'' For FY 2016, as 
discussed in section III. of the preamble of this final rule, we are 
continuing to use a labor-related share of 69.6 percent for the 
national standardized amounts, and 63.2 percent for the Puerto Rico-
specific standardized amount, if the hospital has a wage index value 
that is greater than 1.0000. Consistent with section 1886(d)(3)(E) of 
the Act, we are applying the wage index to a labor-related share of 62 
percent of the national standardized amount for all IPPS hospitals 
whose wage index values are less than or equal to 1.0000. For all IPPS 
hospitals whose wage indexes are greater than 1.0000, we are applying 
the wage index to a labor-related share of 69.6 percent of the national 
standardized amount.
    For FY 2016, all Puerto Rico hospitals have a wage index value that 
is less than 1.0000 because the average hourly rate of every hospital 
in Puerto Rico divided by the national average hourly rate (the sum of 
all salaries and hours for all hospitals in the 50 United States and 
Puerto Rico) results in a wage index that is below 1.0000. However, 
when we divide the average hourly rate of every hospital located in 
Puerto Rico by the Puerto Rico-specific national average hourly rate 
(the sum of all salaries and hours for all hospitals located only in 
Puerto Rico), the result is a Puerto Rico-specific wage index value for 
some hospitals that is either above, or below 1.0000, depending on the 
hospital's location within Puerto Rico. Therefore, for hospitals 
located in Puerto Rico, we are applying a labor-related share of 63.2 
percent if its Puerto Rico-specific wage index is greater than 1.0000. 
For hospitals located in Puerto Rico whose Puerto Rico-specific wage 
index values are less than or equal to 1.0000, we are applying a labor 
share of 62 percent.
    The standardized amounts for operating costs appear in Tables 1A, 
1B, and 1C that are listed and published in section VI. of the Addendum 
to this final rule and are available via the Internet on the CMS Web 
site.
2. Computing the National Average Standardized Amount and Puerto Rico-
Specific Standardized Amount
    Section 1886(d)(3)(A)(iv)(II) of the Act requires that, beginning 
with FY 2004 and thereafter, an equal standardized amount be computed 
for all hospitals at the level computed for large urban hospitals 
during FY 2003, updated by the applicable percentage update. Section 
1886(d)(9)(A)(ii)(II) of the Act equalizes the Puerto Rico-specific 
urban and rural area rates. Accordingly, we are calculating the FY 2016 
national average standardized amount and Puerto Rico-specific 
standardized amount irrespective of whether a hospital is located in an 
urban or rural location.

[[Page 49773]]

3. Updating the National Average Standardized Amount and Puerto Rico-
Specific Standardized Amount
    Section 1886(b)(3)(B) of the Act specifies the applicable 
percentage increase used to update the standardized amount for payment 
for inpatient hospital operating costs. We note that, in compliance 
with section 404 of the MMA, in this final rule, we are using the 
revised and rebased FY 2010-based IPPS operating and capital market 
baskets for FY 2016 (which replaced the FY 2006-based IPPS operating 
and capital market baskets in FY 2014). As discussed in section IV.A. 
of the preamble of this final rule, in accordance with section 
1886(b)(3)(B) of the Act, as amended by section 3401(a) of the 
Affordable Care Act, we are reducing the FY 2016 applicable percentage 
increase (which is based on IHS Global Insight, Inc.'s (IGI's) second 
quarter 2015 forecast of the FY 2010-based IPPS market basket) by the 
MFP adjustment (the 10-year moving average of MFP for the period ending 
FY 2016) of 0.5 percentage point, which is calculated based on IGI's 
second quarter 2015 forecast.
    In addition, in accordance with section 1886(b)(3)(B)(i) of the 
Act, as amended by sections 3401(a) and 10319(a) of the Affordable Care 
Act, we are further updating the standardized amount for FY 2016 by the 
estimated market basket percentage increase less 0.2 percentage point 
for hospitals in all areas. Sections 1886(b)(3)(B)(xi) and (xii) of the 
Act, as added and amended by sections 3401(a) and 10319(a) of the 
Affordable Care Act, further state that these adjustments may result in 
the applicable percentage increase being less than zero. The percentage 
increase in the market basket reflects the average change in the price 
of goods and services comprising routine, ancillary, and special care 
unit hospital inpatient services.
    Based on IGI's 2015 second quarter forecast of the hospital market 
basket increase (as discussed in Appendix B of this final rule), the 
most recent forecast of the hospital market basket increase for FY 2016 
is 2.4 percent. As discussed above, for FY 2016, depending on whether a 
hospital submits quality data under the rules established in accordance 
with section 1886(b)(3)(B)(viii) of the Act and is a meaningful EHR 
user under section 1886(b)(3)(B)(ix) of the Act, there are four 
possible applicable percentage increases that could be applied to the 
standardized amount. We refer readers to section IV.A. of the preamble 
of this final rule for a complete discussion on the FY 2016 inpatient 
hospital update to the standardized amount. We also refer readers to 
the table above for the four possible applicable percentage increases 
that are applied to update the national standardized amount. The 
standardized amounts shown in Tables 1A through 1C that are published 
in section VI. of this Addendum and that are available via the Internet 
on the CMS Web site reflect these differential amounts.
    Section 401(c) of Public Law 108-173 amended section 
1886(d)(9)(C)(i) of the Act and states that, for discharges occurring 
in a fiscal year (beginning with FY 2004), the Secretary shall compute 
an average standardized amount for hospitals located in any area of 
Puerto Rico that is equal to the average standardized amount computed 
under subclause (I) for FY 2003 for hospitals in a large urban area 
(or, beginning with FY 2005, for all hospitals in the previous fiscal 
year) increased by the applicable percentage increase under subsection 
(b)(3)(B) for the fiscal year involved. Therefore, the update to the 
Puerto Rico-specific operating standardized amount is subject to the 
applicable percentage increase set forth under section 1886(b)(3)(B)(i) 
of the Act, as amended by sections 3401(a) and 10319(a) of the 
Affordable Care Act (that is, the same update factor as for all other 
hospitals subject to the IPPS). Accordingly, we are establishing an 
applicable percentage increase to the Puerto Rico-specific standardized 
amount of 1.7 percent for FY 2016.
    Although the update factors for FY 2016 are set by law, we are 
required by section 1886(e)(4) of the Act to recommend, taking into 
account MedPAC's recommendations, appropriate update factors for FY 
2016 for both IPPS hospitals and hospitals and hospital units excluded 
from the IPPS. Section 1886(e)(5)(A) of the Act requires that we 
publish our proposed recommendations in the Federal Register for public 
comment. Our recommendation on the update factors is set forth in 
Appendix B of this final rule.
4. Other Adjustments to the Average Standardized Amount
    As in the past, we are adjusting the FY 2016 standardized amount to 
remove the effects of the FY 2015 geographic reclassifications and 
outlier payments before applying the FY 2016 updates. We then apply 
budget neutrality offsets for outliers and geographic reclassifications 
to the standardized amount based on finalized FY 2016 payment policies.
    We do not remove the prior year's budget neutrality adjustments for 
reclassification and recalibration of the DRG relative weights and for 
updated wage data because, in accordance with sections 
1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act, estimated aggregate 
payments after updates in the DRG relative weights and wage index 
should equal estimated aggregate payments prior to the changes. If we 
removed the prior year's adjustment, we would not satisfy these 
conditions.
    Budget neutrality is determined by comparing aggregate IPPS 
payments before and after making changes that are required to be budget 
neutral (for example, changes to MS-DRG classifications, recalibration 
of the MS-DRG relative weights, updates to the wage index, and 
different geographic reclassifications). We include outlier payments in 
the simulations because they may be affected by changes in these 
parameters.
    In order to appropriately estimate aggregate payments in our 
modeling, we make several inclusions and exclusions so that the 
appropriate universe of claims and charges are included. We discuss IME 
Medicare Advantage payment amounts, fee-for-service only claims, and 
charges for anti-hemophilic blood factor and organ acquisition below.
    Consistent with our methodology established in the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50422 through 50433), because IME Medicare 
Advantage payments are made to IPPS hospitals under section 1886(d) of 
the Act, we believe these payments must be part of these budget 
neutrality calculations. However, we note that it is not necessary to 
include Medicare Advantage IME payments in the outlier threshold 
calculation or the outlier offset to the standardized amount because 
the statute requires that outlier payments be not less than 5 percent 
nor more than 6 percent of total ``operating DRG payments,'' which does 
not include IME and DSH payments. We refer readers to the FY 2011 IPPS/
LTCH PPS final rule for a complete discussion on our methodology of 
identifying and adding the total Medicare Advantage IME payment amount 
to the budget neutrality adjustments.
    In addition, consistent with the methodology in the FY 2012 IPPS/
LTCH PPS final rule, in order to ensure that we capture only fee-for-
service claims, we are only including claims with a ``Claim Type'' of 
60 (which is a field on the MedPAR file that indicates a claim is a 
fee-for-service claim).
    Finally, consistent with our methodology established in the FY 2011

[[Page 49774]]

IPPS/LTCH PPS final rule (75 FR 50422 through 50423), we examined the 
MedPAR file and removed pharmacy charges for anti-hemophilic blood 
factor (which are paid separately under the IPPS) with an indicator of 
``3'' for blood clotting with a revenue code of ``0636'' from the 
covered charge field for the budget neutrality adjustments. We also 
removed organ acquisition charges from the covered charge field for the 
budget neutrality adjustments because organ acquisition is a pass-
through payment not paid under the IPPS.
    The Bundled Payments for Care Improvement (BPCI) initiative, 
developed under the authority of section 3021 of the Affordable Care 
Act (codified at section 1115A of the Act), is comprised of four 
broadly defined models of care, which link payments for multiple 
services beneficiaries receive during an episode of care. Under the 
BPCI initiative, organizations enter into payment arrangements that 
include financial and performance accountability for episodes of care. 
On January 31, 2013, CMS announced the first set of health care 
organizations selected to participate in the BPCI initiative. 
Additional organizations were selected in 2014. For additional 
information on the BPCI initiative, we refer readers to the CMS Center 
for Medicare and Medicaid Innovation's Web site at: http://innovation.cms.gov/initiatives/Bundled-Payments/index.html.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53341 through 
53343), for FY 2013 and subsequent fiscal years, we finalized a 
methodology to treat hospitals that participate in the BPCI initiative 
the same as prior fiscal years for the IPPS payment modeling and 
ratesetting process (which includes recalibration of the MS-DRG 
relative weights, ratesetting, calculation of the budget neutrality 
factors, and the impact analysis) without regard to a hospital's 
participation within these bundled payment models (that is, as if they 
are not participating in those models under the BPCI initiative). For 
FY 2016, we are continuing to include all applicable data from 
subsection (d) hospitals participating in BPCI Models 1, 2, and 4 in 
our IPPS payment modeling and ratesetting calculations.
    The Affordable Care Act established the Hospital Readmissions 
Reduction Program and the Hospital VBP Program which adjust payments to 
certain IPPS hospitals beginning with discharges on or after October 1, 
2012. Because the adjustments made under these programs affect the 
estimation of aggregate IPPS payments, in this final rule, consistent 
with our methodology established in the FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53687 through 53688), we believe that it is appropriate to 
include adjustments for these programs within our budget neutrality 
calculations. We discuss the treatment of these two programs in the 
context of budget neutrality adjustments below.
    Section 1886(q) of the Act establishes the ``Hospital Readmissions 
Reduction Program'' effective for discharges from an ``applicable 
hospital'' beginning on or after October 1, 2012, under which payments 
to those hospitals under section 1886(d) of the Act are reduced to 
account for certain excess readmissions. Under the Hospital 
Readmissions Reduction Program, for discharges beginning on October 1, 
2012 discharges from an ``applicable hospital'' are paid at an amount 
equal to the product of the ``base operating DRG payment amount'' and 
an ``adjustment factor'' that accounts for excess readmissions for the 
hospital for the fiscal year plus any applicable add-on payments. We 
refer readers to section IV.E. of the preamble of this final rule for 
full details of our FY 2016 policy changes to the Hospital Readmissions 
Reduction Program. We also note that the Hospital Readmissions 
Reduction Program provided for under section 1886(q) of the Act is not 
budget neutral.
    Section 1886(o) of the Act requires the Secretary to establish a 
Hospital VBP Program under which, for discharges beginning on October 
1, 2012, value-based incentive payments are made in a fiscal year to 
eligible subsection (d) hospitals based on their performance on 
measures established for a performance period for that fiscal year. As 
specified under section 1886(o)(7)(B)(i) of the Act, these value-based 
incentive payments are funded by a reduction applied to each eligible 
hospital's base-operating DRG payment amount, for each discharge 
occurring in the fiscal year. As required by section 1886(o)(7)(A) of 
the Act, the total amount of allocated funds available for value-based 
incentive payments with respect to a fiscal year is equal to the total 
amount of base-operating DRG payment reductions, as estimated by the 
Secretary. In a given fiscal year, hospitals may earn a value-based 
incentive payment amount for a fiscal year that is greater than, equal 
to, or less than the reduction amount, based on their performance on 
quality measures under the Hospital VBP Program. Thus, the Hospital VBP 
Program is estimated to have no net effect on overall payments. We 
refer readers to section IV.F. of the preamble of this final rule for 
details regarding the Hospital VBP Program.
    Both the hospital readmissions payment adjustment (reduction) and 
the hospital VBP payment adjustment (redistribution) are applied on a 
claim-by-claim basis by adjusting, as applicable, the base-operating 
DRG payment amount for individual subsection (d) hospitals, which 
affects the overall sum of aggregate payments on each side of the 
comparison within the budget neutrality calculations. For example, when 
we calculate the budget neutrality factor for MS-DRG reclassification 
and recalibration of the relative weights, we compare aggregate 
payments estimated using the prior year's GROUPER and relative weights 
to estimated payments using the new GROUPER and relative weights. (We 
refer readers to section II.A.4.a. of this Addendum for details.) Other 
factors, such as the DSH and IME payment adjustments, are the same on 
both sides of the comparison because we are only seeking to ensure that 
aggregate payments do not increase or decrease as a result of the 
changes of MS-DRG reclassification and recalibration.
    In order to properly determine aggregate payments on each side of 
the comparison, as we did for FY 2014 and FY 2015, for FY 2016 and 
subsequent years, we are continuing to apply the hospital readmissions 
payment adjustment and the hospital VBP payment adjustment on each side 
of the comparison, consistent with the methodology that we adopted in 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53687 through 53688). That 
is, we are applying the readmissions payment adjustment factor and the 
hospital VBP payment adjustment factor on both sides of our comparison 
of aggregate payments when determining all budget neutrality factors 
described in section II.A.4. of this Addendum.
    For the purpose of calculating the FY 2016 readmissions payment 
adjustment factors, we are using excess readmission ratios and 
aggregate payments for excess readmissions based on admissions from the 
prior fiscal year's applicable period because hospitals have had the 
opportunity to review and correct these data before the data were made 
public under the policy we adopted regarding the reporting of hospital-
specific readmission rates, consistent with section 1886(q)(6) of the 
Act. For FY 2016, in this final rule, we are calculating the 
readmissions payment adjustment factors using excess readmission ratios 
and aggregate payments for excess readmissions based on admissions from 
the finalized applicable period for FY 2016 as hospitals have had the 
opportunity to review and correct these data under our

[[Page 49775]]

policy regarding the reporting of hospital-specific readmission rates 
consistent with section 1886(q)(6) of the Act. We discuss our policy 
regarding the reporting of hospital-specific readmission rates for FY 
2016 in section IV.E.3.f. of the preamble of this final rule. (For 
additional information on our general policy for the reporting of 
hospital-specific readmission rates, consistent with section 1886(q)(6) 
of the Act, we refer readers to the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53399 through 53400).)
    In addition, for FY 2016, in this final rule, for the purpose of 
modeling aggregate payments when determining all budget neutrality 
factors, we are using proxy hospital VBP payment adjustment factors for 
FY 2016 that are based on data from a historical period because 
hospitals have not yet had an opportunity to review and submit 
corrections for their data from the FY 2016 performance period. (For 
additional information on our policy regarding the review and 
correction of hospital-specific measure rates under the Hospital VBP 
Program, consistent with section 1886(o)(10)(A)(ii) of the Act, we 
refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53578 
through 53581), the CY 2012 OPPS/ASC final rule with comment period (76 
FR 74544 through 74547), and the Hospital Inpatient VBP final rule (76 
FR 26534 through 26536).)
    The Affordable Care Act also established section 1886(r) of the 
Act, which modifies the methodology for computing the Medicare DSH 
payment adjustment beginning in FY 2014. Beginning in FY 2014, IPPS 
hospitals receiving Medicare DSH payment adjustments will receive an 
empirically justified Medicare DSH payment equal to 25 percent of the 
amount that would previously have been received under the statutory 
formula set forth under section 1886(d)(5)(F) of the Act governing the 
Medicare DSH payment adjustment. In accordance with section 1886(r)(2) 
of the Act, the remaining amount, equal to an estimate of 75 percent of 
what otherwise would have been paid as Medicare DSH payments, reduced 
to reflect changes in the percentage of individuals under age 65 who 
are uninsured and an additional statutory adjustment, will be available 
to make additional payments to Medicare DSH hospitals based on their 
share of the total amount of uncompensated care reported by Medicare 
DSH hospitals for a given time period. In order to properly determine 
aggregate payments on each side of the comparison for budget 
neutrality, prior to FY 2014, we included estimated Medicare DSH 
payments on both sides of our comparison of aggregate payments when 
determining all budget neutrality factors described in section II.A.4. 
of this Addendum.
    To do this for FY 2016 (as we did for FY 2014 and FY 2015), we are 
including estimated empirically justified Medicare DSH payments that 
will be paid in accordance with section 1886(r)(1) of the Act and 
estimates of the additional uncompensated care payments made to 
hospitals receiving Medicare DSH payment adjustments as described by 
section 1886(r)(2) of the Act. That is, we consider estimated 
empirically justified Medicare DSH payments at 25 percent of what would 
otherwise have been paid, and also the estimated additional 
uncompensated care payments for hospitals receiving Medicare DSH 
payment adjustments on both sides of our comparison of aggregate 
payments when determining all budget neutrality factors described in 
section II.A.4. of this Addendum.
    We note that, when calculating total payments for budget 
neutrality, to determine total payments for SCHs, we model total 
hospital-specific rate payments and total Federal rate payments and 
then include whichever one of the total payments is greater. As 
discussed in section IV.D. of the preamble to this final rule and 
below, we are continuing the FY 2014 finalized methodology under which 
we take into consideration uncompensated care payments in the 
comparison of payments under the Federal rate and the hospital-specific 
rate for SCHs. Therefore, we include estimated uncompensated care 
payments in this comparison.
    Similarly, for MDHs, as discussed in section IV. of the preamble to 
this final rule, when computing payments under the Federal national 
rate plus 75 percent of the difference between the payments under the 
Federal national rate and the payments under the updated hospital-
specific rate, we are continuing to take into consideration 
uncompensated care payments in the computation of payments under the 
Federal rate and the hospital-specific rate for MDHs.
    In addition, we are including an adjustment to the standardized 
amount for those hospitals that are not meaningful EHR users in our 
modeling of aggregate payments for budget neutrality for FY 2016. We 
did not include this adjustment for FY 2015 because that was the first 
year hospitals experienced a reduction to their applicable percentage 
increase due to whether they are meaningful EHR users and data were not 
available at that time. However, we believe it is appropriate to 
include this adjustment for FY 2016 because FY 2016 is the second year 
for which hospitals will experience this reduction and data on the 
prior year's performance are now available. Payments for hospitals are 
estimated based on the applicable standardized amount in Tables 1A and 
1B for discharges occurring in FY 2016.
a. Recalibration of MS-DRG Relative Weights and Updated Wage Index--
Budget Neutrality Adjustment
    Section 1886(d)(4)(C)(iii) of the Act specifies that, beginning in 
FY 1991, the annual DRG reclassification and recalibration of the 
relative weights must be made in a manner that ensures that aggregate 
payments to hospitals are not affected. As discussed in section II.H. 
of the preamble of this final rule, we normalized the recalibrated MS-
DRG relative weights by an adjustment factor so that the average case 
relative weight after recalibration is equal to the average case 
relative weight prior to recalibration. However, equating the average 
case relative weight after recalibration to the average case relative 
weight before recalibration does not necessarily achieve budget 
neutrality with respect to aggregate payments to hospitals because 
payments to hospitals are affected by factors other than average case 
relative weight. Therefore, as we have done in past years, we are 
making a budget neutrality adjustment to ensure that the requirement of 
section 1886(d)(4)(C)(iii) of the Act is met.
    Section 1886(d)(3)(E)(i) of the Act requires us to update the 
hospital wage index on an annual basis beginning October 1, 1993. This 
provision also requires us to make any updates or adjustments to the 
wage index in a manner that ensures that aggregate payments to 
hospitals are not affected by the change in the wage index. Section 
1886(d)(3)(E)(i) of the Act requires that we implement the wage index 
adjustment in a budget neutral manner. However, section 
1886(d)(3)(E)(ii) of the Act sets the labor-related share at 62 percent 
for hospitals with a wage index less than or equal to 1.0000, and 
section 1886(d)(3)(E)(i) of the Act provides that the Secretary shall 
calculate the budget neutrality adjustment for the adjustments or 
updates made under that provision as if section 1886(d)(3)(E)(ii) of 
the Act had not been enacted. In other words, this section of the 
statute requires that we implement the updates to the wage index in a 
budget neutral manner, but that our budget neutrality adjustment should 
not take into account the requirement that we set the labor-related 
share for hospitals with wage

[[Page 49776]]

indexes less than or equal to 1.0000 at the more advantageous level of 
62 percent. Therefore, for purposes of this budget neutrality 
adjustment, section 1886(d)(3)(E)(i) of the Act prohibits us from 
taking into account the fact that hospitals with a wage index less than 
or equal to 1.0000 are paid using a labor-related share of 62 percent. 
Consistent with current policy, for FY 2016, we are adjusting 100 
percent of the wage index factor for occupational mix. We describe the 
occupational mix adjustment in section III.E. of the preamble of this 
final rule.
    For FY 2016, to comply with the requirement that MS-DRG 
reclassification and recalibration of the relative weights be budget 
neutral for the Puerto Rico standardized amount and the hospital-
specific rates, we used FY 2014 discharge data to simulate payments and 
compared the following:
     Aggregate payments using the FY 2015 labor-related share 
percentages, the FY 2015 relative weights, and the FY 2015 pre-
reclassified wage data, and applied the FY 2016 hospital readmissions 
payment adjustments and estimated FY 2016 hospital VBP payment 
adjustments; and
     Aggregate payments using the FY 2015 labor-related share 
percentages, the FY 2016 relative weights, and the FY 2015 pre-
reclassified wage data, and applied the same FY 2016 hospital 
readmissions payment adjustments and estimated FY 2016 hospital VBP 
payment adjustments applied above.
    Based on this comparison, we computed a budget neutrality 
adjustment factor equal to 0.998399. As discussed in section IV. of 
this Addendum, we also are applying the MS-DRG reclassification and 
recalibration budget neutrality factor of 0.998399 to the hospital-
specific rates that are effective for cost reporting periods beginning 
on or after October 1, 2015.
    In order to meet the statutory requirements that we do not take 
into account the labor-related share of 62 percent when computing wage 
index budget neutrality adjustment factor, it was necessary to use a 
three-step process to comply with the requirements that MS-DRG 
reclassification and recalibration of the relative weights and the 
updated wage index and labor-related share have no effect on aggregate 
payments for IPPS hospitals. Under the first step, we determined an MS-
DRG reclassification and recalibration budget neutrality adjustment 
factor of 0.998399 (by using the same methodology described above to 
determine the MS-DRG reclassification and recalibration budget 
neutrality factor for the Puerto Rico standardized amount and hospital-
specific rates). Under the second step, to compute a budget neutrality 
adjustment factor for wage index and labor-related share percentage 
changes we used FY 2014 discharge data to simulate payments and 
compared the following:
     Aggregate payments using the FY 2016 relative weights and 
the FY 2015 pre-reclassified wage indexes, applied the FY 2015 labor-
related share of 69.6 percent to all hospitals (regardless of whether 
the hospital's wage index was above or below 1.0000), and applied the 
FY 2016 hospital readmissions payment adjustment and the estimated FY 
2016 hospital VBP payment adjustment; and
     Aggregate payments using the FY 2016 relative weights and 
the FY 2016 pre-reclassified wage indexes, applied the labor-related 
share for FY 2016 of 69.6 percent to all hospitals (regardless of 
whether the hospital's wage index was above or below 1.0000), and 
applied the same FY 2016 hospital readmissions payment adjustments and 
estimated FY 2016 hospital VBP payment adjustments applied above.
    In addition, we applied the MS-DRG reclassification and 
recalibration budget neutrality adjustment factor (derived in the first 
step) to the payment rates that were used to simulate payments for this 
comparison of aggregate payments from FY 2015 to FY 2016. By applying 
this methodology, we determined a budget neutrality adjustment factor 
of 0.998749 for changes to the wage index. Finally, we multiplied the 
MS-DRG reclassification and recalibration budget neutrality adjustment 
factor of 0.998399 (derived in the first step) by the budget neutrality 
adjustment factor of 0.998749 for changes to the wage index (derived in 
the second step) to determine the MS-DRG reclassification and 
recalibration and updated wage index budget neutrality adjustment 
factor of 0.997150.
b. Reclassified Hospitals--Budget Neutrality Adjustment
    Section 1886(d)(8)(B) of the Act provides that certain rural 
hospitals are deemed urban. In addition, section 1886(d)(10) of the Act 
provides for the reclassification of hospitals based on determinations 
by the MGCRB. Under section 1886(d)(10) of the Act, a hospital may be 
reclassified for purposes of the wage index.
    Under section 1886(d)(8)(D) of the Act, the Secretary is required 
to adjust the standardized amount to ensure that aggregate payments 
under the IPPS after implementation of the provisions of sections 
1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal to the 
aggregate prospective payments that would have been made absent these 
provisions. We note that the wage index adjustments provided for under 
section 1886(d)(13) of the Act are not budget neutral. Section 
1886(d)(13)(H) of the Act provides that any increase in a wage index 
under section 1886(d)(13) shall not be taken into account in applying 
any budget neutrality adjustment with respect to such index under 
section 1886(d)(8)(D) of the Act. To calculate the budget neutrality 
adjustment factor for FY 2016, we used FY 2014 discharge data to 
simulate payments and compared the following:
     Aggregate payments using the FY 2016 labor-related share 
percentages, FY 2016 relative weights, and FY 2016 wage data prior to 
any reclassifications under sections 1886(d)(8)(B) and (C) and 
1886(d)(10) of the Act, and applied the FY 2016 hospital readmissions 
payment adjustments and the estimated FY 2016 hospital VBP payment 
adjustments; and
     Aggregate payments using the FY 2016 labor-related share 
percentages, FY 2016 relative weights, and FY 2016 wage data after such 
reclassifications, and applied the same FY 2016 hospital readmissions 
payment adjustments and the estimated FY 2016 hospital VBP payment 
adjustments applied above.
    We note that the reclassifications applied under the second 
simulation and comparison are those listed in Table 2 associated with 
this final rule, which is available via the Internet on the CMS Web 
site. This table reflects reclassification crosswalks for FY 2016, and 
applies the policies explained in section III. of the preamble to this 
final rule. Based on these simulations, we calculated a budget 
neutrality adjustment factor of 0.987905 to ensure that the effects of 
these provisions are budget neutral, consistent with the statute.
    The FY 2016 budget neutrality adjustment factor was applied to the 
standardized amount after removing the effects of the FY 2015 budget 
neutrality adjustment factor. We note that the FY 2016 budget 
neutrality adjustment reflects FY 2016 wage index reclassifications 
approved by the MGCRB or the Administrator at the time of development 
of the final rule.
c. Rural Floor Budget Neutrality Adjustment
    Under Sec.  412.64(e)(4), we make an adjustment to the wage index 
to ensure that aggregate payments after implementation of the rural 
floor under section 4410 of the BBA (Pub. L. 105-33) and the imputed 
floor under Sec.  412.64(h)(4) are equal to the aggregate prospective 
payments that would have

[[Page 49777]]

been made in the absence of such provisions. Consistent with section 
3141 of the Affordable Care Act and as discussed in section III.H. of 
the preamble of this final rule and codified at Sec.  412.64(e)(4)(ii), 
the budget neutrality adjustment for the rural and imputed floor is a 
national adjustment to the wage index.
    As noted above and as discussed in section III.H.2. of the preamble 
of this final rule, in the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51594), we extended the imputed floor calculated under the original 
methodology through FY 2013. In the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53368 through 53369), we established an alternative methodology 
for calculating the imputed floor and established a policy that the 
minimum wage index value for an all-urban State would be the higher of 
the value determined under the original methodology or the value 
computed using the alternative methodology. Consistent with the 
methodology for treating the imputed floor, similar to the methodology 
we used in the FY 2013 IPPS/LTCH PPS final rule, we included this 
alternative methodology for computing the imputed floor index in the 
calculation of the uniform, national rural floor budget neutrality 
adjustment for FY 2014. For FY 2015, as discussed in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 49969 through 49971), we extended the 
imputed floor for another year using the higher of the value determined 
under the original methodology or the alternative methodology. As 
discussed in section III.H.2. of the preamble of this final rule, we 
are extending the imputed floor using the higher of the value 
determined under the original methodology or the alternative 
methodology for FY 2016. Therefore, in order to ensure that aggregate 
payments to hospitals are not affected, similar to prior years, we 
follow our policy of including the imputed floor in the rural floor 
budget neutrality adjustment to the wage index.
    Under the new OMB labor market area delineations adopted beginning 
with the FY 2015 wage indexes, New Jersey, Rhode Island, and Delaware 
are all-urban States. Therefore, for FY 2016, the imputed floor was 
applied to the wage index for hospitals located in these three States.
    Similar to our calculation in the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 50369 through 50370), for FY 2016, we are calculating a national 
rural Puerto Rico wage index (used to adjust the labor-related share of 
the national standardized amount for hospitals located in Puerto Rico 
which receive 75 percent of the national standardized amount) and a 
rural Puerto Rico-specific wage index (which is used to adjust the 
labor-related share of the Puerto Rico-specific standardized amount for 
hospitals located in Puerto Rico that receive 25 percent of the Puerto 
Rico-specific standardized amount). Because there are no rural Puerto 
Rico hospitals with established wage data, our calculation of the FY 
2016 rural Puerto Rico wage index is based on the policy adopted in the 
FY 2008 IPPS final rule with comment period (72 FR 47323). That is, we 
use the unweighted average of the wage indexes from all CBSAs (urban 
areas) that are contiguous (share a border with) to the rural counties 
to compute the rural floor (72 FR 47323; 76 FR 51594). Under the new 
OMB labor market area delineations, except for Arecibo, Puerto Rico 
(CBSA 11640), all other Puerto Rico urban areas are contiguous to a 
rural area. Therefore, based on our existing policy, the FY 2016 rural 
Puerto Rico wage index is calculated based on the average of the FY 
2016 wage indexes for the following urban areas: Aguadilla-Isabela, PR 
(CBSA 10380); Guayama, PR (CBSA 25020); Mayaguez, PR (CBSA 32420); 
Ponce, PR (CBSA 38660), San German, PR (CBSA 41900) and San Juan-
Carolina-Caguas, PR (CBSA 41980).
    To calculate the national rural floor and imputed floor budget 
neutrality adjustment factors and the Puerto Rico-specific rural floor 
budget neutrality adjustment factor, we used FY 2014 discharge data to 
simulate payments and the post-reclassified national and Puerto Rico-
specific wage indexes and compared the following:
     The national and Puerto Rico-specific simulated payments 
without the national rural floor and imputed floor and Puerto Rico-
specific rural floor applied; and
     The national and Puerto Rico-specific simulated payments 
with the national rural floor and imputed floor and Puerto Rico-
specific rural floor applied.
    Based on this comparison, we determined a national rural budget 
neutrality adjustment factor of 0.990298 and the Puerto Rico-specific 
budget neutrality adjustment factor of 0.987646. The national 
adjustment was applied to the national wage indexes to produce a 
national rural floor budget neutral wage index and the Puerto Rico-
specific adjustment was applied to the Puerto Rico-specific wage 
indexes to produce a Puerto Rico-specific rural floor budget neutral 
wage index.
d. Wage Index Transition Budget Neutrality
    As discussed in section III.G. of the preamble of this final rule, 
in the past, we have provided for transition periods when adopting 
changes that have significant payment implications, particularly large 
negative impacts.
    Similar to FY 2005, for FY 2015, we determined that the transition 
to using the new OMB labor market area delineations would have the 
largest impact on hospitals that were located in an urban county that 
became rural under the new OMB delineations or hospitals deemed urban 
where the urban area became rural under the new OMB delineations. To 
alleviate the decreased payments associated with having a rural wage 
index, in calculating the area wage index, similar to the transition 
provided in the FY 2005 IPPS final rule, we finalized a policy to 
generally assign these counties the urban wage index value of the CBSA 
to which they are physically located in for FY 2014 for FYs 2015, 2016, 
and 2017. Fiscal year 2016 is the second year of this 3-year transition 
policy. We note that the 1-year blended wage index transitional policy 
for all hospitals that would experience any decrease in their wage 
index value expires in FY 2015.
    As discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50372 
through 50373), in the past, CMS has budget neutralized transitional 
wage indexes. We stated that because we established a policy that 
allows for the application of a transitional wage index only when it 
benefits the hospital, we believe that it would be appropriate to 
ensure that such a transitional policy does not increase aggregate 
Medicare payments beyond the payments that would be made had we simply 
adopted the OMB delineations without any transitional provisions. 
Therefore, as we did for FY 2015, for FY 2016, we are using our 
exceptions and adjustments authority under section 1886(d)(5)(I)(i) of 
the Act to make an adjustment to the national and Puerto Rico-specific 
standardized amounts to ensure that total payments for the effect of 
the 3-year transitional wage index provisions will equal what payments 
would have been if we had fully adopted the new OMB delineations 
without providing these transitional provisions. To calculate the 
transitional wage index budget neutrality factor for FY 2016, we used 
FY 2014 discharge data to simulate payments and compared the following:
     Aggregate payments using the OMB delineations for FY 2016, 
the FY 2016 relative weights, the FY 2016 wage data after such 
reclassifications under

[[Page 49778]]

sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act, application 
of the rural floor budget neutrality adjustment factor to the wage 
index, and application of the FY 2016 hospital readmissions payment 
adjustments and the estimated FY 2016 hospital VBP payment adjustments; 
and
     Aggregate payments using the OMB delineations for FY 2016, 
the FY 2016 relative weights, the FY 2016 wage data after such 
reclassifications under sections 1886(d)(8)(B) and (C) and 1886(d)(10) 
of the Act, application of the rural floor budget neutrality adjustment 
factor to the wage index, application of the 3-year transitional wage 
indexes, and application of the same FY 2016 hospital readmissions 
payment adjustments and the estimated FY 2016 hospital VBP payment 
adjustments applied above.
    Based on these simulations, we calculated a budget neutrality 
adjustment factor of 0.999996. Therefore, for FY 2016, we applied a 
transitional wage index budget neutrality adjustment factor of 0.999996 
to the national average and Puerto Rico-specific standardized amounts 
to ensure that the effects of these transitional wage indexes are 
budget neutral.
    We note that the budget neutrality adjustment factor calculated 
above is based on the increase in payments in FY 2016 that would result 
from the second year of the 3-year transitional wage index policies. 
Therefore, we applied this budget neutrality adjustment factor as a 
one-time adjustment to the FY 2016 national and Puerto Rico-specific 
standardized amounts in order to offset the increase in payments in FY 
2016 as a result of this second year of the 3-year transitional wage 
index. For subsequent fiscal years, we will not take into consideration 
the adjustment factor applied to the national and Puerto Rico-specific 
standardized amounts in the previous fiscal year's update when 
calculating the current fiscal year transitional wage index budget 
neutrality adjustment factor (that is, this adjustment will not be 
applied cumulatively).
e. Case-Mix Budget Neutrality Adjustment
(1) Background
    Below we summarize the recoupment adjustment to the FY 2016 payment 
rates, as required by section 631 of ATRA, to account for the increase 
in aggregate payments as a result of not completing the prospective 
adjustment authorized under section 7(b)(1)(A) of Public Law 110-90 
until FY 2013. We refer readers to section II.D. of the preamble of 
this final rule for a complete discussion regarding our policies for FY 
2016 in this final rule and previously finalized policies (including 
our historical adjustments to the payment rates) relating to the effect 
of changes in documentation and coding that do not reflect real changes 
in case-mix.
(2) Recoupment or Repayment Adjustment Authorized by Section 631 of the 
American Taxpayer Relief Act of 2012 (ATRA) to the National 
Standardized Amount
    Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law 
110-90 to require the Secretary to make a recoupment adjustment 
totaling $11 billion by FY 2017. Our actuaries estimated that if CMS 
were to fully account for the $11 billion recoupment required by 
section 631 of the ATRA in FY 2014, a one-time -9.3 percent adjustment 
to the standardized amount would be necessary. It is often our practice 
to delay or phase-in payment rate adjustments over more than 1 year, in 
order to moderate the effect on payment rates in any 1 year. Therefore, 
consistent with the policies that we have adopted in many similar 
cases, for FY 2014 and FY 2015, we applied a -0.8 percent adjustment to 
the standardized amount. For FY 2016, as we proposed, we are applying a 
-0.8 percent adjustment to the standardized amount. We note that, as 
section 631 of the ATRA instructs the Secretary to make a recoupment 
adjustment only to the standardized amount, this adjustment does not 
apply to the Puerto Rico-specific standardized amount and hospital-
specific payment rates.
f. Rural Community Hospital Demonstration Program Adjustment
    As discussed in section IV.L. of the preamble of this final rule, 
section 410A of Public Law 108-173 originally required the Secretary to 
establish a demonstration program that modifies reimbursement for 
inpatient services for up to 15 small rural hospitals. Section 
410A(c)(2) of Public Law 108-173 requires that, in conducting the 
demonstration program under this section, the Secretary shall ensure 
that the aggregate payments made by the Secretary do not exceed the 
amount which the Secretary would have paid if the demonstration program 
under this section was not implemented.
    Sections 3123 and 10313 of the Affordable Care Act extended the 
demonstration program for an additional 5-year period, and allowed up 
to 30 hospitals to participate in 20 States with low population 
densities determined by the Secretary. (In determining which States to 
include in the expansion, the Secretary is required to use the same 
criteria and data that the Secretary used to determine the States for 
purposes of the initial 5-year period.) In the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 50141 through 50145), in order to achieve budget 
neutrality, we adjusted the national IPPS payment rates by an amount 
sufficient to account for the added costs of this demonstration program 
as described in section IV.L. of that final rule. In other words, we 
applied budget neutrality across the payment system as a whole rather 
than merely across the participants of this demonstration program, 
consistent with past practice. We stated that we believe the language 
of the statutory budget neutrality requirement permits the agency to 
implement the budget neutrality provision in this manner. The statutory 
language requires that aggregate payments made by the Secretary do not 
exceed the amount which the Secretary would have paid if the 
demonstration was not implemented, but does not identify the range 
across which aggregate payments must be held equal.
    For FY 2016, we are calculating a budget neutrality offset amount, 
according to the methodology set forth in section IV.I. of the preamble 
of this final rule, to account for the estimated additional costs of 
the demonstration program for FY 2016. In addition, as explained in 
section IV.I. of the preamble of this final rule, we are subtracting 
from this budget neutrality offset amount the following: (1) The amount 
by which the budget neutrality offset that was finalized in the FY 2009 
IPPS final rule exceeded the actual costs of the demonstration for FY 
2009 (as shown in finalized cost reports for hospitals that 
participated in FY 2009 and had cost reporting periods beginning in FY 
2009), and (2) the amount by which the budget neutrality offset that 
was finalized for FY 2010 to account for the demonstration costs in FY 
2010 (as set forth in the FY 2010 and 2011 IPPS final rules) exceeded 
the actual costs of the demonstration for FY 2010 (as shown in 
finalized cost reports for hospitals that participated in FY 2010 and 
had cost reporting periods beginning in FY 2010). The total budget 
neutrality offset amount for which the adjustment to the FY 2016 IPPS 
rates is calculated is $12,835,618. Accordingly, using the most recent 
data available to account for the estimated costs of the demonstration 
program, for FY 2016, we have computed a factor of 0.999861 for the 
rural community hospital

[[Page 49779]]

demonstration program budget neutrality adjustment that will be applied 
to the IPPS standard Federal payment rate.
g. Outlier Payments
    Section 1886(d)(5)(A) of the Act provides for payments in addition 
to the basic prospective payments for ``outlier'' cases involving 
extraordinarily high costs. To qualify for outlier payments, a case 
must have costs greater than the sum of the prospective payment rate 
for the DRG, any IME and DSH payments, any new technology add-on 
payments, and the ``outlier threshold'' or ``fixed-loss'' amount (a 
dollar amount by which the costs of a case must exceed payments in 
order to qualify for an outlier payment). We refer to the sum of the 
prospective payment rate for the DRG, any IME and DSH payments, any new 
technology add-on payments, and the outlier threshold as the outlier 
``fixed-loss cost threshold.'' To determine whether the costs of a case 
exceed the fixed-loss cost threshold, a hospital's CCR is applied to 
the total covered charges for the case to convert the charges to 
estimated costs. Payments for eligible cases are then made based on a 
marginal cost factor, which is a percentage of the estimated costs 
above the fixed-loss cost threshold. The marginal cost factor for FY 
2016 is 80 percent, the same marginal cost factor we have used since FY 
1995 (59 FR 45367).
    In accordance with section 1886(d)(5)(A)(iv) of the Act, outlier 
payments for any year are projected to be not less than 5 percent nor 
more than 6 percent of total operating DRG payments (which does not 
include IME and DSH payments) plus outlier payments. When setting the 
outlier threshold, we compute the 5.1 percent target by dividing the 
total operating outlier payments by the total operating DRG payments 
plus outlier payments. We do not include any other payments such as IME 
and DSH within the outlier target amount. Therefore, it is not 
necessary to include Medicare Advantage IME payments in the outlier 
threshold calculation. Section 1886(d)(3)(B) of the Act requires the 
Secretary to reduce the average standardized amount by a factor to 
account for the estimated proportion of total DRG payments made to 
outlier cases. Similarly, section 1886(d)(9)(B)(iv) of the Act requires 
the Secretary to reduce the average standardized amount applicable to 
hospitals located in Puerto Rico to account for the estimated 
proportion of total DRG payments made to outlier cases. More 
information on outlier payments may be found on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/outlier.html.
(1) FY 2016 Outlier Fixed-Loss Cost Threshold
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50977 through 
50983), in response to public comments on the FY 2013 IPPS/LTCH PPS 
proposed rule, we made changes to our methodology for projecting the 
outlier fixed-loss cost threshold for FY 2014. We refer readers to the 
FY 2014 IPPS/LTCH PPS final rule for detailed discussion of the 
changes.
    For FY 2016, we proposed to continue to use the same methodology 
that we used in FY 2015. As we have done in the past, to calculate the 
proposed FY 2016 outlier threshold, we simulated payments by applying 
proposed FY 2016 payment rates and policies using cases from the FY 
2014 MedPAR file. Therefore, in order to determine the proposed FY 2016 
outlier threshold, we inflated the charges on the MedPAR claims by 2 
years, from FY 2014 to FY 2016. As discussed in the FY 2014 IPPS/LTCH 
PPS final rule, we believe a methodology that is based on 1-year of 
charge data will provide a more stable measure to project the average 
charge per case because our prior methodology used a 6-month measure, 
which inherently uses fewer claims than a 1-year measure and makes it 
more susceptible to fluctuations in the average charge per case as a 
result of any significant charge increases or decreases by hospitals.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50375), we stated 
that commenters were concerned that they were unable to replicate the 
calculation of the charge inflation factor that CMS used in the 
proposed rule. In response to those comments, we stated that, 
consistent with our longstanding policy since FY 2005, we continue to 
believe that it is optimal to use the most recent period of charge data 
available to measure charge inflation. We also stated we would consider 
how best to provide additional information on the charge inflation 
factor for future years. In response to those comments, in the proposed 
rule, we provided the following table that displays covered charges and 
cases by quarter in the periods used to calculate the charge inflation 
factor.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Covered charges                             Covered charges
                                                                    (January 1, 2013,     Cases (January 1,     (January 1, 2014,     Cases (January 1,
                             Quarter                              through December 31,      2013, through       through  December       2014, through
                                                                          2013)          December 31, 2013)         31, 2014)        December 31, 2014)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1...............................................................      $126,534,546,428             2,640,744      $125,988,476,809             2,480,809
2...............................................................       118,741,812,697             2,507,483       121,297,544,913             2,433,390
3...............................................................       115,745,380,133             2,425,636       116,785,744,335             2,321,731
4...............................................................       119,331,676,066             2,406,770        89,923,763,220             1,764,002
                                                                 ---------------------------------------------------------------------------------------
    Total.......................................................       480,353,415,324             9,980,633       453,995,529,277             8,999,932
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Under this new methodology, to compute the 1-year average 
annualized rate-of-change in charges per case for FY 2016, we proposed 
to compare the average covered charge per case of $48,129 
($480,353,415,324/9,980,633) from the second quarter of FY 2013 through 
the first quarter of FY 2014 (January 1, 2013, through December 31, 
2013) to the average covered charge per case of $50,444 
($453,995,529,277/8,999,932) from the second quarter of FY 2014 through 
the first quarter of FY 2015 (January 1, 2014, through December 31, 
2014). This rate-of-change was 4.8 percent (1.048116) or 9.8 percent 
(1.098547) over 2 years.
    Comment: Many commenters were concerned that they were unable to 
replicate the calculation of the charge inflation factor that CMS used 
in the proposed rule. One commenter requested that CMS add the claims 
data used to compute the charge inflation factor to the list of limited 
data set (LDS) files that can be ordered through the usual LDS data 
request process. Another commenter who was also focusing on replicating 
the charge inflation factor stated that it was unable to match the 
figures in the table from the proposed rule with publicly available 
data sources. The commenter further stated

[[Page 49780]]

that CMS has not made the necessary data available, or any guidance 
that describes whether and how it edited such data to arrive at the 
total of quarterly charges and charges per case it used to measure 
charge inflation. Consequently, the commenter stated that the table 
provided in the proposed rule is not useful in assessing the accuracy 
of the charge inflation figure that CMS used in the proposed rule to 
calculate the outlier threshold. In the absence of such data and how it 
was edited by CMS to arrive at the totals used in its charge inflation 
calculation, the commenter asserted that CMS has violated a principal 
tenet of the Administrative Procedure Act by not providing adequate 
notice to allow for meaningful comment.
    Response: As stated in last year's rule, we continue to believe 
that it is optimal to use the most recent period of charge data 
available to measure charge inflation. The commenters did not suggest 
that CMS use charge data from a different period to compute the charge 
inflation factor. If we computed the charge inflation factor using the 
latest data available to the public at the time of issuance of this 
final rule, we would need to compare charge data from FY 2013 (October 
2012-September 2013) to FY 2014 (October 2013-September 2014), data 
which would be at least 10 months old compared to the charge data we 
currently use, which is 4 months old. Furthermore, we note that, with 
regard to CCRs (as summarized below), the commenters suggested that CMS 
use the most recent data available when it calculates the outlier 
threshold. We share the commenters' view. Therefore, we are continuing 
to use the most recent charge data available to us at the time of this 
final rule to compute the charge inflation factor.
    With respect to commenters who expressed concern that they were 
unable to replicate the calculation of the charge inflation factor that 
CMS used in the proposed rule, the information we provided in the 
proposed rule was sufficient for meaningful comment on our proposal and 
balances the commenter's requests that we use the latest claims data to 
compute the charge inflation factor with the current limitations of the 
LDS file. We note that we responded to similar comments on the 
replication of the charge inflation factor in the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 50375) and refer readers to that final rule.
    Nevertheless, in response to the request for additional 
information, we are taking two actions. For the quarterly charge data 
table, we grouped claims data by quarter in order that the public would 
be able to replicate the claims summary for the claims with discharge 
dates through September 30, 2014, that are available under the current 
LDS structure. In order to provide even more information in response to 
the commenters' request, we will make available on the CMS Web site at 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html (click on the link on the left titled ``FY 
2016 IPPS Final Rule Home Page'' and then click the link ``FY 2016 
Final Rule Data Files'') a more detailed summary table by provider with 
the monthly charges that were used to compute the charge inflation 
factor. The second action we will take is to work with our systems 
teams and privacy office to explore expanding the information available 
in the current LDS, perhaps through the provision of a supplemental 
data file for future rulemaking.
    In response to the commenters who requested additional detail on 
our calculation, we note that section II.A.4. of this Addendum 
describes the inclusion and exclusion of claims and charges used in the 
outlier calculation and charge inflation calculation. As we have done 
in the past, in the FY 2016 IPPS/LTCH PPS proposed rule, we proposed to 
establish the FY 2016 outlier threshold using hospital CCRs from the 
December 2014 update to the Provider-Specific File (PSF)--the most 
recent available data at the time of the proposed rule. We also 
proposed that if more recent data became available, we would use that 
data to calculate the final FY 2016 outlier threshold. For FY 2016, we 
also proposed to continue to apply an adjustment factor to the CCRs to 
account for cost and charge inflation (as explained below).
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we adopted a 
new methodology to adjust the CCRs. Specifically, we finalized a policy 
to compare the national average case-weighted operating and capital CCR 
from the most recent update of the PSF to the national average case-
weighted operating and capital CCR from the same period of the prior 
year.
    Therefore, as we did for FY 2014 and FY 2015, we proposed to adjust 
the CCRs from the December 2014 update of the PSF by comparing the 
percentage change in the national average case-weighted operating CCR 
and capital CCR from the December 2013 update of the PSF to the 
national average case-weighted operating CCR and capital CCR from the 
December 2014 update of the PSF. We note that, in the proposed rule, we 
used total transfer-adjusted cases from FY 2014 to determine the 
national average case-weighted CCRs for both sides of the comparison. 
As stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we 
believe that it is appropriate to use the same case count on both sides 
of the comparison because this will produce the true percentage change 
in the average case-weighted operating and capital CCR from one year to 
the next without any effect from a change in case count on different 
sides of the comparison.
    Using the proposed methodology above, for the proposed rule, we 
calculated a December 2013 operating national average case-weighted CCR 
of 0.288792 and a December 2014 operating national average case-
weighted CCR of 0.280581. We then calculated the percentage change 
between the two national operating case-weighted CCRs by subtracting 
the December 2013 operating national average case-weighted CCR from the 
December 2014 operating national average case-weighted CCR and then 
dividing the result by the December 2013 national operating average 
case-weighted CCR. This resulted in a proposed national operating CCR 
adjustment factor of 0.971568.
    We used the same methodology proposed above to adjust the capital 
CCRs. Specifically, for the proposed rule we calculated a December 2013 
capital national average case-weighted CCR of 0.025014 and a December 
2014 capital national average case-weighted CCR of 0.024500. We then 
calculated the percentage change between the two national capital case-
weighted CCRs by subtracting the December 2013 capital national average 
case-weighted CCR from the December 2014 capital national average case-
weighted CCR and then dividing the result by the December 2013 capital 
national average case-weighted CCR. This resulted in a proposed 
national capital CCR adjustment factor of 0.979474.
    Consistent with our methodology used in the past and as stated in 
the FY 2009 IPPS final rule (73 FR 48763), we continue to believe that 
it is appropriate to apply only a 1-year adjustment factor to the CCRs. 
On average, it takes approximately 9 months for a MAC to tentatively 
settle a cost report from the fiscal year end of a hospital's cost 
reporting period. The average ``age'' of hospitals' CCRs from the time 
the fiscal intermediary or the MAC inserts the CCR in the PSF until the 
beginning of FY 2016 is approximately 1 year. Therefore, as stated 
above, we believe a 1-year adjustment factor to the CCRs is 
appropriate.
    As stated above, for FY 2016, we applied the FY 2016 payment rates 
and

[[Page 49781]]

policies from the proposed rule using cases from the FY 2014 MedPAR 
files in calculating the outlier threshold.
    As discussed above, for FY 2016, we are applying the second year of 
the 3-year transitional wage index because of the adoption of the new 
OMB labor market area delineations. Also, as discussed in section 
III.B.3. of the preamble to the FY 2011 IPPS/LTCH PPS final rule (75 FR 
50160 and 50161) and in section III.H.3. of the preamble of this final 
rule, in accordance with section 10324(a) of the Affordable Care Act, 
we created a wage index floor of 1.0000 for all hospitals located in 
States determined to be frontier States. We note that the frontier 
State floor adjustments are calculated and applied after rural and 
imputed floor budget neutrality adjustments are calculated for all 
labor market areas, in order to ensure that no hospital in a frontier 
State receives a wage index less than 1.0000 due to the rural and 
imputed floor adjustment. In accordance with section 10324(a) of the 
Affordable Care Act, the frontier State adjustment will not be subject 
to budget neutrality, and will only be extended to hospitals 
geographically located within a frontier State. However, for purposes 
of estimating the proposed outlier threshold for FY 2016, it was 
necessary to apply the 3-year transitional wage indexes and adjust the 
wage index of those eligible hospitals in a frontier State when 
calculating the outlier threshold that results in outlier payments 
being 5.1 percent of total payments for FY 2016. If we did not take the 
above into account, our estimate of total FY 2016 payments would be too 
low, and, as a result, our proposed outlier threshold would be too 
high, such that estimated outlier payments would be less than our 
projected 5.1 percent of total payments.
    As we did in establishing the FY 2009 outlier threshold (73 FR 
57891), in our projection of FY 2016 outlier payments, we proposed not 
to make any adjustments for the possibility that hospitals' CCRs and 
outlier payments may be reconciled upon cost report settlement. We 
stated that we continue to believe that, due to the policy implemented 
in the June 9, 2003 Outlier final rule (68 FR 34494), CCRs will no 
longer fluctuate significantly and, therefore, few hospitals will 
actually have these ratios reconciled upon cost report settlement. In 
addition, it is difficult to predict the specific hospitals that will 
have CCRs and outlier payments reconciled in any given year. We note 
that we have instructed MACs to identify for CMS any instances where 
(1) a hospital's actual CCR for the cost reporting period fluctuates 
plus or minus 10 percentage points compared to the interim CCR used to 
calculate outlier payments when a bill is processed; and (2) the total 
outlier payments for the hospital exceeded $500,000.00 for that period. 
Our simulations assume that CCRs accurately measure hospital costs 
based on information available to us at the time we set the outlier 
threshold. For these reasons, we proposed not to make any assumptions 
regarding the effects of reconciliation on the outlier threshold 
calculation.
    Comment: Commenters were concerned with CMS' decision not to 
consider outlier reconciliation in developing the outlier threshold and 
stated that it has not provided objective data concerning the number of 
hospitals that have been subjected to reconciliation and the amounts 
recovered during this process. The commenters' views were similar to 
comments received and responded to in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50376 through 50377).
    Another commenter submitted the same comment as last year and cited 
CMS' response from the FY 2015 IPPS/LTCH PPS final rule (79 FR 50377). 
The commenter questioned CMS' response with the following comments: The 
commenter asked what is the basis for CMS' claim ``that the CCRs will 
reflect low costs and high charges that the commenter referred to, and 
when applied to the charges on the claim will result in less outlier 
payments for such cases because the costs of the case will be lower 
when compared to the total MS-DRG payments excluding outlier 
payments.'' The commenter cited the 2013 OIG Report and stated that the 
report seems to state the opposite of CMS' position when it states that 
``high-outlier hospitals charged Medicare substantially more for the 
same MS-DRGs, yet had similar average lengths of stay and CCRs.'' The 
commenter further cited the same 2013 OIG report which stated ``that 
high-outlier hospitals had similar average CCRs, compared to all other 
hospitals, which means that the higher charges by the hospitals 
directly resulted in larger and more frequent outlier payments. As 
mentioned, Medicare applies a hospital's CCR to the covered charges on 
a claim to determine the estimated cost of services covered by the 
claim. The amount of the estimated cost determines whether Medicare 
makes an outlier payment and the amount received. In 2008, the average 
CCR at high-outlier hospitals was the same as the average CCR for all 
other hospitals, 0.35. CCRs declined, on average, during 2008-2011, to 
0.30 at high-outlier hospitals and to 0.33 at all other hospitals. 
Although the high-outlier hospitals had higher charges, their CCR (that 
is, 0.30) was not significantly lower than the CCR of all other 
hospitals (that is, 0.33). Therefore, the higher charges led Medicare 
to calculate higher estimated costs for the high-outlier hospitals, and 
paying larger, more frequent outlier payments.''
    The commenter concluded that it is neither consistent with the 
outlier statute nor reasonable for CMS, in modeling outlier payments 
for the upcoming fiscal year, to include outlier payments that were 
based on excessively high charges for particular MS-DRGs and not based 
on truly unusually high costs. The commenter suggested that, if CMS 
claims that such payments will not be recouped because they do not 
trigger reconciliation under current criteria, CMS explain how it plans 
to address the matter in setting the outlier fixed-loss cost threshold. 
The commenter suggested the following possibilities: Chapter 3, Section 
20.1.2 of the Medicare Claims Processing Manual authorizes CMS to 
``direct Medicare contractors to use an alternative CCR if CMS believes 
this will result in a more accurate CCR'' or a Medicare contractor 
``may specify an alternative CCR if it believes that the CCR being 
applied is inaccurate.''
    Response: We responded to similar comments in the FY 2015 IPPS/LTCH 
final rule (79 FR 50376 through 50377) and refer readers to that final 
rule. With regard to the OIG report that the commenter believed 
contradicted our statement in last year's final rule, we note that the 
OIG report used CCRs from 2008-2011. The CCRs are updated in the PSF at 
the time the MAC tentatively settles the hospital cost report, which is 
approximately 6 to 7 months after the cost report has been submitted. 
Thus, there is a lag in CCRs with the possibility that a CCR may be 18 
months old from the time the cost report is submitted by the provider 
to the MAC until it is updated at the following tentative settlement. 
Because hospitals typically increase their charges, over time CCRs will 
decrease but, due to the lag these lower CCRs will not be reflected in 
the PSF until the following tentative settlement. Thus, it is possible 
that the PSF will reflect CCRs that are similar for hospitals with high 
and low outlier payments. In addition, providers determine what they 
will charge for items, services, and procedures provided to patients, 
and these charges are the amount that the providers bill for an item, 
service, or procedure. Moreover, different hospitals can have similar 
lengths of stay but different

[[Page 49782]]

CCRs. We encourage transparency with respect to hospital charges and 
have posted hospital charge data on the CMS Web site at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data. In addition, as the commenter 
noted, there are mechanisms to avoid outlier overpayments or 
underpayments as CMS and the MACs have the authority to specify an 
alternative CCR. Also, in addition to the examples cited by the 
commenter, as we note in every proposed and final rule, hospitals can 
also request alternative CCRs. Therefore, if hospitals make these 
requests, these CCRs would be reflected in the PSF which would be used 
to compute the fixed-loss threshold.
    As described in sections IV.H. and IV.I., respectively, of the 
preamble of this final rule, sections 1886(q) and 1886(o) of the Act 
establish the Hospital Readmissions Reduction Program and the Hospital 
VBP Program, respectively. We do not believe that it is appropriate to 
include the hospital VBP payment adjustments and the hospital 
readmissions payment adjustments in the outlier threshold calculation 
or the outlier offset to the standardized amount. Specifically, 
consistent with our definition of the base operating DRG payment amount 
for the Hospital Readmissions Reduction Program under Sec.  412.152 and 
the Hospital VBP Program under Sec.  412.160, outlier payments under 
section 1886(d)(5)(A) of the Act are not affected by these payment 
adjustments. Therefore, outlier payments will continue to be calculated 
based on the unadjusted base DRG payment amount (as opposed to using 
the base-operating DRG payment amount adjusted by the hospital 
readmissions payment adjustment and the hospital VBP payment 
adjustment). Consequently, we proposed to exclude the hospital VBP 
payment adjustments and the hospital readmissions payment adjustments 
from the calculation of the outlier fixed-loss cost threshold.
    We noted that, to the extent section 1886(r) of the Act modifies 
the existing DSH payment methodology under section 1886(d)(5)(F) of the 
Act, the new uncompensated care payment under section 1886(r)(2) of the 
Act, like the empirically justified Medicare DSH payment under section 
1886(r)(1) of the Act, may be considered an amount payable under 
section 1886(d)(5)(F) of the Act such that it would be reasonable to 
include the payment in the outlier determination under section 
1886(d)(5)(A) of the Act. As we did for FY 2014 and FY 2015, for FY 
2016, we proposed to allocate an estimated per-discharge uncompensated 
care payment amount to all cases for the hospitals eligible to receive 
the uncompensated care payment amount in the calculation of the outlier 
fixed-loss cost threshold methodology. We stated that we continue to 
believe that allocating an eligible hospital's estimated uncompensated 
care payment to all cases equally in the calculation of the outlier 
fixed-loss cost threshold would best approximate the amount we would 
pay in uncompensated care payments during the year because, when we 
make claim payments to a hospital eligible for such payments, we would 
be making estimated per-discharge uncompensated care payments to all 
cases equally. Furthermore, we stated that we continue to believe that 
using the estimated per-claim uncompensated care payment amount to 
determine outlier estimates provides predictability as to the amount of 
uncompensated care payments included in the calculation of outlier 
payments. Therefore, consistent with the methodology used in FY 2014 
and FY 2015 to calculate the outlier fixed-loss cost threshold, for FY 
2016, we proposed to include estimated FY 2016 uncompensated care 
payments in the computation of the proposed outlier fixed-loss cost 
threshold. Specifically, we proposed to use the estimated per-discharge 
uncompensated care payments to hospitals eligible for the uncompensated 
care payment for all cases in the calculation of the outlier fixed-loss 
cost threshold methodology.
    Using this methodology, we proposed an outlier fixed-loss cost 
threshold for FY 2016 equal to the prospective payment rate for the MS-
DRG, plus any IME, empirically justified Medicare DSH payments, 
estimated uncompensated care payment, and any add-on payments for new 
technology, plus $24,485.
    In the proposed rule, we noted that the proposed FY 2016 fixed-loss 
cost threshold is lower than the FY 2015 final outlier fixed-loss cost 
threshold of $24,626. We stated that we believe that the decrease in 
the charge inflation factor (compared to the FY 2015 charge inflation 
factor) contributed to a lower outlier fixed-loss threshold for FY 
2016. As charges decrease, so does the amount of outlier payments. As a 
result, it was necessary for us to lower the proposed outlier fixed-
loss cost threshold to increase the amount of outlier payments expended 
in order to reach the 5.1 percent target.
    Comment: One commenter believed that it is important that CMS 
accurately calculate prior year actual payment comparisons to the 5.1 
percent target. The commenter asserted that it is not possible for CMS 
to appropriately modify its methodology to achieve an accurate result 
if it is not aware of, or misinformed about, inaccuracies resulting 
from prior the prior year methodology. The commenter cited the FY 2014 
IPPS/LTCH PPS proposed rule as an example where CMS indicated that 
using partial year data for FY 2013 demonstrated that outlier payments 
would equal about 5.17 percent of overall payments, while in the FY 
2015 IPPS/LTCH PPS final rule, CMS indicated that, for FY 2013, outlier 
payments would equal about 4.81 percent of MS-DRG payments. The 
commenter stated that this demonstrates that CMS' early estimate for FY 
2013 was too high, as has often been the case. The commenter also cited 
the FY 2015 IPPS/LTCH PPS final rule correction notice (79 FR 59681) as 
another example where using the FY 2013 MedPAR file, CMS estimated 
actual FY 2014 outlier payments would be approximately 5.68 percent of 
actual total MS-DRG payments, while the current estimate, using 
available FY 2014 claims data, is that actual outlier payments for FY 
2014 were approximately 5.34 percent of actual total MS-DRG payments.
    The commenter stated that it was concerned that CMS believed it was 
over shooting its target amount for FY 2014 by 0.58 percent and this 
motivated CMS to dramatically increase the threshold for FY 2015, only 
to learn this year that its estimate was grossly overstated. The 
commenter concluded that it is critical that CMS not allow the use of 
incomplete data from prior years to affect its calculation of current 
period thresholds.
    Another commenter noted that the final outlier threshold 
established by CMS is always significantly lower than the threshold set 
forth in the proposed rule. The commenter believed the decline is most 
likely due to the use of updated CCRs or other data in calculating the 
final threshold. The commenter stated that this emphasizes that CMS 
must use the most recent data available when it calculates the outlier 
threshold. The commenter cited as an example that, in the proposed 
rule, CMS used data from the December 2014 PSF file, but at the time 
the proposed rule was issued, the March 2015 PSF file was available.
    Response: We responded to similar comments in the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 50378 through 50379) and refer the reader to that 
rule for our response.
    Comment: One commenter stated CMS' explanation of why the threshold 
decreased from FY 2015 to FY 2016 conflicts with its historical 
adjustments

[[Page 49783]]

to the outlier fixed-loss cost threshold. The commenter noted that, 
from FY 2013 to FY 2014, CMS decreased the outlier fixed-loss cost 
threshold even though the charge inflation factor increased compared to 
the previous year. Moreover, the commenter stated that CMS is incorrect 
that its model assumes that charges will decrease in FY 2016 when 
compared to FY 2015 for several reasons. First, the average charge per 
case from the FY 2014 MedPAR file (used to calculate the FY 2016 
outlier fixed-loss cost threshold) is approximately 5 percent higher 
than the average charge per case from the FY 2013 MedPAR file (used to 
calculate the FY 2015 outlier fixed-loss cost threshold; 79 FR 50375 
and 50379). Second, the proposed rule establishes a 1-year charge 
inflation factor of 4.8116 percent, which is only 0.2801 percent lower 
than the FY 2015 1-year charge inflation factor of 5.0917 percent (80 
FR 24632 and 79 FR 50379). Accordingly, the commenter stated that the 
proposed rule is proposing to lower the outlier fixed-loss cost 
threshold even though charges are projected to increase (that is, net 
charge inflation) in FY 2016 (when compared to FY 2015). The commenter 
requested that CMS explain this reduction because the proposed 
reduction in the outlier fixed-loss cost threshold cannot be attributed 
to a decrease in charges (because charges increased).
    Response: In our description comparing the proposed FY 2016 outlier 
threshold to the FY 2015 final threshold, we stated that the decrease 
in charges contributed to a lower threshold. We did not state that this 
was the only reason. When we conduct our modeling to determine the 
outlier threshold, we factor in all payments and policies that would 
affect actual payments for the upcoming fiscal year in order to 
estimate that outlier payments are 5.1 percent of total MS-DRG 
payments. As a result, there are many components of the payment system 
that can contribute to the increase and decrease of outlier payments. 
Also, we believe the commenter, by only comparing the 1-year change, is 
inadvertently distorting the variance of the charge inflation factor. 
For FY 2016, we are using claims from FY 2014, which requires a 2-year 
inflation factor. The actual variance in the charge inflation factor 
from FY 2015 to FY 2016 is 0.5880 percent (FY 2015 IPPS/LTCH PPS final 
rule 2-year inflation factor of 1.104427 minus FY 2016 IPPS/LTCH PPS 
proposed rule 2-year inflation factor 1.098547).
    Comment: One commenter believed that the outlier threshold should 
be further reduced because outlier payments this year are on target to 
fall below the 5.1 percent target. The commenter suggested that CMS 
consider calculating the threshold with a target of 5.5 percent of 
inpatient spending in order to ensure that the final total of outlier 
payment is between the statutory requirements of 5 to 6 percent of 
total payments.
    Another commenter recommended that that threshold be maintained at 
the FY 2014 level of $21,748 until CMS develops a more reliable 
methodology for meeting the 5.1 percent target. One other commenter 
also noted that CMS' estimate of FY 2015 outlier payments in the 
proposed rule was 4.88 percent, which is below the 5.1 percent target. 
The commenter believed that the proposed FY 2016 threshold was 
understated. As a result, the commenter suggested that CMS apply the 
following formula to compute the FY 2016 outlier threshold: Step 1--FY 
2015 Difference = (5.1 percent Target - 4.88 percent estimate from FY 
2015 = 0.22 percent)/4.88 percent estimate from FY 2015 = 4.51 percent; 
Step 2--Suggested FY 2016 Threshold = Threshold from FY 2015 of $24,626 
* (100 - 4.51 from Step 1 = 95.49 percent) = $23,515.
    Response: As we responded to similar comments in the FY 2015 IPPS/
LTCH PPS final rule (78 FR 50379), section 1886(d)(5)(A)(iv) of the Act 
requires outlier payments to be not less than 5 percent nor more than 6 
percent of total estimated or projected payments in that year. 
Therefore, we cannot adopt the commenters' suggestions of using a 
target of 5.5 percent, maintaining the threshold at the FY 2014 level, 
or using a forecast correction to compute the outlier threshold. When 
we calculate the threshold, we use the latest data that are available 
at the time of the development of the proposed and final rules in order 
to estimate that outlier payments are 5.1 percent of total payments.
    Comment: One commenter was concerned that CMS constantly misses the 
5.1 percent target. The commenter recommended that CMS conduct 
additional analysis to evaluate the methodology for incorporating 
uncompensated care and DSH payment into the outlier threshold 
calculation.
    Response: As discussed above, we include uncompensated care 
payments in our calculation of the fixed-loss outlier threshold. 
Without additional information or data analysis, we are unsure what 
exactly the commenter is referencing when the commenter stated that CMS 
should further evaluate the methodology for incorporating uncompensated 
care and DSH payments into the outlier threshold calculation.
    After consideration of the public comments we received, we are not 
making any changes to our methodology in this final rule for FY 2016. 
Therefore, we are using the same methodology we proposed to calculate 
the final outlier threshold.
    As described above, we used the latest claims data from the MedPAR 
file to compute the charge inflation factor. Similar to the table 
provided in the proposed rule, for this final rule, we are providing 
the following table that displays covered charges and cases by quarter 
in the periods used to calculate the charge inflation factor.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Covered charges                             Covered charges
                                                                     (April 1, 2013,      Cases  (April 1,       (April 1, 2014,      Cases  (April 1,
                             Quarter                               through  March 31,   2013, through  March   through  March 31,   2014, through  March
                                                                          2014)               31, 2014)               2015)               31, 2015)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1...............................................................      $126,565,555,412             2,486,502      $100,567,278,074             1,932,720
2...............................................................       118,792,100,497             2,505,875       121,989,001,463             2,444,426
3...............................................................       115,796,137,233             2,424,262       118,516,052,865             2,351,444
4...............................................................       119,439,461,865             2,405,925       122,175,830,268             2,396,231
                                                                 ---------------------------------------------------------------------------------------
    Total.......................................................       480,593,255,007             9,822,564       463,248,162,670             9,124,821
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Under our current methodology, to compute the 1-year average 
annualized rate-of-change in charges per case for FY 2016, based on the 
data from the table above, we compared the average covered charge per 
case of $48,927 ($480,593,255,007/9,822,564) from the third quarter of 
FY 2013 through the second quarter of FY 2014 (April 1, 2013, through 
March 31, 2014) to the average covered charge per case of $50,768 
($463,248,162,670/9,124,821)

[[Page 49784]]

from the third quarter of FY 2014 through the second quarter of FY 2015 
(April 1, 2014, through March 31, 2015). This rate-of-change is 3.7 
percent (1.037616) or 7.7 percent (1.076647) over 2 years.
    As we have done in the past, we are establishing the FY 2016 
outlier threshold using hospital CCRs from the March 2015 update to the 
Provider-Specific File (PSF)--the most recent available data at the 
time of development of this final rule. For FY 2016, we also are 
continuing to apply an adjustment factor to the CCRs to account for 
cost and charge inflation (as explained below). In the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50979), we adopted a new methodology to 
adjust the CCRs. Specifically, we finalized a policy to compare the 
national average case-weighted operating and capital CCR from the most 
recent update of the PSF to the national average case-weighted 
operating and capital CCR from the same period of the prior year.
    Therefore, as we did for FY 2014 and for FY 2015, we are adjusting 
the CCRs from the March 2015 update of the PSF by comparing the 
percentage change in the national average case-weighted operating CCR 
and capital CCR from the March 2014 update of the PSF to the national 
average case-weighted operating CCR and capital CCR from the March 2015 
update of the PSF. We note that we used total transfer-adjusted cases 
from FY 2014 to determine the national average case-weighted CCRs for 
both sides of the comparison. As stated in the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50979), we believe that it is appropriate to use the 
same case count on both sides of the comparison as this will produce 
the true percentage change in the average case-weighted operating and 
capital CCR from one year to the next without any effect from a change 
in case count on different sides of the comparison.
    Using the methodology above, we calculated a March 2014 operating 
national average case-weighted CCR of 0.287139 and a March 2015 
operating national average case-weighted CCR of 0.278565. We then 
calculated the percentage change between the two national operating 
case-weighted CCRs by subtracting the March 2014 operating national 
average case-weighted CCR from the March 2015 operating national 
average case-weighted CCR and then dividing the result by the March 
2014 national operating average case-weighted CCR. This resulted in a 
national operating CCR adjustment factor of 0.970141.
    We also used the same methodology above to adjust the capital CCRs. 
Specifically, we calculated a March 2014 capital national average case-
weighted CCR of 0.024879 and a March 2015 capital national average 
case-weighted CCR of 0.024243. We then calculated the percentage change 
between the two national capital case-weighted CCRs by subtracting the 
March 2014 capital national average case-weighted CCR from the March 
2015 capital national average case-weighted CCR and then dividing the 
result by the March 2014 capital national average case-weighted CCR. 
This resulted in a national capital CCR adjustment factor of 0.974442.
    Consistent with our methodology in the past and as stated in the FY 
2009 IPPS final rule (73 FR 48763), we continue to believe that it is 
appropriate to apply only a 1-year adjustment factor to the CCRs. On 
average, it takes approximately 9 months for a MAC to tentatively 
settle a cost report from the fiscal year end of a hospital's cost 
reporting period. The average ``age'' of hospitals' CCRs from the time 
the fiscal intermediary or the MAC inserts the CCR in the PSF until the 
beginning of FY 2016 is approximately 1 year. Therefore, as stated 
above, we believe a 1-year adjustment factor to the CCRs is 
appropriate.
    As stated above, for FY 2016, we applied the FY 2016 payment rates 
and policies using cases from the FY 2014 MedPAR files in calculating 
the outlier threshold.
    As discussed above, for FY 2016, we are applying the second year of 
the 3-year transitional wage index because of the adoption of the new 
OMB labor market area delineations. Also, as discussed in section 
III.B.3. of the preamble to the FY 2011 IPPS/LTCH PPS final rule (75 FR 
50160 and 50161) and in section III.H.3. of the preamble of this final 
rule, in accordance with section 10324(a) of the Affordable Care Act, 
we created a wage index floor of 1.0000 for all hospitals located in 
States determined to be frontier States. We note that the frontier 
State floor adjustments are calculated and applied after rural and 
imputed floor budget neutrality adjustments are calculated for all 
labor market areas, in order to ensure that no hospital in a frontier 
State receives a wage index less than 1.0000 due to the rural and 
imputed floor adjustment. In accordance with section 10324(a) of the 
Affordable Care Act, the frontier State adjustment will not be subject 
to budget neutrality, and will only be extended to hospitals 
geographically located within a frontier State. However, for purposes 
of estimating the outlier threshold for FY 2016, it was necessary to 
apply the 3-year transitional wage indexes and adjust the wage index of 
those eligible hospitals in a frontier State when calculating the 
outlier threshold that results in outlier payments being 5.1 percent of 
total payments for FY 2016. If we did not take the above into account, 
our estimate of total FY 2016 payments would be too low, and, as a 
result, our outlier threshold would be too high, such that estimated 
outlier payments would be less than our projected 5.1 percent of total 
payments.
    As we did in establishing the FY 2009 outlier threshold (73 FR 
57891), as we proposed and for the reasons discussed above, in our 
projection of FY 2016 outlier payments, we are not making any 
adjustments for the possibility that hospitals' CCRs and outlier 
payments may be reconciled upon cost report settlement.
    As described in sections IV.E. and IV.F. respectively, of the 
preamble of this final rule, sections 1886(q) and 1886(o) of the Act 
establish the Hospital Readmissions Reduction Program and the Hospital 
VBP Program, respectively. We do not believe that it is appropriate to 
include the hospital VBP payment adjustments and the hospital 
readmissions payment adjustments in the outlier threshold calculation 
or the outlier offset to the standardized amount. Specifically, 
consistent with our definition of the base operating DRG payment amount 
for the Hospital Readmissions Reduction Program under Sec.  412.152 and 
the Hospital VBP Program under Sec.  412.160, outlier payments under 
section 1886(d)(5)(A) of the Act are not affected by these payment 
adjustments. Therefore, outlier payments will continue to be calculated 
based on the unadjusted base DRG payment amount (as opposed to using 
the base-operating DRG payment amount adjusted by the hospital 
readmissions payment adjustment and the hospital VBP payment 
adjustment). Consequently, we excluded the hospital VBP payment 
adjustments and the hospital readmissions payment adjustments from the 
calculation of the outlier fixed-loss cost threshold.
    We note that, to the extent section 1886(r) of the Act modifies the 
DSH payment methodology under section 1886(d)(5)(F) of the Act, the new 
uncompensated care payment under section 1886(r)(2) of the Act, like 
the empirically justified Medicare DSH payment under section 1886(r)(1) 
of the Act, may be considered an amount payable under section 
1886(d)(5)(F) of the Act such that it would be reasonable to include 
the payment in the outlier determination under section 1886(d)(5)(A) of 
the Act. As we did for

[[Page 49785]]

FYs 2014 and 2015, we also for FY 2016 allocated an estimated per-
discharge uncompensated care payment amount to all cases for the 
hospitals eligible to receive the uncompensated care payment amount in 
the calculation of the outlier fixed-loss cost threshold methodology. 
We continue to believe that allocating an eligible hospital's estimated 
uncompensated care payment to all cases equally in the calculation of 
the outlier fixed-loss cost threshold best approximates the amount we 
will pay in uncompensated care payments during the year because, when 
we make claim payments to a hospital eligible for such payments, we 
will be making estimated per-discharge uncompensated care payments to 
all cases equally. Furthermore, we continue to believe that using the 
estimated per-claim uncompensated care payment amount to determine 
outlier estimates provides predictability as to the amount of 
uncompensated care payments included in the calculation of outlier 
payments. Therefore, consistent with the methodology used in FYs 2014 
and 2015 to calculate the outlier fixed-loss cost threshold, for FY 
2016, we included estimated FY 2016 uncompensated care payments in the 
computation of the outlier fixed-loss cost threshold. Specifically, we 
used the estimated per-discharge uncompensated care payments to 
hospitals eligible for the uncompensated care payment for all cases in 
the calculation of the outlier fixed-loss cost threshold methodology.
    Using this methodology, we calculated a final outlier fixed-loss 
cost threshold for FY 2016 equal to the prospective payment rate for 
the MS-DRG, plus any IME, empirically justified Medicare DSH payments, 
estimated uncompensated care payments, and any add-on payments for new 
technology, plus $22,544.
(2) Other Changes Concerning Outliers
    As stated in the FY 1994 IPPS final rule (58 FR 46348), we 
establish an outlier threshold that is applicable to both hospital 
inpatient operating costs and hospital inpatient capital-related costs. 
When we modeled the combined operating and capital outlier payments, we 
found that using a common threshold resulted in a lower percentage of 
outlier payments for capital-related costs than for operating costs. We 
project that the thresholds for FY 2016 will result in outlier payments 
that will equal 5.1 percent of operating DRG payments and 6.35 percent 
of capital payments based on the Federal rate.
    In accordance with section 1886(d)(3)(B) of the Act, we reduced the 
FY 2016 standardized amount by the same percentage to account for the 
projected proportion of payments paid as outliers.
    The outlier adjustment factors that were applied to the 
standardized amount based on the FY 2016 outlier threshold are as 
follows:

------------------------------------------------------------------------
                                             Operating
                                           standardized       Capital
                                              amounts      Federal rate
------------------------------------------------------------------------
National................................        0.949000        0.936519
Puerto Rico.............................        0.935042        0.919230
------------------------------------------------------------------------

    We applied the outlier adjustment factors to the FY 2016 payment 
rates after removing the effects of the FY 2015 outlier adjustment 
factors on the standardized amount.
    To determine whether a case qualifies for outlier payments, we 
apply hospital-specific CCRs to the total covered charges for the case. 
Estimated operating and capital costs for the case are calculated 
separately by applying separate operating and capital CCRs. These costs 
are then combined and compared with the outlier fixed-loss cost 
threshold.
    Under our current policy at Sec.  412.84, we calculate operating 
and capital CCR ceilings and assign a statewide average CCR for 
hospitals whose CCRs exceed 3.0 standard deviations from the mean of 
the log distribution of CCRs for all hospitals. Based on this 
calculation, for hospitals for which the MAC computes operating CCRs 
greater than 1.21 or capital CCRs greater than 0.175, or hospitals for 
which the MAC is unable to calculate a CCR (as described under Sec.  
412.84(i)(3) of our regulations), statewide average CCRs are used to 
determine whether a hospital qualifies for outlier payments. Table 8A 
listed in section VI. of this Addendum (and available only via the 
Internet on the CMS Web site) contains the statewide average operating 
CCRs for urban hospitals and for rural hospitals for which the MAC is 
unable to compute a hospital-specific CCR within the above range. 
Effective for discharges occurring on or after October 1, 2015, these 
statewide average ratios will replace the ratios posted on our Web site 
at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY-2014-IPPS-Final-Rule-Home-Page-Items/FY-2014-IPPS-Final-Rule-CMS-1599-F-Tables.html. Table 8B listed in section VI. of 
this Addendum (and available via the Internet on the CMS Web site) 
contains the comparable statewide average capital CCRs. As previously 
stated, the CCRs in Tables 8A and 8B will be used during FY 2016 when 
hospital-specific CCRs based on the latest settled cost report either 
are not available or are outside the range noted above. Table 8C listed 
in section VI. of this Addendum (and available via the Internet on the 
CMS Web site) contains the statewide average total CCRs used under the 
LTCH PPS as discussed in section V. of this Addendum.
    We finally note that we published a manual update (Change Request 
3966) to our outlier policy on October 12, 2005, which updated Chapter 
3, Section 20.1.2 of the Medicare Claims Processing Manual. The manual 
update covered an array of topics, including CCRs, reconciliation, and 
the time value of money. We encourage hospitals that are assigned the 
statewide average operating and/or capital CCRs to work with their MAC 
on a possible alternative operating and/or capital CCR as explained in 
Change Request 3966. Use of an alternative CCR developed by the 
hospital in conjunction with the MAC can avoid possible overpayments or 
underpayments at cost report settlement, thereby ensuring better 
accuracy when making outlier payments and negating the need for outlier 
reconciliation. We also note that a hospital may request an alternative 
operating or capital CCR ratio at any time as long as the guidelines of 
Change Request 3966 are followed. In addition, we published an 
additional manual update (Change Request 7192) to our outlier policy on 
December 3, 2010, which also updated Chapter 3, Section 20.1.2 of the 
Medicare Claims Processing Manual. The manual update outlines the 
outlier reconciliation process for hospitals and Medicare contractors. 
To download and view the manual instructions on outlier reconciliation, 
we refer readers to the CMS Web site: http://www.cms.hhs.gov/manuals/downloads/clm104c03.pdf.

[[Page 49786]]

(3) FY 2014 and FY 2015 Outlier Payments
    In the FY 2015 IPPS/LTCH PPS final rule correction notice (79 FR 
59681), we stated that, based on available data, we estimated that 
actual FY 2014 outlier payments would be approximately 5.68 percent of 
actual total MS-DRG payments. This estimate was computed based on 
simulations using the FY 2013 MedPAR file (discharge data for FY 2013 
claims). That is, the estimate of actual outlier payments did not 
reflect actual FY 2014 claims, but instead reflected the application of 
FY 2014 payment rates and policies to available FY 2013 claims.
    Our current estimate, using available FY 2014 claims data, is that 
actual outlier payments for FY 2014 were approximately 5.38 percent of 
actual total MS-DRG payments. Therefore, the data indicate that, for FY 
2014, the percentage of actual outlier payments relative to actual 
total payments is higher than we projected for FY 2014. Consistent with 
the policy and statutory interpretation we have maintained since the 
inception of the IPPS, we do not make retroactive adjustments to 
outlier payments to ensure that total outlier payments for FY 2014 are 
equal to 5.1 percent of total MS-DRG payments.
    We currently estimate that, using the latest CCRs from the March 
2015 update of the PSF, actual outlier payments for FY 2015 will be 
approximately 4.65 percent of actual total MS-DRG payments, 
approximately 0.45 percentage point lower than the 5.1 percent we 
projected when setting the outlier policies for FY 2015. This estimate 
of 4.65 percent is based on simulations using the FY 2014 MedPAR file 
(discharge data for FY 2014 claims).
    Comment: One commenter requested that CMS clarify its methodology 
used to calculate historical outlier payments. The commenter noted that 
CMS used FY 2014 claims data to model the total estimated actual 
outlier payments for FY 2014. The commenter stated that commenters have 
repeatedly noted that CMS' model overestimates the amount of total 
outlier payments, as compared to using actual claims data. The 
commenter further stated that in the FYs 2013 and 2014 IPPS/LTCH PPS 
final rules (77 FR 53698 and 78 FR 50983, respectively), one commenter 
used cost report data from the HCRIS to analyze the historical actual 
outlier payout from 2003 through 2010 and 2012 through 2014, which 
demonstrated that total outlier payments as a percentage of total MS-
DRG payments are substantially lower than what CMS has ``modeled.''
    The commenter stated that actual outlier payment estimates should 
be objectively calculated independent of HHS's ``modeling'' 
methodology. The commenter further stated that, in setting the fixed-
loss cost threshold, CMS considers prior fiscal years' outlier payments 
and therefore it is important to have an accurate tally of those 
payments. The commenter concluded that CMS' estimates are unreliable 
and commenters have demonstrated far more reliable methods.
    Response: As stated above, we do not rely upon historical actual 
outlier payments to determine the fixed-loss cost threshold. When we 
calculate the threshold, we use the latest data that are available at 
the time of the proposed and final rule in order to estimate that 
outlier payments are 5.1 percent of total payments. With regard to the 
remainder of the commenter's views, we have responded to similar 
comments in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51796) and 
refer readers to that final rule.
    Comment: One commenter asked if CMS can confirm if calculations of 
historical actual outlier payments based on HCRIS data produce lower 
total outlier payments than CMS' methodology. The commenter stated that 
the correct calculation of actual outlier payments is important because 
CMS relies upon historical actual outlier payments to determine the 
fixed-loss cost threshold and general IPPS payments. The commenter 
noted that, in the proposed rule (80 FR 24665), CMS stated that ``The 
impact of moving from our estimate of FY 2015 outlier payments, 4.9 
percent, to the proposed estimate of FY 2016 outlier payments, 5.1 
percent, would result in an increase of 0.2 percent in FY 2016 payments 
relative to FY 2015.'' Based on this statement, the commenter stated 
that if the estimate of FY 2015 outlier payments was lower than 4.9 
percent, CMS would need to make a corresponding upward adjustment in FY 
2016 payments relative to FY 2015. The commenter further stated that if 
CMS' modeling efforts to calculate historical outlier payments have 
consistently underestimated actual outlier payments, CMS should adjust 
FY 2016 payments to compensate for the miscalculation of historical 
outlier payments. The commenter believed that such a correction would 
not be retroactive per se as CMS would simply be making the adjustment 
for upcoming fiscal year payments.
    Response: Contrary to the commenter's statement, as stated above, 
we do not rely upon historical actual outlier payments to determine the 
fixed-loss cost threshold. When we calculate the threshold, we use the 
latest data that are available at the time of the proposed and final 
rule in order to estimate that outlier payments are 5.1 percent of 
total payments. For purposes of impacts and assessing whether or not 
potential changes to the outlier methodology may be warranted, we 
estimate outlier payments from the preceding fiscal year. However, this 
estimate does not impact the calculation of the fixed-loss threshold 
for the upcoming fiscal year. With regard to using HCRIS data to 
measure actual outlier payments, hospitals' cost reporting periods do 
not match the period of the Federal fiscal year. For example, many 
hospitals submit cost reports based on a calendar year (January 1 
through December 31), while the Federal fiscal year runs from October 1 
through September 30. Outlier payments are reported in the aggregate on 
the cost report, and it is currently not possible to break out outlier 
payments from the cost report to a Federal fiscal year if the cost 
report submitted by the provider is using a different reporting period.
5. FY 2016 Standardized Amount
    The adjusted standardized amount is divided into labor-related and 
nonlabor-related portions. Tables 1A and 1B listed and published in 
section VI. of this Addendum (and available via the Internet on the CMS 
Web site) contain the national standardized amounts that we are 
applying to all hospitals, except hospitals located in Puerto Rico, for 
FY 2016. The Puerto Rico-specific amounts are shown in Table 1C listed 
and published in section VI. of this Addendum (and available via the 
Internet on the CMS Web site). The amounts shown in Tables 1A and 1B 
differ only in that the labor-related share applied to the standardized 
amounts in Table 1A is 69.6 percent, and the labor-related share 
applied to the standardized amounts in Table 1B is 62 percent. In 
accordance with sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the 
Act, we are applying a labor-related share of 62 percent, unless 
application of that percentage will result in lower payments to a 
hospital than would otherwise be made. In effect, the statutory 
provision means that we will apply a labor-related share of 62 percent 
for all hospitals whose wage indexes are less than or equal to 1.0000.
    In addition, Tables 1A and 1B include the standardized amounts 
reflecting the applicable percentage increases for FY 2016.
    Under section 1886(d)(9)(A)(ii) of the Act, the Federal portion of 
the Puerto Rico payment rate is based on the

[[Page 49787]]

discharge-weighted average of the national large urban standardized 
amount (this amount is set forth in Table 1A). The labor-related and 
nonlabor-related portions of the national average standardized amounts 
for Puerto Rico hospitals for FY 2016 are set forth in Table 1C listed 
and published in section VI. of this Addendum (and available via the 
Internet on the CMS Web site). This table also includes the Puerto 
Rico-specific standardized amounts. The labor-related share applied to 
the Puerto Rico-specific standardized amount is the labor-related share 
of 63.2 percent, or 62 percent, depending on which provides higher 
payments to the hospital. (Section 1886(d)(9)(C)(iv) of the Act, as 
amended by section 403(b) of Public Law 108-173, provides that the 
labor-related share for hospitals located in Puerto Rico be 62 percent, 
unless the application of that percentage would result in lower 
payments to the hospital.)
    The following table illustrates the changes from the FY 2015 
national standardized amount to the FY 2016 national standardized 
amount. The second through fifth columns display the changes from the 
FY 2015 standardized amounts for each applicable FY 2016 standardized 
amount. The first row of the table shows the updated (through FY 2015) 
average standardized amount after restoring the FY 2015 offsets for 
outlier payments, demonstration budget neutrality, geographic 
reclassification budget neutrality, new labor market delineation wage 
Index transition budget neutrality and the retrospective documentation 
and coding adjustment under section 7(b)(1)(B) of Public Law 110-90. 
The MS-DRG reclassification and recalibration and wage index budget 
neutrality adjustment factors are cumulative. Therefore, those FY 2015 
adjustment factors are not removed from this table.

                 Comparison of FY 2015 Standardized Amounts to the FY 2016 Standardized Amounts
----------------------------------------------------------------------------------------------------------------
                                                      Hospital submitted   Hospital did NOT    Hospital did NOT
                                  Hospital submitted   quality data and     submit quality      submit quality
                                   quality data and        is NOT a          data and is a     data and is NOT a
                                    is a meaningful     meaningful EHR      meaningful EHR      meaningful EHR
                                       EHR user              user                user                user
----------------------------------------------------------------------------------------------------------------
FY 2015 Base Rate after           If Wage Index is    If Wage Index is    If Wage Index is    If Wage Index is
 removing:                         Greater Than        Greater Than        Greater Than        Greater Than
1. FY 2015 Geographic              1.0000: Labor       1.0000: Labor       1.0000: Labor       1.0000: Labor
 Reclassification Budget           (69.6%):            (69.6%):            (69.6%):            (69.6%):
 Neutrality (0.990429).            $4,324.23           $4,324.23           $4,324.23           $4,324.23
2. FY 2015 Rural Community         Nonlabor (30.4%):   Nonlabor (30.4%):   Nonlabor (30.4%):   Nonlabor (30.4%):
 Hospital Demonstration Program    $1,888.74.          $1,888.74.          $1,888.74.          $1,888.74.
 Budget Neutrality (0.999313).    If Wage Index is    If Wage Index is    If Wage Index is    If Wage Index is
3. Cumulative FY 2008, FY 2009,    less Than or        less Than or        less Than or        less Than or
 FY 2012, FY 2013 and FY 2014,     Equal to 1.0000:    Equal to 1.0000:    Equal to 1.0000:    Equal to 1.0000:
 FY 2015 Documentation and         Labor (62%):        Labor (62%):        Labor (62%):        Labor (62%):
 Coding Adjustment as Required     $3,852.04           $3,852.04           $3,852.04           $3,852.04
 under Sections 7(b)(1)(A) and     Nonlabor (38%):     Nonlabor (38%):     Nonlabor (38%):     Nonlabor (38%):
 7(b)(1)(B) of Public Law 110-90   $2,360.93.          $2,360.93.          $2,360.93.          $2,360.93.
 and Documentation and Coding
 Recoupment Adjustment as
 required under Section 631 of
 the American Taxpayer Relief
 Act of 2012 (0.9329)
4. FY 2015 Operating Outlier
 Offset (0.948999)
5. FY 2015 New Labor Market
 Delineation Wage Index
 Transition Budget Neutrality
 Factor (0.998854)
FY 2016 Update Factor...........  1.017.............  1.005.............  1.011.............  0.999.
FY 2016 MS[dash]DRG               0.997150..........  0.997150..........  0.997150..........  0.997150.
 Recalibration and Wage Index
 Budget Neutrality Factor.
FY 2016 Reclassification Budget   0.987905..........  0.987905..........  0.987905..........  0.987905.
 Neutrality Factor.
FY 2016 Rural Community           0.999861..........  0.999861..........  0.999861..........  0.999861.
 Demonstration Program Budget
 Neutrality Factor.
FY 2016 Operating Outlier Factor  0.949000..........  0.949000..........  0.949000..........  0.949000.
Cumulative Factor: FY 2008, FY    0.9255............  0.9255............  0.9255............  0.9255.
 2009, FY 2012, FY 2013, FY
 2014, FY 2015 and FY 2016
 Documentation and Coding
 Adjustment as Required under
 Sections 7(b)(1)(A) and
 7(b)(1)(B) of Public Law 110-90
 and Documentation and Coding
 Recoupment Adjustment as
 required under Section 631 of
 the American Taxpayer Relief
 Act of 2012.
FY 2016 New Labor Market          0.999996..........  0.999996..........  0.999996..........  0.999996.
 Delineation Wage Index 3-Year
 Hold Harmless Transition Budget
 Neutrality Factor.
National Standardized Amount for  Labor: $3,804.40..  Labor: $3,759.51..  Labor: $3,781.96..  Labor: $3,737.07.
 FY 2016 if Wage Index is         Nonlabor:           Nonlabor:           Nonlabor:           Nonlabor:
 Greater Than 1.0000; Labor/Non-   $1,661.69.          $1,642.08.          $1,651.89.          $1,632.28.
 Labor Share Percentage (69.6/
 30.4).

[[Page 49788]]

 
National Standardized Amount for  Labor: $3,388.98..  Labor: $3,348.99..  Labor: $3,368.99..  Labor: $3,329.00
 FY 2016 if Wage Index is less    Nonlabor:           Nonlabor:           Nonlabor:           Nonlabor:
 Than or Equal to 1.0000; Labor/   $2,077.11.          $2,052.60.          $2,064.86.          $2,040.35.
 Non-Labor Share Percentage (62/
 38).
----------------------------------------------------------------------------------------------------------------

    The following table illustrates the changes from the FY 2015 Puerto 
Rico-specific payment rate for hospitals located in Puerto Rico. The 
second column shows the changes from the FY 2015 Puerto Rico specific 
payment rate for hospitals with a Puerto Rico-specific wage index 
greater than 1.0000. The third column shows the changes from the FY 
2015 Puerto Rico specific payment rate for hospitals with a Puerto 
Rico-specific wage index less than or equal to 1.0000. The first row of 
the table shows the updated (through FY 2015) Puerto Rico-specific 
payment rate after restoring the FY 2015 offsets for Puerto Rico-
specific outlier payments, rural community hospital demonstration 
program budget neutrality, and the geographic reclassification budget 
neutrality. The MS-DRG recalibration budget neutrality adjustment 
factor is cumulative and is not removed from this table.

    Comparison of FY 2015 Puerto Rico-Specific Payment Rate to the FY 2016 Puerto Rico-Specific Payment Rate
----------------------------------------------------------------------------------------------------------------
                                        Update (1.7 percent); wage index is  Update (1.7 percent); wage index is
                                          greater than 1.0000; labor/non-    less than or equal to 1.0000; labor/
                                         labor share percentage (63.2/36.8)   non-labor share percentage (62/38)
----------------------------------------------------------------------------------------------------------------
FY 2015 Puerto Rico Base Rate, after    Labor: $1,758.02...................  Labor: $1,724.64.
 removing:                              Nonlabor: $1,023.66................  Nonlabor: $1,057.04.
    1. FY 2015 Geographic
     Reclassification Budget
     Neutrality (0.990429).
    2. FY 2015 Rural Community
     Hospital Demonstration Program
     Budget Neutrality (0.999313).
    3. FY 2015 Puerto Rico Operating
     Outlier Offset (0.926334).
    4. FY 2015 New Labor Market
     Delineation Wage Index Transition
     Budget Neutrality Factor
     (0.998854).
FY 2016 Update Factor.................  1.017..............................  1.017.
FY 2016 MS[dash]DRG Recalibration       0.998399...........................  0.998399.
 Budget Neutrality Factor.
FY 2016 Reclassification Budget         0.987905...........................  0.987905.
 Neutrality Factor.
FY 2016 Rural Community Hospital        0.999861...........................  0.999861.
 Demonstration Program Budget
 Neutrality Factor.
FY 2016 New Labor Market Delineation    0.999996...........................  0.999996.
 Wage Index 3-Year Hold Harmless
 Transition Budget Neutrality Factor.
FY 2016 Puerto Rico Operating Outlier   0.935042...........................  0.935042.
 Factor.
Puerto Rico[dash]Specific Payment Rate  Labor: $1,648.66...................  Labor: $1,617.36.
 for FY 2016.                           Nonlabor: $959.98..................  Nonlabor: $991.28.
----------------------------------------------------------------------------------------------------------------

B. Adjustments for Area Wage Levels and Cost-of-Living

    Tables 1A through 1C, as published in section VI. of this Addendum 
(and available via the Internet on the CMS Web site), contain the 
labor-related and nonlabor-related shares that we used to calculate the 
prospective payment rates for hospitals located in the 50 States, the 
District of Columbia, and Puerto Rico for FY 2016. This section 
addresses two types of adjustments to the standardized amounts that are 
made in determining the prospective payment rates as described in this 
Addendum.
1. Adjustment for Area Wage Levels
    Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require 
that we make an adjustment to the labor-related portion of the national 
and Puerto Rico prospective payment rates, respectively, to account for 
area differences in hospital wage levels. This adjustment is made by 
multiplying the labor-related portion of the adjusted standardized 
amounts by the appropriate wage index for the area in which the 
hospital is located. In section III of the preamble of this final rule, 
we discuss the data and methodology for the FY 2016 wage index.
2. Adjustment for Cost-of-Living in Alaska and Hawaii
    Section 1886(d)(5)(H) of the Act provides discretionary authority 
to the Secretary to make such adjustments as the Secretary deems 
appropriate to take into account the unique circumstances of hospitals 
located in Alaska and Hawaii. Higher labor-related costs for these two 
States are taken into account in the adjustment for area wages 
described above. To account for higher nonlabor-related costs for these 
two States, we multiply the nonlabor-related portion of the 
standardized amount for hospitals located in Alaska and Hawaii by an 
adjustment factor.
    In the FY 2013 IPPS/LTCH PPS final rule, we established a 
methodology to update the COLA factors for Alaska and Hawaii that were 
published by the U.S. Office of Personnel Management (OPM) every 4 
years (at the same time as the update to the labor-related share of the 
IPPS market basket), beginning in FY 2014. We refer readers to the FY 
2013 IPPS/LTCH PPS proposed and final rules for additional background 
and a detailed description of this methodology

[[Page 49789]]

(77 FR 28145 through 28146 and 77 FR 53700 through 53701, 
respectively).
    For FY 2014, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50985 
through 50987), we updated the COLA factors published by OPM for 2009 
(as these are the last COLA factors OPM published prior to 
transitioning from COLAs to locality pay) using the methodology that we 
finalized in the FY 2013 IPPS/LTCH PPS final rule.
    Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final 
rule, we are continuing to use the same COLA factors in FY 2016 that 
were used in FY 2015 to adjust the nonlabor-related portion of the 
standardized amount for hospitals located in Alaska and Hawaii. Below 
is a table listing the COLA factors for FY 2016.

 FY 2016 Cost-of-Living Adjustment Factors: Alaska and Hawaii Hospitals
------------------------------------------------------------------------
                                                         Cost of living
                         Area                          adjustment factor
------------------------------------------------------------------------
Alaska:
    City of Anchorage and 80-kilometer (50-mile)                    1.23
     radius by road..................................
    City of Fairbanks and 80-kilometer (50-mile)                    1.23
     radius by road..................................
    City of Juneau and 80-kilometer (50-mile) radius                1.23
     by road.........................................
    Rest of Alaska...................................               1.25
Hawaii:
    City and County of Honolulu......................               1.25
    County of Hawaii.................................               1.19
    County of Kauai..................................               1.25
    County of Maui and County of Kalawao.............               1.25
------------------------------------------------------------------------

    Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final 
rule, the next update to the COLA factors for Alaska and Hawaii will 
occur in FY 2018.

C. Calculation of the Prospective Payment Rates

General Formula for Calculation of the Prospective Payment Rates for FY 
2016
    In general, the operating prospective payment rate for all 
hospitals paid under the IPPS located outside of Puerto Rico, except 
SCHs and MDHs, for FY 2016 equals the Federal rate (which includes 
uncompensated care payments).
    We note that section 205 of the Medicare Access and CHIP 
Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10, enacted on April 
16, 2015) extended the MDH program (which, under previous law, was to 
be in effect for discharges on or before March 31, 2015 only) for 
discharges occurring on or after April 1, 2015, through FY 2017 (that 
is, for discharges occurring on or before September 30, 2017).
    SCHs are paid based on whichever of the following rates yields the 
greatest aggregate payment: The Federal national rate (which, as 
discussed in section IV.D. of the preamble of this final rule, includes 
uncompensated care payments); the updated hospital-specific rate based 
on FY 1982 costs per discharge; the updated hospital-specific rate 
based on FY 1987 costs per discharge; the updated hospital-specific 
rate based on FY 1996 costs per discharge; or the updated hospital-
specific rate based on FY 2006 costs per discharge to determine the 
rate that yields the greatest aggregate payment.
    The prospective payment rate for SCHs for FY 2016 equals the higher 
of the applicable Federal rate, or the hospital-specific rate as 
described below. The prospective payment rate for MDHs for FY 2016 
equals the higher of the Federal rate, or the Federal rate plus 75 
percent of the difference between the Federal rate and the hospital-
specific rate as described below. For MDHs, the updated hospital-
specific rate is based on FY 1982, FY 1987 or FY 2002 costs per 
discharge, whichever yields the greatest aggregate payment.
    The prospective payment rate for hospitals located in Puerto Rico 
for FY 2016 equals 25 percent of the Puerto Rico-specific payment rate 
plus 75 percent of the applicable national rate.
1. Federal Rate
    The Federal rate is determined as follows:
    Step 1--Select the applicable average standardized amount depending 
on whether the hospital submitted qualifying quality data and is a 
meaningful EHR user, as described above.
    Step 2--Multiply the labor-related portion of the standardized 
amount by the applicable wage index for the geographic area in which 
the hospital is located or the area to which the hospital is 
reclassified.
    Step 3--For hospitals located in Alaska and Hawaii, multiply the 
nonlabor-related portion of the standardized amount by the applicable 
cost-of-living adjustment factor.
    Step 4--Add the amount from Step 2 and the nonlabor-related portion 
of the standardized amount (adjusted, if applicable, under Step 3).
    Step 5--Multiply the final amount from Step 4 by the relative 
weight corresponding to the applicable MS-DRG (Table 5 listed in 
section VI. of this Addendum and available via the Internet on the CMS 
Web site).
    The Federal payment rate as determined in Step 5 may then be 
further adjusted if the hospital qualifies for either the IME or DSH 
adjustment. In addition, for hospitals that qualify for a low-volume 
payment adjustment under section 1886(d)(12) of the Act and 42 CFR 
412.101(b), the payment in Step 5 would be increased by a specified 
formula. The base-operating DRG payment amount may be further adjusted 
by the hospital readmissions payment adjustment and the hospital VBP 
payment adjustment as described under sections 1886(q) and 1886(o) of 
the Act, respectively. Finally, we add the uncompensated care payment 
to the total claim payment amount. We note that, as discussed above, we 
take uncompensated care payments into consideration when calculating 
outlier payments.
2. Hospital-Specific Rate (Applicable Only to SCHs and MDHs)
a. Calculation of Hospital-Specific Rate
    Section 1886(b)(3)(C) of the Act provides that SCHs are paid based 
on whichever of the following rates yields the greatest aggregate 
payment: The Federal rate (which, as discussed in section IV.D. of the 
preamble of this final rule, includes uncompensated care payments); the 
updated hospital-specific rate based on FY 1982 costs per discharge; 
the updated hospital-specific rate based on FY 1987 costs per

[[Page 49790]]

discharge; the updated hospital-specific rate based on FY 1996 costs 
per discharge; or the updated hospital-specific rate based on FY 2006 
costs per discharge to determine the rate that yields the greatest 
aggregate payment.
    As noted above, section 205 of the Medicare Access and CHIP 
Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10, enacted on April 
16, 2015) extended the MDH program (which, under previous law, was to 
be in effect for discharges on or before March 31, 2015 only) for 
discharges occurring on or after April 1, 2015, through FY 2017 (that 
is, for discharges occurring on or before September 30, 2017). As 
discussed previously, currently MDHs are paid based on the Federal 
national rate or, if higher, the Federal national rate plus 75 percent 
of the difference between the Federal national rate and the greater of 
the updated hospital-specific rates based on either FY 1982, FY 1987 or 
FY 2002 costs per discharge.
    For a more detailed discussion of the calculation of the hospital-
specific rates, we refer readers to the FY 1984 IPPS interim final rule 
(48 FR 39772); the April 20, 1990 final rule with comment period (55 FR 
15150); the FY 1991 IPPS final rule (55 FR 35994); and the FY 2001 IPPS 
final rule (65 FR 47082). We also refer readers to section IV.D. of the 
preamble of this final rule for a complete discussion on empirically 
justified Medicare DSH and uncompensated care payments.
b. Updating the FY 1982, FY 1987, FY 1996, FY 2002 and FY 2006 
Hospital-Specific Rate for FY 2016
    Section 1886(b)(3)(B)(iv) of the Act provides that the applicable 
percentage increase applicable to the hospital-specific rates for SCHs 
and MDHs equals the applicable percentage increase set forth in section 
1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all 
other hospitals subject to the IPPS). Because the Act sets the update 
factor for SCHs and MDHs equal to the update factor for all other IPPS 
hospitals, the update to the hospital-specific rates for SCHs and MDHs 
is subject to the amendments to section 1886(b)(3)(B) of the Act made 
by sections 3401(a) and 10319(a) of the Affordable Care Act. 
Accordingly, the applicable percentage increases to the hospital-
specific rates applicable to SCHs and MDHs are the following:

----------------------------------------------------------------------------------------------------------------
                                           Hospital           Hospital       Hospital did NOT   Hospital did NOT
                                      submitted quality  submitted quality    submit quality     submit quality
               FY 2016                  data and is a    data and is NOT a    data and is a    data and is NOT a
                                        meaningful EHR     meaningful EHR     meaningful EHR     meaningful EHR
                                             user               user               user               user
----------------------------------------------------------------------------------------------------------------
Market Basket                                       2.4                2.4                2.4                2.4
 Rate[dash]of[dash]Increase.........
Adjustment for Failure to Submit                    0.0                0.0               -0.6               -0.6
 Quality Data under Section
 1886(b)(3)(B)(viii) of the Act.....
Adjustment for Failure to be a                      0.0               -1.2                0.0               -1.2
 Meaningful EHR User under Section
 1886(b)(3)(B)(ix) of the Act.......
MFP Adjustment under Section                       -0.5               -0.5               -0.5               -0.5
 1886(b)(3)(B)(xi) of the Act.......
Statutory Adjustment under Section                 -0.2               -0.2               -0.2               -0.2
 1886(b)(3)(B)(xii) of the Act......
Applicable Percentage Increase                      1.7                0.5                1.1               -0.1
 Applied to Hospital-specific rate..
----------------------------------------------------------------------------------------------------------------

    For a complete discussion of the applicable percentage increase 
applied to the hospital-specific rates for SCHs and MDHs, we refer 
readers to section IV.A. of the preamble of this final rule.
    In addition, because SCHs and MDHs use the same MS-DRGs as other 
hospitals when they are paid based in whole or in part on the hospital-
specific rate, the hospital-specific rate is adjusted by a budget 
neutrality factor to ensure that changes to the MS-DRG classifications 
and the recalibration of the MS-DRG relative weights are made in a 
manner so that aggregate IPPS payments are unaffected. Therefore, a 
SCH's and MDH's hospital-specific rate is adjusted by the proposed MS-
DRG reclassification and recalibration budget neutrality factor of 
0.998399, as discussed in section III. of this Addendum. The resulting 
rate is used in determining the payment rate that an SCH and an MDH 
will receive for its discharges beginning on or after October 1, 2015. 
We note that, in this final rule, for FY 2016, we are not making a 
documentation and coding adjustment to the hospital-specific rate. We 
refer readers to section II.D. of the preamble of this final rule for a 
complete discussion regarding our finalized policies and previously 
finalized policies (including our historical adjustments to the payment 
rates) relating to the effect of changes in documentation and coding 
that do not reflect real changes in case-mix.
3. General Formula for Calculation of Prospective Payment Rates for 
Hospitals Located in Puerto Rico Beginning on or After October 1, 2015, 
and Before October 1, 2016
    Section 1886(d)(9)(E)(iv) of the Act provides that, effective for 
discharges occurring on or after October 1, 2004, hospitals located in 
Puerto Rico are paid based on a blend of 75 percent of the national 
prospective payment rate and 25 percent of the Puerto Rico-specific 
rate.
a. Puerto Rico-Specific Rate
    The Puerto Rico-specific prospective payment rate is determined as 
follows:
    Step 1--Select the applicable average standardized amount 
considering the applicable wage index (obtained from Table 1C published 
in section VI. of this Addendum and available via the Internet on the 
CMS Web site).
    Step 2--Multiply the labor-related portion of the standardized 
amount by the applicable Puerto Rico-specific wage index.
    Step 3--Add the amount from Step 2 and the nonlabor-related portion 
of the standardized amount.
    Step 4--Multiply the amount from Step 3 by the applicable MS-DRG 
relative weight (obtained from Table 5 listed in section VI. of this 
Addendum and available via the Internet on the CMS Web site).
    Step 5--Multiply the result in Step 4 by 25 percent.
b. National Prospective Payment Rate
    The national prospective payment rate is determined as follows:
    Step 1--Select the applicable national average standardized amount.
    Step 2--Multiply the labor-related portion of the national average

[[Page 49791]]

standardized amount by the applicable wage index for the geographic 
area in which the hospital is located or the area to which the hospital 
is reclassified.
    Step 3--Add the amount from Step 2 and the nonlabor-related portion 
of the national average standardized amount.
    Step 4--Multiply the amount from Step 3 by the applicable MS-DRG 
relative weight (obtained from Table 5 listed in section VI. of this 
Addendum and available via the Internet on the CMS Web site).
    Step 5--Multiply the result in Step 4 by 75 percent.
    The sum of the Puerto Rico-specific rate and the national 
prospective payment rate computed above equals the prospective payment 
rate for a given discharge for a hospital located in Puerto Rico. This 
payment rate is then further adjusted if the hospital qualifies for 
either the IME or DSH adjustment.
    Finally, we add the uncompensated care payment to the total claim 
payment amount. We note that, as discussed above, we take uncompensated 
care payments into consideration when calculating outlier payments.

III. Changes to Payment Rates for Acute Care Hospital Inpatient 
Capital-Related Costs for FY 2016

    The PPS for acute care hospital inpatient capital-related costs was 
implemented for cost reporting periods beginning on or after October 1, 
1991. Effective with that cost reporting period, over a 10-year 
transition period (which extended through FY 2001) the payment 
methodology for Medicare acute care hospital inpatient capital-related 
costs changed from a reasonable cost-based methodology to a prospective 
methodology (based fully on the Federal rate).
    The basic methodology for determining Federal capital prospective 
rates is set forth in the regulations at 42 CFR 412.308 through 
412.352. Below we discuss the factors that we used to determine the 
capital Federal rate for FY 2016, which is effective for discharges 
occurring on or after October 1, 2015.
    The 10-year transition period ended with hospital cost reporting 
periods beginning on or after October 1, 2001 (FY 2002). Therefore, for 
cost reporting periods beginning in FY 2002, all hospitals (except 
``new'' hospitals under Sec.  412.304(c)(2)) are paid based on the 
capital Federal rate. For FY 1992, we computed the standard Federal 
payment rate for capital-related costs under the IPPS by updating the 
FY 1989 Medicare inpatient capital cost per case by an actuarial 
estimate of the increase in Medicare inpatient capital costs per case. 
Each year after FY 1992, we update the capital standard Federal rate, 
as provided at Sec.  412.308(c)(1), to account for capital input price 
increases and other factors. The regulations at Sec.  412.308(c)(2) 
also provide that the capital Federal rate be adjusted annually by a 
factor equal to the estimated proportion of outlier payments under the 
capital Federal rate to total capital payments under the capital 
Federal rate. In addition, Sec.  412.308(c)(3) requires that the 
capital Federal rate be reduced by an adjustment factor equal to the 
estimated proportion of payments for exceptions under Sec.  412.348. 
(We note that, as discussed in the FY 2013 IPPS/LTCH PPS final rule (77 
FR 53705), there is generally no longer a need for an exceptions 
payment adjustment factor.) However, in limited circumstances, an 
additional payment exception for extraordinary circumstances is 
provided for under Sec.  412.348(f) for qualifying hospitals. 
Therefore, in accordance with Sec.  412.308(c)(3), an exceptions 
payment adjustment factor may need to be applied if such payments are 
made. Section 412.308(c)(4)(ii) requires that the capital standard 
Federal rate be adjusted so that the effects of the annual DRG 
reclassification and the recalibration of DRG weights and changes in 
the geographic adjustment factor (GAF) are budget neutral.
    Section 412.374 provides for blended payments to hospitals located 
in Puerto Rico under the IPPS for acute care hospital inpatient 
capital-related costs. Accordingly, under the capital PPS, we compute a 
separate payment rate specific to hospitals located in Puerto Rico 
using the same methodology used to compute the national Federal rate 
for capital-related costs. In accordance with section 1886(d)(9)(A) of 
the Act, under the IPPS for acute care hospital operating costs, 
hospitals located in Puerto Rico are paid for operating costs under a 
special payment formula. Effective October 1, 2004, in accordance with 
section 504 of Public Law 108-173, the methodology for operating 
payments made to hospitals located in Puerto Rico under the IPPS was 
revised to make payments based on a blend of 25 percent of the 
applicable standardized amount specific to Puerto Rico hospitals and 75 
percent of the applicable national average standardized amount. In 
conjunction with this change to the operating blend percentage, 
effective with discharges occurring on or after October 1, 2004, we 
also revised the methodology for computing capital payments made to 
hospitals located in Puerto Rico to be based on a blend of 25 percent 
of the Puerto Rico capital rate and 75 percent of the national capital 
Federal rate (69 FR 49185).

A. Determination of the Federal Hospital Inpatient Capital-Related 
Prospective Payment Rate Update

    In the discussion that follows, we explain the factors that we used 
to determine the capital Federal rate for FY 2016. In particular, we 
explain why the FY 2016 capital Federal rate increases approximately 
0.85 percent, compared to the FY 2015 capital Federal rate. As 
discussed in the impact analysis in Appendix A to this final rule, we 
estimate that capital payments per discharge will increase 
approximately 2.3 percent during that same period. Because capital 
payments constitute about 10 percent of hospital payments, a percent 
change in the capital Federal rate yields only about a 0.1 percent 
change in actual payments to hospitals.
1. Projected Capital Standard Federal Rate Update
a. Description of the Update Framework
    Under Sec.  412.308(c)(1), the capital standard Federal rate is 
updated on the basis of an analytical framework that takes into account 
changes in a capital input price index (CIPI) and several other policy 
adjustment factors. Specifically, we adjust the projected CIPI rate-of-
increase as appropriate each year for case-mix index-related changes, 
for intensity, and for errors in previous CIPI forecasts. The update 
factor for FY 2016 under that framework is 1.3 percent based on the 
best data available at this time. The update factor under that 
framework is based on a projected 1.3 percent increase in the FY 2010-
based CIPI, a 0.0 percentage point adjustment for intensity, a 0.0 
percentage point adjustment for case-mix, a 0.0 percentage point 
adjustment for the DRG reclassification and recalibration, and a 
forecast error correction of 0.0 percentage point. As discussed below 
in section III.C. of this Addendum, we continue to believe that the 
CIPI is the most appropriate input price index for capital costs to 
measure capital price changes in a given year. We also explain the 
basis for the FY 2016 CIPI projection in that same section of this 
Addendum. Below we describe the policy adjustments that we are applying 
in the update framework for FY 2016.
    The case-mix index is the measure of the average DRG weight for 
cases paid under the IPPS. Because the DRG weight determines the 
prospective payment for each case, any percentage increase in the case-
mix index corresponds to an

[[Page 49792]]

equal percentage increase in hospital payments.
    The case-mix index can change for any of several reasons:
     The average resource use of Medicare patients changes 
(``real'' case-mix change);
     Changes in hospital documentation and coding of patient 
records result in higher-weighted DRG assignments (``coding effects''); 
and
     The annual DRG reclassification and recalibration changes 
may not be budget neutral (``reclassification effect'').
    We define real case-mix change as actual changes in the mix (and 
resource requirements) of Medicare patients as opposed to changes in 
documentation and coding behavior that result in assignment of cases to 
higher-weighted DRGs, but do not reflect higher resource requirements. 
The capital update framework includes the same case-mix index 
adjustment used in the former operating IPPS update framework (as 
discussed in the May 18, 2004 IPPS proposed rule for FY 2005 (69 FR 
28816)). (We no longer use an update framework to make a recommendation 
for updating the operating IPPS standardized amounts as discussed in 
section II. of Appendix B to the FY 2006 IPPS final rule (70 FR 
47707).)
    For FY 2016, we are projecting a 0.5 percent total increase in the 
case-mix index. We estimated that the real case-mix increase will equal 
0.5 percent for FY 2016. The net adjustment for change in case-mix is 
the difference between the projected real increase in case-mix and the 
projected total increase in case-mix. Therefore, as we proposed, the 
net adjustment for case-mix change in FY 2016 is 0.0 percentage point.
    The capital update framework also contains an adjustment for the 
effects of DRG reclassification and recalibration. This adjustment is 
intended to remove the effect on total payments of prior year's changes 
to the DRG classifications and relative weights, in order to retain 
budget neutrality for all case-mix index-related changes other than 
those due to patient severity of illness. Due to the lag time in the 
availability of data, there is a 2-year lag in data used to determine 
the adjustment for the effects of DRG reclassification and 
recalibration. For example, we have data available to evaluate the 
effects of the FY 2014 DRG reclassification and recalibration as part 
of our update for FY 2016. We estimate that FY 2014 DRG 
reclassification and recalibration resulted in no change in the case-
mix when compared with the case-mix index that would have resulted if 
we had not made the reclassification and recalibration changes to the 
DRGs. Therefore, as we proposed, we are making a 0.0 percentage point 
adjustment for reclassification and recalibration in the update 
framework for FY 2016.
    The capital update framework also contains an adjustment for 
forecast error. The input price index forecast is based on historical 
trends and relationships ascertainable at the time the update factor is 
established for the upcoming year. In any given year, there may be 
unanticipated price fluctuations that may result in differences between 
the actual increase in prices and the forecast used in calculating the 
update factors. In setting a prospective payment rate under the 
framework, we make an adjustment for forecast error only if our 
estimate of the change in the capital input price index for any year is 
off by 0.25 percentage point or more. There is a 2-year lag between the 
forecast and the availability of data to develop a measurement of the 
forecast error. Historically, when a forecast error of the CIPI is 
greater than 0.25 percentage point in absolute terms, it is reflected 
in the update recommended under this framework. A forecast error of 0.0 
percentage point was calculated for the FY 2014 update, for which there 
is historical data. That is, current historical data indicate that the 
forecasted FY 2014 CIPI (1.2 percent) used in calculating the FY 2014 
update factor was equal to the actual realized price increases (also 
1.2 percent). Therefore, as we proposed, we are not making an 
adjustment for a forecast error in the update for FY 2016.
    Under the capital IPPS update framework, we also make an adjustment 
for changes in intensity. Historically, we calculated this adjustment 
using the same methodology and data that were used in the past under 
the framework for operating IPPS. The intensity factor for the 
operating update framework reflected how hospital services are utilized 
to produce the final product, that is, the discharge. This component 
accounts for changes in the use of quality-enhancing services, for 
changes within DRG severity, and for expected modification of practice 
patterns to remove noncost-effective services. Our intensity measure is 
based on a 5-year average.
    We calculate case-mix constant intensity as the change in total 
cost per discharge, adjusted for price level changes (the CPI for 
hospital and related services) and changes in real case-mix. Without 
reliable estimates of the proportions of the overall annual intensity 
increases that are due, respectively, to ineffective practice patterns 
and the combination of quality-enhancing new technologies and 
complexity within the DRG system, we assume that one-half of the annual 
increase is due to each of these factors. The capital update framework 
thus provides an add-on to the input price index rate of increase of 
one-half of the estimated annual increase in intensity, to allow for 
increases within DRG severity and the adoption of quality-enhancing 
technology.
    In this final rule, we are continuing to use a Medicare-specific 
intensity measure that is based on a 5-year adjusted average of cost 
per discharge for FY 2016 (we refer readers to the FY 2011 IPPS/LTCH 
PPS final rule (75 FR 50436) for a full description of our Medicare-
specific intensity measure). Specifically, for FY 2016, we are using an 
intensity measure that is based on an average of cost per discharge 
data from the 5-year period beginning with FY 2009 and extending 
through FY 2013. Based on these data, we estimated that case-mix 
constant intensity declined during FYs 2009 through 2013. In the past, 
when we found intensity to be declining, we believed a zero (rather 
than a negative) intensity adjustment was appropriate. Consistent with 
this approach, because we estimate that intensity declined during that 
5-year period, we believe it is appropriate to continue to apply a zero 
intensity adjustment for FY 2016. Therefore, as we proposed, we are 
making a 0.0 percentage point adjustment for intensity in the update 
for FY 2016.
    Above, we described the basis of the components used to develop the 
1.3 percent capital update factor under the capital update framework 
for FY 2016 as shown in the table below.

          CMS FY 2016 Update Factor to the Capital Federal Rate
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Capital Input Price Index *                                          1.3
Intensity...............................................             0.0
Case-Mix Adjustment Factors:
  Real Across DRG Change................................             0.5
  Projected Case-Mix Change.............................             0.5
                                                         ---------------
    Subtotal............................................             1.3
Effect of FY 2014 Reclassification and Recalibration....             0.0
Forecast Error Correction...............................             0.0
                                                         ---------------
    Total Update........................................             1.3
------------------------------------------------------------------------
* The capital input price index is based on the FY 2010-based CIPI.

b. Comparison of CMS and MedPAC Update Recommendation
    In its March 2015 Report to Congress, MedPAC did not make a 
specific update recommendation for capital IPPS

[[Page 49793]]

payments for FY 2016. (We refer readers to MedPAC's Report to the 
Congress: Medicare Payment Policy, March 2015, Chapter 3, available on 
the Web site at: http://www.medpac.gov.)
2. Outlier Payment Adjustment Factor
    Section 412.312(c) establishes a unified outlier payment 
methodology for inpatient operating and inpatient capital-related 
costs. A single set of thresholds is used to identify outlier cases for 
both inpatient operating and inpatient capital-related payments. 
Section 412.308(c)(2) provides that the standard Federal rate for 
inpatient capital-related costs be reduced by an adjustment factor 
equal to the estimated proportion of capital-related outlier payments 
to total inpatient capital-related PPS payments. The outlier thresholds 
are set so that operating outlier payments are projected to be 5.1 
percent of total operating IPPS DRG payments.
    For FY 2015, we estimated that outlier payments for capital would 
equal 6.18 percent of inpatient capital-related payments based on the 
capital Federal rate in FY 2015. Based on the thresholds as set forth 
in section II.A. of this Addendum, we estimate that outlier payments 
for capital-related costs will equal 6.35 percent for inpatient 
capital-related payments based on the capital Federal rate in FY 2016. 
Therefore, we are applying an outlier adjustment factor of 0.9365 in 
determining the capital Federal rate for FY 2016. Thus, we estimate 
that the percentage of capital outlier payments to total capital 
Federal rate payments for FY 2016 will be higher than the percentage 
for FY 2015.
    The outlier reduction factors are not built permanently into the 
capital rates; that is, they are not applied cumulatively in 
determining the capital Federal rate. The FY 2016 outlier adjustment of 
0.9365 is a - 0.18 percent change from the FY 2015 outlier adjustment 
of 0.9382. Therefore, the net change in the outlier adjustment to the 
capital Federal rate for FY 2016 is 0.9982 (0.9365/0.9382). Thus, the 
outlier adjustment will decrease the FY 2016 capital Federal rate by 
0.18 percent compared to the FY 2015 outlier adjustment.
3. Budget Neutrality Adjustment Factor for Changes in DRG 
Classifications and Weights and the GAF
    Section 412.308(c)(4)(ii) requires that the capital Federal rate be 
adjusted so that aggregate payments for the fiscal year based on the 
capital Federal rate after any changes resulting from the annual DRG 
reclassification and recalibration and changes in the GAF are projected 
to equal aggregate payments that would have been made on the basis of 
the capital Federal rate without such changes. Because we implemented a 
separate GAF for Puerto Rico, we apply separate budget neutrality 
adjustments for the national GAF and the Puerto Rico GAF. We apply the 
same budget neutrality factor for DRG reclassifications and 
recalibration nationally and for Puerto Rico. Separate adjustments were 
unnecessary for FY 1998 and earlier because the GAF for Puerto Rico was 
implemented in FY 1998.
    To determine the factors for FY 2016, we compared (separately for 
the national capital rate and the Puerto Rico capital rate) estimated 
aggregate capital Federal rate payments based on the FY 2015 MS-DRG 
classifications and relative weights and the FY 2015 GAF to estimated 
aggregate capital Federal rate payments based on the FY 2015 MS-DRG 
classifications and relative weights and the FY 2016 GAFs. To achieve 
budget neutrality for the changes in the national GAFs, based on 
calculations using updated data, we are applying an incremental budget 
neutrality adjustment factor of 0.9979 for FY 2016 to the previous 
cumulative FY 2015 adjustment factor of 0.9884, yielding an adjustment 
factor of 0.9864 through FY 2016. For the Puerto Rico GAFs, we are 
applying an incremental budget neutrality adjustment factor of 0.9993 
for FY 2016 to the previous cumulative FY 2015 adjustment factor of 
1.0082, yielding a cumulative adjustment factor of 1.0075 through FY 
2016.
    We then compared estimated aggregate capital Federal rate payments 
based on the FY 2015 MS-DRG relative weights and the FY 2016 GAFs to 
estimated aggregate capital Federal rate payments based on the 
cumulative effects of the FY 2016 MS-DRG classifications and relative 
weights and the FY 2016 GAFs. The incremental adjustment factor for DRG 
classifications and changes in relative weights is 0.9994 both 
nationally and for Puerto Rico. The cumulative adjustment factors for 
MS-DRG classifications and changes in relative weights and for changes 
in the GAFs through FY 2016 are 0.9858 nationally and 1.0069 for Puerto 
Rico. (We note that all the values are calculated with unrounded 
numbers.) The GAF/DRG budget neutrality adjustment factors are built 
permanently into the capital rates; that is, they are applied 
cumulatively in determining the capital Federal rate. This follows the 
requirement under Sec.  412.308(c)(4)(ii) that estimated aggregate 
payments each year be no more or less than they would have been in the 
absence of the annual DRG reclassification and recalibration and 
changes in the GAFs.
    The methodology used to determine the recalibration and geographic 
adjustment factor (GAF/DRG) budget neutrality adjustment is similar to 
the methodology used in establishing budget neutrality adjustments 
under the IPPS for operating costs. One difference is that, under the 
operating IPPS, the budget neutrality adjustments for the effect of 
geographic reclassifications are determined separately from the effects 
of other changes in the hospital wage index and the MS-DRG relative 
weights. Under the capital IPPS, there is a single GAF/DRG budget 
neutrality adjustment factor (the national capital rate and the Puerto 
Rico capital rate are determined separately) for changes in the GAF 
(including geographic reclassification) and the MS-DRG relative 
weights. In addition, there is no adjustment for the effects that 
geographic reclassification has on the other payment parameters, such 
as the payments for DSH or IME.
    The cumulative adjustment factor of 0.9973 (the product of the 
incremental national GAF budget neutrality adjustment factor of 0.9979 
and the incremental DRG budget neutrality adjustment factor of 0.9994) 
accounts for the MS-DRG reclassifications and recalibration and for 
changes in the GAFs. It also incorporates the effects on the GAFs of FY 
2016 geographic reclassification decisions made by the MGCRB compared 
to FY 2015 decisions. However, it does not account for changes in 
payments due to changes in the DSH and IME adjustment factors.
4. Capital Federal Rate for FY 2016
    For FY 2015, we established a capital Federal rate of $434.97 (79 
FR 59684). We are establishing an update of 1.3 percent in determining 
the FY 2016 capital Federal rate for all hospitals. As a result of this 
update and the budget neutrality factors discussed above, we are 
establishing a national capital Federal rate of $438.65 for FY 2016. 
The national capital Federal rate for FY 2016 was calculated as 
follows:
     The FY 2016 update factor is 1.013, that is, the update is 
1.3 percent.
     The FY 2016 budget neutrality adjustment factor that is 
applied to the capital Federal rate for changes in the MS-DRG 
classifications and relative weights and changes in the GAFs is 0.9973.
     The FY 2016 outlier adjustment factor is 0.9365.
    (We note that, as discussed in section VI.C. of the preamble of 
this final rule,

[[Page 49794]]

we are not making an additional MS-DRG documentation and coding 
adjustment to the capital IPPS Federal rates for FY 2016.)
    Because the FY 2016 capital Federal rate has already been adjusted 
for differences in case-mix, wages, cost-of-living, indirect medical 
education costs, and payments to hospitals serving a disproportionate 
share of low-income patients, we are not making additional adjustments 
in the capital Federal rate for these factors, other than the budget 
neutrality factor for changes in the MS-DRG classifications and 
relative weights and for changes in the GAFs.
    We are providing the following chart that shows how each of the 
factors and adjustments for FY 2016 affects the computation of the FY 
2016 national capital Federal rate in comparison to the FY 2015 
national capital Federal rate. The FY 2016 update factor has the effect 
of increasing the capital Federal rate by 1.3 percent compared to the 
FY 2015 capital Federal rate. The GAF/DRG budget neutrality adjustment 
factor has the effect of decreasing the capital Federal rate by 0.27 
percent. The FY 2016 outlier adjustment factor has the effect of 
decreasing the capital Federal rate by 0.18 percent compared to the FY 
2015 capital Federal rate. The combined effect of all the changes will 
increase the national capital Federal rate by approximately 0.85 
percent compared to the FY 2015 national capital Federal rate.

      Comparison of Factors and Adjustments: FY 2015 Capital Federal Rate and FY 2016 Capital Federal Rate
----------------------------------------------------------------------------------------------------------------
                                           FY 2015            FY 2016             Change        Percent  change
----------------------------------------------------------------------------------------------------------------
Update Factor \1\...................             1.0150             1.0130             1.0130                1.3
GAF/DRG Adjustment Factor \1\.......             0.9993             0.9973             0.9973              -0.27
Outlier Adjustment Factor \2\.......             0.9382             0.9365             0.9982              -0.18
Capital Federal Rate................            $434.97            $438.65             1.0085               0.85
----------------------------------------------------------------------------------------------------------------
\1\ The update factor and the GAF/DRG budget neutrality adjustment factors are built permanently into the
  capital Federal rates. Thus, for example, the incremental change from FY 2015 to FY 2016 resulting from the
  application of the 0.9973 GAF/DRG budget neutrality adjustment factor for FY 2016 is a net change of 0.9973
  (or -0.27 percent).
\2\ The outlier reduction factor is not built permanently into the capital Federal rate; that is, the factor is
  not applied cumulatively in determining the capital Federal rate. Thus, for example, the net change resulting
  from the application of the FY 2016 outlier adjustment factor is 0.9365/0.9382, or 0.9982 (or -0.18 percent).

    In this final rule, we also are providing the following chart that 
shows how the final FY 2016 capital Federal rate differs from the 
proposed FY 2016 capital Federal rate as presented in the FY 2016 IPPS/
LTCH PPS proposed rule (80 FR 24640).

 Comparison of Factors and Adjustments: Proposed FY 2016 Capital Federal Rate and Final FY 2016 Capital Federal
                                                      Rate
----------------------------------------------------------------------------------------------------------------
                                      Proposed  FY 2016    Final  FY 2016         Change         Percent change
----------------------------------------------------------------------------------------------------------------
Update Factor.......................             1.0130             1.0130             1.0000               0.00
GAF/DRG Adjustment Factor...........             0.9976             0.9973             0.9997              -0.30
Outlier Adjustment Factor...........             0.9357             0.9365             1.0008               0.08
Capital Federal Rate................             438.40             438.65             1.0006               0.06
----------------------------------------------------------------------------------------------------------------

5. Special Capital Rate for Puerto Rico Hospitals
    Section 412.374 provides for the use of a blended payment system 
for payments made to hospitals located in Puerto Rico under the PPS for 
acute care hospital inpatient capital-related costs. Accordingly, under 
the capital PPS, we compute a separate payment rate specific to 
hospitals located in Puerto Rico using the same methodology used to 
compute the national Federal rate for capital-related costs. Under the 
broad authority of section 1886(g) of the Act, beginning with 
discharges occurring on or after October 1, 2004, capital payments made 
to hospitals located in Puerto Rico are based on a blend of 25 percent 
of the Puerto Rico capital rate and 75 percent of the capital Federal 
rate. The Puerto Rico capital rate is derived from the costs of Puerto 
Rico hospitals only, while the capital Federal rate is derived from the 
costs of all acute care hospitals participating in the IPPS (including 
Puerto Rico).
    To adjust hospitals' capital payments for geographic variations in 
capital costs, we apply a GAF to both portions of the blended capital 
rate. The GAF is calculated using the operating IPPS wage index, and 
varies depending on the labor market area or rural area in which the 
hospital is located. We use the Puerto Rico wage index to determine the 
GAF for the Puerto Rico part of the capital-blended rate and the 
national wage index to determine the GAF for the national part of the 
blended capital rate.
    Because we implemented a separate GAF for Puerto Rico in FY 1998, 
we also apply separate budget neutrality adjustment factors for the 
national GAF and for the Puerto Rico GAF. However, we apply the same 
budget neutrality adjustment factor for MS-DRG reclassifications and 
recalibration nationally and for Puerto Rico. The budget neutrality 
adjustment factors for the national GAF and for the Puerto Rico GAF and 
the budget neutrality factor for MS-DRG reclassifications and 
recalibration (which is the same nationally and for Puerto Rico) are 
discussed in section III.A.3. of this Addendum.
    In computing the payment for a particular Puerto Rico hospital, the 
Puerto Rico portion of the capital rate (25 percent) is multiplied by 
the Puerto Rico-specific GAF for the labor market area in which the 
hospital is located, and the national portion of the capital rate (75 
percent) is multiplied by the national GAF for the labor market area in 
which the hospital is located (which is computed from national data for 
all hospitals in the United States and Puerto Rico).

[[Page 49795]]

    For FY 2015, the special capital rate for hospitals located in 
Puerto Rico was $209.45 (79 FR 59683). With the changes we are making 
to the factors used to determine the capital Federal rate, the FY 2016 
special capital rate for hospitals in Puerto Rico is $212.56.

B. Calculation of the Inpatient Capital-Related Prospective Payments 
for FY 2016

    For purposes of calculating payments for each discharge during FY 
2016, the capital Federal rate is adjusted as follows: (Standard 
Federal Rate) x (DRG weight) x (GAF) x (COLA for hospitals located in 
Alaska and Hawaii) x (1 + DSH Adjustment Factor + IME Adjustment 
Factor, if applicable). The result is the adjusted capital Federal 
rate.
    Hospitals also may receive outlier payments for those cases that 
qualify under the thresholds established for each fiscal year. Section 
412.312(c) provides for a single set of thresholds to identify outlier 
cases for both inpatient operating and inpatient capital-related 
payments. The outlier thresholds for FY 2016 are in section II.A. of 
this Addendum. For FY 2016, a case would qualify as a cost outlier if 
the cost for the case plus the (operating) IME and DSH payments 
(including both the empirically justified Medicare DSH payment and the 
estimated uncompensated care payment, as discussed in section 
II.A.4.g.(1) of this Addendum) is greater than the prospective payment 
rate for the MS-DRG plus the fixed-loss amount of $22,544.
    Currently, as provided under Sec.  412.304(c)(2), we pay a new 
hospital 85 percent of its reasonable costs during the first 2 years of 
operation unless it elects to receive payment based on 100 percent of 
the capital Federal rate. Effective with the third year of operation, 
we pay the hospital based on 100 percent of the capital Federal rate 
(that is, the same methodology used to pay all other hospitals subject 
to the capital PPS).

C. Capital Input Price Index

1. Background
    Like the operating input price index, the capital input price index 
(CIPI) is a fixed-weight price index that measures the price changes 
associated with capital costs during a given year. The CIPI differs 
from the operating input price index in one important aspect--the CIPI 
reflects the vintage nature of capital, which is the acquisition and 
use of capital over time. Capital expenses in any given year are 
determined by the stock of capital in that year (that is, capital that 
remains on hand from all current and prior capital acquisitions). An 
index measuring capital price changes needs to reflect this vintage 
nature of capital. Therefore, the CIPI was developed to capture the 
vintage nature of capital by using a weighted-average of past capital 
purchase prices up to and including the current year.
    We periodically update the base year for the operating and capital 
input price indexes to reflect the changing composition of inputs for 
operating and capital expenses. In the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50603 through 50607), we rebased and revised the CIPI to a FY 
2010 base year to reflect the more current structure of capital costs 
in hospitals. For a complete discussion of this rebasing, we refer 
readers to the FY 2014 IPPS/LTCH PPS final rule.
2. Forecast of the CIPI for FY 2016
    Based on the latest forecast by IHS Global Insight, Inc. (second 
quarter of 2015), we are forecasting the FY 2010-based CIPI to increase 
1.3 percent in FY 2016. This reflects a projected 1.8 percent increase 
in vintage-weighted depreciation prices (building and fixed equipment, 
and movable equipment), and a projected 2.6 percent increase in other 
capital expense prices in FY 2016, partially offset by a projected 1.4 
percent decline in vintage-weighted interest expense prices in FY 2016. 
The weighted average of these three factors produces the forecasted 1.3 
percent increase for the FY 2010-based CIPI as a whole in FY 2016.

IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-Increase 
Percentages for FY 2016

    Payments for services furnished in children's hospitals, 11 cancer 
hospitals, and hospitals located outside the 50 States, the District of 
Columbia and Puerto Rico (that is, short-term acute care hospitals 
located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, 
and American Samoa) that are excluded from the IPPS are made on the 
basis of reasonable costs based on the hospital's own historical cost 
experience, subject to a rate-of-increase ceiling. A per discharge 
limit (the target amount as defined in Sec.  413.40(a) of the 
regulations) is set for each hospital based on the hospital's own cost 
experience in its base year, and updated annually by a rate-of-increase 
percentage. (We note that, in accordance with Sec.  403.752(a), RNHCIs 
are also subject to the rate-of-increase limits established under Sec.  
413.40 of the regulations.)
    As discussed in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 
24641), the FY 2016 rate-of-increase percentage for updating the target 
amounts for the 11 cancer hospitals, children's hospitals, the short-
term acute care hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa, and RNHCIs is the 
estimated percentage increase in the IPPS operating market basket for 
FY 2016, in accordance with applicable regulations at Sec.  413.40. 
Based on IHS Global Insight, Inc.'s 2015 first quarter forecast, we 
estimated that the FY 2010-based IPPS operating market basket update 
for FY 2016 would be 2.7 percent (that is, the estimate of the market 
basket rate-of-increase). However, we proposed that if more recent data 
became available for the final rule, we would use them to calculate the 
IPPS operating market basket update for FY 2016. Therefore, based on 
IHS Global Insight, Inc.'s 2015 second quarter forecast, with 
historical data through the first quarter of 2015, we estimate that the 
FY 2010-based IPPS operating market basket update for FY 2016 is 2.4 
percent (that is, the estimate of the market basket rate-of-increase). 
For children's hospitals, the 11 cancer hospitals, hospitals located 
outside the 50 States, the District of Columbia and Puerto Rico (that 
is, short-term acute care hospitals located in the U.S. Virgin Islands, 
Guam, the Northern Mariana Islands, and American Samoa), and RNHCIs, 
the FY 2016 rate-of-increase percentage that will be applied to the FY 
2015 target amounts in order to determine the final FY 2016 target 
amounts is 2.4 percent.
    The IRF PPS, the IPF PPS, and the LTCH PPS are updated annually. We 
refer readers to section VII. of the preamble of this final rule and 
section V. of the Addendum to this final rule for the update changes to 
the Federal payment rates for LTCHs under the LTCH PPS for FY 2016. The 
annual updates for the IRF PPS and the IPF PPS are issued by the agency 
in separate Federal Register documents.

V. Updates to the Payment Rates for the LTCH PPS for FY 2016

A. LTCH PPS Standard Federal Payment Rate for FY 2016

1. Background
    In section VII. of the preamble of this final rule, we discuss our 
annual updates to the payment rates, factors, and specific policies 
under the LTCH PPS for FY 2016.
    Under Sec.  412.523(c)(3)(ii) of the regulations, for LTCH PPS rate 
years beginning RY 2004 through RY 2006, we

[[Page 49796]]

updated the standard Federal rate annually by a factor to adjust for 
the most recent estimate of the increases in prices of an appropriate 
market basket of goods and services for LTCHs. We established this 
policy of annually updating the standard Federal rate because, at that 
time, we believed that was the most appropriate method for updating the 
LTCH PPS standard Federal rate for years after the initial 
implementation of the LTCH PPS in FY 2003. Therefore, under Sec.  
412.523(c)(3)(ii), for RYs 2004 through 2006, the annual update to the 
LTCH PPS standard Federal rate was equal to the previous rate year's 
Federal rate updated by the most recent estimate of increases in the 
appropriate market basket of goods and services included in covered 
inpatient LTCH services.
    In determining the annual update to the standard Federal rate for 
RY 2007, based on our ongoing monitoring activity, we believed that, 
rather than solely using the most recent estimate of the LTCH PPS 
market basket update as the basis of the annual update factor, it was 
appropriate to adjust the standard Federal rate to account for the 
effect of documentation and coding in a prior period that was unrelated 
to patients' severity of illness (71 FR 27818). Accordingly, we 
established under Sec.  412.523(c)(3)(iii) that the annual update to 
the standard Federal rate for RY 2007 was zero percent based on the 
most recent estimate of the LTCH PPS market basket at that time, offset 
by an adjustment to account for changes in case-mix in prior periods 
due to the effect of documentation and coding that were unrelated to 
patients' severity of illness. For RY 2008 through FY 2011, we also 
made an adjustment to account for the effect of documentation and 
coding that was unrelated to patients' severity of illness in 
establishing the annual update to the standard Federal rate as set 
forth in the regulations at Sec. Sec.  412.523(c)(3)(iv) through 
(c)(3)(vii). For FYs 2012, 2013, 2014, and 2015, we updated the 
standard Federal rate by the most recent estimate of the LTCH PPS 
market basket at that time, including additional statutory adjustments 
required by section 1886(m)(3)(A) of the Act as set forth in the 
regulations at Sec. Sec.  412.523(c)(3)(viii) through (c)(3)(ix).
    Section 1886(m)(3)(A) of the Act, as added by section 3401(c) of 
the Affordable Care Act, specifies that, for rate year 2010 and each 
subsequent rate year, any annual update to the standard Federal rate 
shall be reduced:
     For rate year 2010 through 2019, by the other adjustment 
specified in section 1886(m)(3)(A)(ii) and (m)(4) of the Act; and
     For rate year 2012 and each subsequent year, by the 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of 
the Act (which we refer to as ``the multifactor productivity (MFP) 
adjustment'') as discussed in section VII.D.2. of the preamble of this 
final rule.
    Section 1886(m)(3)(B) of the Act provides that the application of 
paragraph (3) of section 1886(m) of the Act may result in the annual 
update being less than zero for a rate year, and may result in payment 
rates for a rate year being less than such payment rates for the 
preceding rate year. (As noted in section VII.D.2.a. of the preamble of 
this final rule, the annual update to the LTCH PPS occurs on October 1 
and we have adopted the term ``fiscal year'' (FY) rather than ``rate 
year'' (RY) under the LTCH PPS beginning October 1, 2010. Therefore, 
for purposes of clarity, when discussing the annual update for the LTCH 
PPS, including the provisions of the Affordable Care Act, we use the 
term ``fiscal year'' rather than ``rate year'' for 2011 and subsequent 
years.)
    For FY 2015, consistent with our historical practice, we 
established an update to the LTCH PPS standard Federal rate based on 
the full estimated LTCH PPS market basket increase of 2.9 percent and 
the 0.7 percentage point reductions required by sections 
1886(m)(3)(A)(i) and 1886(m)(3)(A)(ii) with 1886(m)(4)(E) of the Act. 
Accordingly, at Sec.  412.523(c)(3)(xi) of the regulations, we 
established an annual update of 2.2 percent to the standard Federal 
rate for FY 2015 (79 FR 50391through 50392).
    For FY 2016, as discussed in greater detail in section VII.D.2. of 
the preamble of this final rule, we are establishing an annual update 
to the LTCH PPS standard Federal payment rate based on the full 
estimated increase in the LTCH PPS market basket, less the MFP 
adjustment consistent with section 1886(m)(3)(A)(i) of the Act, and 
less the 0.2 percentage point required by sections 1886(m)(3)(A)(ii) 
and (m)(4)(E) of the Act. In addition, as discussed in greater detail 
in section VII.D.2. of the preamble of this final rule, the annual 
update is further reduced by 2.0 percentage points for LTCHs that fail 
to submit quality reporting data in accordance with the requirements of 
the LTCH QRP under section 1886(m)(5) of the Act.
    Specifically, in this final rule, consistent with our proposal and 
based on the best available data, we are establishing an annual update 
to the LTCH PPS standard Federal payment rate of 1.7 percent, which is 
based on the full estimated increase in the LTCH PPS market basket of 
2.4 percent, less the MFP adjustment of 0.5 percentage point consistent 
with section 1886(m)(3)(A)(i) of the Act, and less the 0.2 percentage 
point required by sections 1886(m)(3)(A)(ii) and (m)(4)(E) of the Act. 
For LTCHs that fail to submit the required quality reporting data for 
FY 2016 in accordance with the LTCH QRP, the annual update is further 
reduced by 2.0 percentage points as required by section 1886(m)(5) of 
the Act (as discussed in greater detail in section VII.D.2.c. of the 
preamble of this final rule). Accordingly, we are establishing an 
annual update to the LTCH PPS standard Federal payment rate of -0.3 
percent for LTCHs that fail to submit the required quality reporting 
data for FY 2016. This -0.3 percent update was calculated based on the 
full estimated increase in the LTCH PPS market basket of 2.4 percent, 
less a MFP adjustment of 0.5 percentage point, less an additional 
adjustment of 0.2 percentage point required by the statute, and less 
2.0 percentage points for failure to submit quality reporting data as 
required by section 1886(m)(5) of the Act.
2. Development of the FY 2016 LTCH PPS Standard Federal Payment Rate
    We continue to believe that the annual update to the LTCH PPS 
standard Federal payment rate should be based on the most recent 
estimate of the increase in the LTCH PPS market basket, including any 
statutory adjustments. Consistent with our historical practice, for FY 
2016, we are applying the annual update to the LTCH PPS standard 
Federal payment rate from the previous year. Furthermore, in 
determining the LTCH PPS standard Federal payment rate for FY 2016, we 
also are making certain regulatory adjustments, consistent with past 
practices. Specifically, in determining the FY 2016 LTCH PPS standard 
Federal payment rate, as we proposed, we are applying a budget 
neutrality adjustment factor for the changes related to the area wage 
adjustment (that is, changes to the wage data and labor-related share) 
in accordance with Sec.  412.523(d)(4). We also, as proposed, used more 
recent data to determine the update to the LTCH PPS standard Federal 
payment rate for FY 2016 in this final rule.
    For FY 2015, we established an annual update to the LTCH PPS 
standard Federal rate of 2.2 percent for FY 2015 based on the full 
estimated LTCH PPS market basket increase of 2.9 percent, less the MFP 
adjustment of 0.5 percentage point consistent with section 
1886(m)(3)(A)(i) of the Act and less the 0.2 percentage point required 
by

[[Page 49797]]

sections 1886(m)(3)(A)(ii) and (m)(4)(E) of the Act. Accordingly, at 
Sec.  412.523(c)(3)(xi), we established an annual update to the 
standard Federal rate for FY 2015 of 2.2 percent. That is, we applied 
an update factor of 1.022 to the FY 2014 Federal rate of $40,607.31 to 
determine the FY 2015 standard Federal rate. The standard Federal rate 
for FY 2015 was further adjusted by an adjustment factor of 0.98734 for 
FY 2015 under the final year of the 3-year phase-in of the one-time 
prospective adjustment at Sec.  412.523(d)(3)(ii). We also applied an 
area wage level budget neutrality factor for FY 2015 of 1.0016703 to 
the standard Federal rate to ensure that any changes to the area wage 
level adjustment would not result in any change in estimated aggregate 
LTCH PPS payments. Consequently, we established a standard Federal rate 
for FY 2015 of $41,043.71 (calculated as $40,607.31 x 1.022 x 0.98734 x 
1.001670) (79 FR 50392).
    In this final rule, we are establishing an annual update to the 
LTCH PPS standard Federal payment rate of 1.7 percent, which was 
determined consistent with our proposal and using the methodology 
previously described. Accordingly, under Sec.  412.523(c)(3)(xii), we 
are applying a factor of 1.017 to the FY 2015 standard Federal rate of 
$41,043.71 to determine the FY 2016 LTCH PPS standard Federal payment 
rate. These factors are based on IGI's second quarter 2015 forecast, 
which are the best available data at this time. For LTCHs that fail to 
submit quality reporting data for FY 2016 under the LTCH QRP, under 
Sec.  412.523(c)(3)(xii), applied in conjunction with the provisions of 
Sec.  412.523(c)(4), we are reducing the annual update to the LTCH PPS 
standard Federal payment rate by an additional 2.0 percentage points 
consistent with section 1886(m)(5) of the Act. In those cases, the LTCH 
PPS standard Federal payment rate is updated by -0.3 percent (that is, 
a update factor of 0.997) for FY 2016 for LTCHs that fail to submit the 
required quality reporting data for FY 2016 as required under the LTCH 
QRP. Consistent with Sec.  412.523(d)(4), we also are applying an area 
wage level budget neutrality factor to the FY 2016 LTCH PPS standard 
Federal payment rate of 1.000513, which was determined using the 
methodology previously described. We are applying this area wage level 
budget neutrality factor to the FY 2016 LTCH PPS standard Federal 
payment rate to ensure that any changes to the area wage level 
adjustment (that is, the annual update of the wage index values and 
labor-related share) will not result in any change (increase or 
decrease) in estimated aggregate LTCH PPS standard Federal payment rate 
payments. Accordingly, we are establishing a LTCH PPS standard Federal 
payment rate of $41,762.85 (calculated as $41,043.71 x 1.017 x 
1.000513) for FY 2016. For LTCHs that fail to submit quality reporting 
data for FY 2016 in accordance with the requirements of the LTCHQRP 
under section 1886(m)(5) of the Act, we are establishing a LTCH PPS 
standard Federal payment rate of $40,941.55 (calculated as $41,043.71 x 
0.997 x 1.000513) for FY 2016. We note, as discussed in section VII.B. 
of the preamble of this final rule, under our application of the site 
neutral payment rate required under section 1886(m)(6) of the Act, this 
LTCH PPS standard Federal payment rate will only be used to determine 
payments for LTCH PPS standard Federal payment rate cases (that is, 
those LTCH PPS cases that meet the statutory criteria to be excluded 
from the site neutral payment rate).

B. Adjustment for Area Wage Levels for the LTCH PPS Standard Federal 
Payment Rate for FY 2016

1. Background
    Under the authority of section 123 of the BBRA, as amended by 
section 307(b) of the BIPA, we established an adjustment to the LTCH 
PPS standard Federal rate to account for differences in LTCH area wage 
levels under Sec.  412.525(c). The labor-related share of the LTCH PPS 
standard Federal rate is adjusted to account for geographic differences 
in area wage levels by applying the applicable LTCH PPS wage index. The 
applicable LTCH PPS wage index is computed using wage data from 
inpatient acute care hospitals without regard to reclassification under 
section 1886(d)(8) or section 1886(d)(10) of the Act.
    When we implemented the LTCH PPS, we established a 5-year 
transition to the full area wage level adjustment. The area wage level 
adjustment was completely phased-in for cost reporting periods 
beginning in FY 2007. Therefore, for cost reporting periods beginning 
on or after October 1, 2006, the applicable LTCH area wage index values 
are the full LTCH PPS area wage index values calculated based on acute 
care hospital inpatient wage index data without taking into account 
geographic reclassification under section 1886(d)(8) and section 
1886(d)(10) of the Act. For additional information on the phase-in of 
the area wage level adjustment under the LTCH PPS, we refer readers to 
the August 30, 2002 LTCH PPS final rule (67 FR 56015 through 56019) and 
the RY 2008 LTCH PPS final rule (72 FR 26891).
2. Geographic Classifications (Labor Market Areas) for the LTCH PPS 
Standard Federal Payment Rate
    In adjusting for the differences in area wage levels under the LTCH 
PPS, the labor-related portion of an LTCH's Federal prospective payment 
is adjusted by using an appropriate area wage index based on the 
geographic classification (labor market area) in which the LTCH is 
located. Specifically, the application of the LTCH PPS area wage level 
adjustment under existing Sec.  412.525(c) is made based on the 
location of the LTCH--either in an ``urban area,'' or a ``rural area,'' 
as defined in Sec.  412.503. Under Sec.  412.503, an ``urban area'' is 
defined as a Metropolitan Statistical Area (MSAs) (which includes a 
Metropolitan division, where applicable), as defined by the Executive 
OMB and a ``rural area'' is defined as any area outside of an urban 
area.
    The CBSA-based geographic classifications (labor market area 
definitions) currently used under the LTCH PPS, effective for 
discharges occurring on or after October 1, 2014, are based on the new 
OMB labor market area delineations based on the 2010 Decennial Census 
data. We made these revisions because we believe that these OMB 
delineations are based on the best available data that reflect the 
local economies and area wage levels of the hospitals that are 
currently located in these geographic areas. We also believe that these 
OMB delineations will ensure that the LTCH PPS area wage level 
adjustment most appropriately accounts for and reflects the relative 
hospital wage levels in the geographic area of the hospital as compared 
to the national average hospital wage level. We noted that this policy 
was consistent with the IPPS policy adopted in FY 2015 under Sec.  
412.64(b)(1)(ii)(D) of the regulations (79 FR 49951 through 49963). 
(For additional information on the CBSA-based labor market area 
(geographic classification) delineations currently used under the LTCH 
PPS and the history of the labor market area definitions used under the 
LTCH PPS, we refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 
FR 50180 through 50185).)
    In general, it is our historical practice to update the CBSA-based 
labor market area delineations annually based on the most recent 
updates issued by OMB. At the time of the development of this proposed 
rule, OMB had not issued any further updates subsequent to OMB Bulletin 
No. 13-01, which was dated February 28, 2013, and established

[[Page 49798]]

revised delineations based on 2010 Census Bureau data that were 
subsequently adopted in the FY 2015 IPPS/LTCH PPS final rule. (The OMB 
bulletins are available on the OMB Web site at: http://www.whitehouse.gov/omb. Go to ``Information For Agencies'' and click on 
``Bulletins''.) Therefore, for FY 2016, as proposed, we are continuing 
to use the CBSA-based labor market area delineations currently used 
under the LTCH PPS (as adopted in the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 50180 through 50185)). We believe that these CBSA-based labor 
market area delineations will ensure that the LTCH PPS area wage level 
adjustment most appropriately accounts for and reflects the relative 
hospital wage levels in the geographic area of the hospital as compared 
to the national average hospital wage level based on the best available 
data that reflect the local economies and area wage levels of the 
hospitals that are currently located in these geographic areas.
3. Labor-Related Share for the LTCH PPS Standard Federal Payment Rate
    Under the payment adjustment for the differences in area wage 
levels under Sec.  412.525(c), the labor-related share of an LTCH's PPS 
Federal prospective payment is adjusted by the applicable wage index 
for the labor market area in which the LTCH is located. The LTCH PPS 
labor-related share currently represents the sum of the labor-related 
portion of operating costs (Wages and Salaries; Employee Benefits; 
Professional Fees Labor-Related, Administrative and Business Support 
Services; and All-Other: Labor-Related Services) and a labor-related 
portion of capital costs using the applicable LTCH PPS market basket. 
Additional background information on the historical development of the 
labor-related share under the LTCH PPS and the development of the RPL 
market basket can be found in the RY 2007 LTCH PPS final rule (71 FR 
27810 through 27817 and 27829 through 27830) and the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51766 through 51769 and 51808).
    For FY 2013, we revised and rebased the market basket used under 
the LTCH PPS by adopting the newly created FY 2009-based LTCH-specific 
market basket. In addition, we determined the labor-related share for 
FY 2013 as the sum of the FY 2013 relative importance of each labor-
related cost category of the FY 2009-based LTCH-specific market basket. 
For more details, we refer readers to the FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53477 through 53479). Consistent with our historical 
practice, in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50393 through 
50394), we determined the LTCH PPS labor-related share for FY 2015 
based on the FY 2015 relative importance of each labor-related cost 
category, which reflected the different rates of price change for these 
cost categories between the base year (FY 2009) and FY 2015. 
Specifically, based on IGI's second quarter 2014 forecast of the FY 
2009-based LTCH-specific market basket, we established a labor-related 
share under the LTCH PPS for FY 2015 of 62.306 percent.
    For FY 2016, we are establishing a labor-related share for the LTCH 
PPS standard Federal payment rate payments based on IGI's second 
quarter 2015 forecast of the FY 2009-based LTCH-specific market basket. 
Consistent with our historical practice, as proposed, we also are using 
more recent data to determine the final FY 2016 labor-related share. In 
addition, as proposed, we are specifying the labor-related share to one 
decimal place, which is consistent with the IPPS labor-related share 
and the LTCH market basket update. The following table shows the FY 
2016 labor-related share relative importance using IGI's second quarter 
2015 forecast of the FY 2009-based LTCH-specific market basket. The sum 
of the relative importance for FY 2016 for operating costs (Wages and 
Salaries; Employee Benefits; Professional Fees: Labor-Related, 
Administrative and Business Support Services; and All Other: Labor-
Related Services) is 57.9 percent. We are establishing that the portion 
of capital-related costs that is influenced by the local labor market 
would continue to be estimated to be 46 percent. Because the relative 
importance for capital-related costs would be 9.0 percent of the FY 
2009-based LTCH-specific market basket in FY 2016, we are taking 46 
percent of 9.0 percent to determine the labor-related share of capital-
related costs for FY 2016, which would result in 4.1 percent (0.46 x 
9.0). We then added that 4.1 percent for the capital-related cost 
amount to the 57.9 percent for the operating cost amount to determine 
the total labor-related share for FY 2016. Therefore, under the broad 
authority of section 123 of the BBRA, as amended by section 307(b) of 
BIPA, to determine appropriate payment adjustments under the LTCH PPS, 
we are establishing a labor-related share under the LTCH PPS for FY 
2016 of 62.0 percent. Consistent with our proposal, this labor-related 
share is determined using the same methodology as used in calculating 
all previous fiscal years LTCH labor-related shares.

  FY 2016 Labor-Related Share Relative Importance Based on the FY 2009-
                    Based LTCH-Specific Market Basket
------------------------------------------------------------------------
                                                            FY 2016
                                                      Labor[dash]related
                                                        share relative
                                                          importance
------------------------------------------------------------------------
Wages and Salaries..................................              44.6
Employee Benefits...................................               8.1
Professional Fees: Labor-Related....................               2.2
Administrative and Business Support Services........               0.5
All Other: Labor-Related Services...................               2.5
  Subtotal..........................................              57.9
Labor-Related Portion of Capital Costs (46 percent).               4.1
                                                     -------------------
  Total Labor-Related Share.........................              62.0
------------------------------------------------------------------------

4. Wage Index for FY 2016 for the LTCH PPS Standard Federal Payment 
Rate
    Historically, we have established LTCH PPS area wage index values 
calculated from acute care IPPS hospital wage data without taking into 
account geographic reclassification under sections 1886(d)(8) and 
1886(d)(10) of the Act (67 FR 56019). The area wage level adjustment 
established under the LTCH PPS is based on an LTCH's actual location 
without regard to the ``urban'' or ``rural'' designation of any related 
or affiliated provider.
    In the FY 2015 LTCH PPS final rule (79 FR 50394 through 50396), we 
calculated the FY 2015 LTCH PPS area wage index values using the same 
data used for the FY 2015 acute care hospital IPPS (that is, data from 
cost reporting periods beginning during FY 2011), without taking into 
account geographic reclassification under sections 1886(d)(8) and 
1886(d)(10) of the Act, as these were the most recent complete data 
available at that time. In that same final rule, we indicated that we 
computed the FY 2015 LTCH PPS area wage index values consistent with 
the urban and rural geographic classifications (labor market areas) 
that were in place at that time, and consistent with the pre-
reclassified IPPS wage index policy (that is, our historical policy of 
not taking into account IPPS geographic reclassifications in 
determining payments under the LTCH PPS). As with the IPPS wage index, 
wage data for multicampus hospitals with campuses located in different 
labor market areas (CBSAs) are apportioned to each CBSA where the 
campus (or campuses) are located. We also continued to use our existing 
policy for determining area wage index values for

[[Page 49799]]

areas where there are no IPPS wage data.
    Consistent with our historical methodology, to determine the 
applicable area wage index values for the FY 2016 LTCH PPS standard 
Federal payment rate, under the broad authority of section 123 of the 
BBRA, as amended by section 307(b) of the BIPA, as we proposed, we are 
using wage data collected from cost reports submitted by IPPS hospitals 
for cost reporting periods beginning during FY 2012, without taking 
into account geographic reclassification under sections 1886(d)(8) and 
1886(d)(10) of the Act. We are using FY 2012 wage data because these 
data are the most recent complete data available. We also note that 
these are the same data used to compute the FY 2016 acute care hospital 
inpatient wage index, as discussed in section III. of the preamble of 
this final rule. We are computing the FY 2016 LTCH PPS standard Federal 
payment rate area wage index values consistent with the ``urban'' and 
``rural'' geographic classifications (that is, labor market area 
delineations, as previously discussed in section V.B.2. of this 
Addendum) and our historical policy of not taking into account IPPS 
geographic reclassifications under sections 1886(d)(8) and 1886(d)(10) 
of the Act in determining payments under the LTCH PPS, as we proposed. 
We also are, as we proposed, continuing to apportion wage data for 
multicampus hospitals with campuses located in different labor market 
areas to each CBSA where the campus or campuses are located, consistent 
with the IPPS policy. Lastly, under our methodology for determining the 
FY 2016 LTCH PPS standard Federal payment rate area wage index values, 
as we proposed, we are continuing to use our existing policy for 
determining area wage index values for areas where there are no IPPS 
wage data.
    Under our existing methodology, the LTCH PPS wage index value for 
urban CBSAs with no IPPS wage data would be determined by using an 
average of all of the urban areas within the State and the LTCH PPS 
wage index value for rural areas with no IPPS wage data would be 
determined by using the unweighted average of the wage indices from all 
of the CBSAs that are contiguous to the rural counties of the State.
    Based on the FY 2012 IPPS wage data that we are using to determine 
the FY 2016 LTCH PPS standard Federal payment rate area wage index 
values in this final rule, there are no IPPS wage data for the urban 
area of Hinesville, GA (CBSA 25980). Consistent with the methodology 
discussed above, we calculated the FY 2016 wage index value for CBSA 
25980 as the average of the wage index values for all of the other 
urban areas within the State of Georgia (that is, CBSAs 10500, 12020, 
12060, 12260, 15260, 16860, 17980, 19140, 23580, 31420, 40660, 42340, 
46660 and 47580), as shown in Table 12A, which is listed in section VI. 
of the Addendum to this final rule and available via the Internet on 
the CMS Web site). We note that, as IPPS wage data are dynamic, it is 
possible that urban areas without IPPS wage data will vary in the 
future.
    Based on the FY 2012 IPPS wage data that we are using to determine 
the FY 2016 LTCH PPS standard Federal payment rate area wage index 
values in this final rule, there are no rural areas without IPPS 
hospital wage data. Therefore, it is not necessary to use our 
established methodology to calculate a LTCH PPS standard Federal 
payment rate wage index value for rural areas with no IPPS wage data 
for FY 2016. We note that, as IPPS wage data are dynamic, it is 
possible that the number of rural areas without IPPS wage data will 
vary in the future. The FY 2016 LTCH PPS standard Federal payment rate 
wage index values that are applicable for LTCH PPS standard Federal 
payment rate discharges occurring on or after October 1, 2015, through 
September 30, 2016, are presented in Table 12A (for urban areas) and 
Table 12B (for rural areas), which are listed in section VI. of the 
Addendum of this final rule and available via the Internet on the CMS 
Web site.
5. Budget Neutrality Adjustment for Changes to the LTCH PPS Standard 
Federal Payment Rate Area Wage Level Adjustment
    Historically, the LTCH PPS wage index and labor-related share are 
updated annually based on the latest available data. Under Sec.  
412.525(c)(2), any changes to the area wage index values or labor-
related share are to be made in a budget neutral manner such that 
estimated aggregate LTCH PPS payments are unaffected; that is, will be 
neither greater than nor less than estimated aggregate LTCH PPS 
payments without such changes to the area wage level adjustment. Under 
this policy, we determine an area wage-level adjustment budget 
neutrality factor that will be applied to the standard Federal rate to 
ensure that any changes to the area wage level adjustments are budget 
neutral such that any changes to the area wage index values or labor-
related share would not result in any change (increase or decrease) in 
estimated aggregate LTCH PPS payments. Accordingly, under Sec.  
412.523(d)(4), we apply an area wage level adjustment budget neutrality 
factor in determining the standard Federal rate, and we also 
established a methodology for calculating an area wage level adjustment 
budget neutrality factor. (For additional information on the 
establishment of our budget neutrality policy for changes to the area 
wage level adjustment, we refer readers to the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51771 through 51773 and 51809).)
    In this final rule, for FY 2016 LTCH PPS standard Federal payment 
rate cases, in accordance with Sec.  412.523(d)(4), as we proposed, we 
are applying an area wage level adjustment budget neutrality factor to 
adjust the standard Federal rate to account for the estimated effect of 
the adjustments or updates to the area wage level adjustment under 
Sec.  412.525(c)(1) on estimated aggregate LTCH PPS payments using a 
methodology that is consistent with the methodology we established in 
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51773). Specifically, as we 
proposed, we are determining an area wage level adjustment budget 
neutrality factor that will be applied to the LTCH PPS standard Federal 
payment rate under Sec.  412.523(d)(4) for FY 2016 using the following 
methodology:
    Step 1--We simulated estimated aggregate LTCH PPS standard Federal 
payment rate payments using the FY 2015 wage index values, including 
the 50/50 blended area wage index values, as applicable, and the FY 
2015 labor-related share of 62.306 percent (as established in the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50393 and 50397).
    Step 2--We simulated estimated aggregate LTCH PPS standard Federal 
payment rate payments using the FY 2016 wage index values (as shown in 
Tables 12A and 12B listed in the Addendum to this final rule and 
available via the Internet on the CMS Web site) and the FY 2016 labor-
related share of 62.0 percent (based on the latest available data as 
previously discussed previously in this Addendum).
    Step 3--We calculated the ratio of these estimated total LTCH PPS 
standard Federal payment rate payments by dividing the estimated total 
LTCH PPS standard Federal payment rate payments using the FY 2015 area 
wage level adjustments (calculated in Step 1) by the estimated total 
LTCH PPS standard Federal payment rate payments using the FY 2016 area 
wage level adjustments (calculated in Step 2) to determine the area 
wage level adjustment budget

[[Page 49800]]

neutrality factor for FY 2016 LTCH PPS standard Federal payment rate 
payments.
    Step 4--We then applied the FY 2016 area wage level adjustment 
budget neutrality factor from Step 3 to determine the FY 2016 LTCH PPS 
standard Federal payment rate after the application of the FY 2016 
annual update (discussed previously in section V.A.2. of this 
Addendum).
    We note that, with the exception of cases subject to the 
transitional blend payment rate provisions in the first 2 years, under 
the dual rate LTCH PPS payment structure, only LTCH PPS cases that meet 
the statutory criteria to be excluded from the site neutral payment 
rate (that is, LTCH PPS standard Federal payment rate cases) will be 
paid based on the LTCH PPS standard Federal payment rate. Because the 
area wage level adjustment under Sec.  412.525(c) is an adjustment to 
the LTCH PPS standard Federal payment rate, we only used data from 
claims that would have qualified for payment at the LTCH PPS standard 
Federal payment rate if such rate were in effect at the time of 
discharge to calculate the FY 2016 LTCH PPS standard Federal payment 
rate area wage level adjustment budget neutrality factor described 
above. (For additional information on our application of site neutral 
payment rate required under section 1886(m)(6) of the Act, we refer 
readers to section VII.B. of the preamble of this final rule.)
    For this final rule, using the steps in the methodology described 
above, we determined a FY 2016 LTCH PPS standard Federal payment rate 
area wage level adjustment budget neutrality factor of 1.000513. 
Accordingly, in section V.A.2. of the Addendum to this final rule, to 
determine the FY 2016 LTCH PPS standard Federal payment rate, we are 
applying an area wage level adjustment budget neutrality factor of 
1.000513, in accordance with Sec.  412.523(d)(4). The FY 2016 LTCH PPS 
standard Federal payment rate shown in Table 1E of the Addendum to this 
final rule reflects this adjustment factor.

C. LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located in 
Alaska and Hawaii

    Under Sec.  412.525(b), a cost-of-living adjustment (COLA) is 
provided for LTCHs located in Alaska and Hawaii to account for the 
higher costs incurred in those States. Specifically, we apply a COLA to 
payments to LTCHs located in Alaska and Hawaii by multiplying the 
nonlabor-related portion of the standard Federal payment rate by the 
applicable COLA factors established annually by CMS. Higher labor-
related costs for LTCHs located in Alaska and Hawaii are taken into 
account in the adjustment for area wage levels described above.
    Under our current methodology, we update the COLA factors for 
Alaska and Hawaii every 4 years (at the same time as the update to the 
labor-related share of the IPPS market basket) (77 FR 53712 through 
53713). This methodology is based on a comparison of the growth in the 
Consumer Price Indexes (CPIs) for Anchorage, Alaska, and Honolulu, 
Hawaii, relative to the growth in the CPI for the average U.S. city as 
published by the Bureau of Labor Statistics (BLS). It also includes a 
25-percent cap on the CPI-updated COLA factors. (For additional details 
on our current methodology for updating the COLA factors for Alaska and 
Hawaii, we refer readers to section VII.D.3. of the preamble of the FY 
2013 IPPS/LTCH PPS final rule (77 FR 53481 through 53482).)
    We continue to believe that determining updated COLA factors using 
this methodology would appropriately adjust the nonlabor-related 
portion of the LTCH PPS standard Federal payment rate for LTCHs located 
in Alaska and Hawaii. Under our current policy, we update the COLA 
factors using the methodology described above every 4 years; the first 
year began in FY 2014 (77 FR 53482). Therefore, in this final rule, as 
we proposed, for FY 2016, under the broad authority conferred upon the 
Secretary by section 123 of the BBRA, as amended by section 307(b) of 
the BIPA, to determine appropriate payment adjustments under the LTCH 
PPS, we are continuing to use the COLA factors based on the 2009 OPM 
COLA factors updated through 2012 by the comparison of the growth in 
the CPIs for Anchorage, Alaska, and Honolulu, Hawaii, relative to the 
growth in the CPI for the average U.S. city as established in the FY 
2014 IPPS/LTCH PPS final rule. (We refer readers to the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50998) for a discussion of the FY 2014 COLA 
factors.) Consistent with our historical practice and as we proposed, 
we are establishing that the COLA factors shown in the following table 
will be used to adjust the nonlabor-related portion of the LTCH PPS 
standard Federal payment rate for LTCHs located in Alaska and Hawaii 
under Sec.  412.525(b).

 Cost-of-Living Adjustment Factors for Alaska and Hawaii Hospitals Under
                        the LTCH PPS for FY 2016
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Alaska:
    City of Anchorage and 80-kilometer (50[dash]mile)               1.23
     radius by road.....................................
    City of Fairbanks and 80-kilometer (50[dash]mile)               1.23
     radius by road.....................................
    City of Juneau and 80-kilometer (50[dash]mile)                  1.23
     radius by road.....................................
    All other areas 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
------------------------------------------------------------------------

D. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases

1. Overview
a. Background
    Under the broad authority conferred upon the Secretary by section 
123 of the BBRA as amended by section 307(b) of the BIPA, in the 
regulations at Sec.  412.525(a), we established an adjustment for 
additional payments for outlier cases that have extraordinarily high 
costs relative to the costs of most discharges. We refer to these cases 
as high cost outliers (HCOs). Providing additional payments for 
outliers strongly improves the accuracy of the LTCH PPS in determining 
resource costs at the patient and hospital level. These additional 
payments reduce the financial losses that would otherwise be incurred 
when treating patients who require more costly care and, therefore, 
reduce the incentives to underserve these patients. Under our current 
HCO policy at Sec.  412.525(a), we set the outlier threshold before the 
beginning of the applicable rate year so that total estimated outlier 
payments are projected to equal 8 percent of total estimated payments 
under the LTCH PPS.
    Under the current HCO policy, we make outlier payments for any 
discharges if the estimated cost of a case exceeds the adjusted payment 
under the LTCH PPS standard Federal payment rate plus a fixed-loss 
amount. Specifically, in accordance with existing Sec.  412.525(a)(3), 
we make an additional payment for an HCO case that is equal to 80 
percent of the difference between the estimated cost of the patient 
case and the outlier threshold, which is the sum of the adjusted 
payment under the

[[Page 49801]]

LTCH PPS standard Federal payment rate and the fixed-loss amount. The 
fixed-loss amount is the amount used to limit the loss that a hospital 
incurs under the outlier policy for a case with unusually high costs 
before the LTCH will receive any additional payments. This results in 
Medicare and the LTCH sharing financial risk in the treatment of 
extraordinarily costly cases. Under the current LTCH PPS HCO policy, 
the LTCH's loss is limited to the fixed-loss amount and a fixed 
percentage of costs above the outlier threshold (the adjusted LTCH PPS 
standard Federal payment rate payment plus the fixed-loss amount). The 
fixed percentage of costs is called the marginal cost factor. We 
calculate the estimated cost of a case by multiplying the Medicare 
allowable covered charge by the hospital's overall hospital cost-to-
charge ratio (CCR).
    Under the current HCO policy at Sec.  412.525(a), we determine a 
fixed-loss amount, that is, the maximum loss that an LTCH can incur 
under the LTCH PPS for a case with unusually high costs before the LTCH 
will receive any additional payments. We calculate the fixed-loss 
amount by estimating aggregate payments with and without an outlier 
policy. The fixed-loss amount results in estimated total outlier 
payments being projected to be equal to 8 percent of projected total 
LTCH PPS payments. Currently, MedPAR claims data and CCRs based on data 
from the most recent Provider-Specific File (PSF) (or from the 
applicable statewide average CCR if an LTCH's CCR data are faulty or 
unavailable) are used to establish a fixed-loss threshold amount under 
the LTCH PPS.
b. Application of the Site Neutral Payment Rate
    Section 1206 of Public Law 113-67 establishes a new dual rate LTCH 
PPS payment structure with two distinct payment rates for LTCH 
discharges, beginning in FY 2016. To implement this statutory change, 
as discussed in section VII.B. of the preamble of this final rule, we 
will pay hospitals for LTCH discharges that meet the criteria for 
exclusion from site neutral payment rate (that is, LTCH PPS standard 
Federal payment rate cases) based on the LTCH PPS standard Federal 
payment rate, which includes HCO payments determined under existing 
Sec.  412.525(a). Furthermore, we are establishing that the site 
neutral payment rate is the lower of the IPPS comparable per diem 
amount as determined under Sec.  412.529(d)(4) (including any 
applicable adjustments, such as outlier payments), or 100 percent of 
the estimated cost of the case as determined under existing Sec.  
412.529(d)(2), consistent with the statute.
    Under the new dual rate LTCH PPS payment structure, as discussed in 
section VII.B.7.b. of the preamble of this final rule, as we proposed, 
we are establishing two separate HCO targets--one for LTCH PPS standard 
Federal payment rate cases and one for site neutral payment rate cases. 
We are revising the regulations by making changes to the HCO policy to 
account for the new dual rate LTCH PPS payment structure by revising 
paragraphs (a)(1), (a)(2), and (a)(3), and adding a new paragraph 
(a)(4) to existing Sec.  412.525 of the regulations. Under our HCO 
policy revised in accordance with the new dual rate LTCH PPS payment 
structure, we are establishing a fixed-loss amount and target for LTCH 
PPS standard Federal payment rate cases using the current LTCH PPS HCO 
policy, but limiting the data used under that policy to LTCH cases that 
would have been LTCH PPS standard Federal payment rate cases if the 
statutory changes had been in effect at the time of those discharges. 
Therefore, we are not making any modifications to the HCO methodology 
as it applies to LTCH PPS standard Federal payment rate cases other 
than determining a fixed-loss amount using only data from LTCH PPS 
standard Federal payment rate cases. Specifically, under our finalized 
policy, LTCH PPS standard Federal payment rate cases will receive an 
additional payment for an HCO case that is equal to 80 percent of the 
difference between the estimated cost of the case and the HCO 
threshold, which is the sum of the LTCH PPS payment for the LTCH PPS 
standard Federal payment rate case and the fixed-loss amount for such 
cases. The fixed-loss amount for LTCH PPS standard Federal payment rate 
cases will continue to be determined so that estimated HCO payments 
would be projected to be equal to 8 percent of estimated total LTCH PPS 
payments for LTCH PPS standard Federal payment rate cases.
    Furthermore, as we proposed, we are revising the HCO policy under 
existing Sec.  412.525(a) to provide for high-cost outlier payments 
under the site neutral payment rate. Specifically, we are establishing 
that site neutral payment rate cases will receive an additional payment 
for HCOs that is equal to 80 percent of the difference between the 
estimated cost of the case and the HCO threshold for site neutral 
payment rate discharges, which we are establishing as the sum of site 
neutral payment rate for the case and the IPPS fixed-loss amount. In 
addition, in order to maintain budget neutrality, as we proposed and as 
discussed in section VII.B.7.b. of the preamble of this final rule, we 
are making the HCO payments for site neutral payment rate cases budget 
neutral by applying a budget neutrality factor to the LTCH PPS payments 
for those site neutral payment rate cases. (Additional details on the 
calculation of the budget neutrality adjustment for HCO payments to 
site neutral payment rate cases is discussed subsequently in section 
V.D.4. of this Addendum.)
2. Determining LTCH CCRs Under the LTCH PPS
a. Background
    The following is a discussion of CCRs that are used in determining 
payments for HCO cases under Sec.  412.525(a), SSO cases paid under the 
LTCH PPS in accordance with Sec.  412.529, and site neutral payment 
rate cases paid in accordance with proposed Sec.  412.522(c) (as 
discussed in section VII.B.4. of the preamble of this final rule). 
Although this section is specific to HCO cases, because CCRs and the 
policies and methodologies pertaining to them are used in determining 
payments for HCO, SSO, and site neutral payment rate cases (to 
determine the estimated costs of these cases), we are discussing the 
determination of CCRs under the LTCH PPS for these three types of cases 
simultaneously in this section.
    In determining HCO payments in accordance with Sec.  412.525(a), 
SSO payments in accordance with Sec.  412.529 and site neutral payment 
rate payments in accordance with Sec.  412.522(c), we calculate the 
estimated cost of the case by multiplying the LTCH's overall CCR by the 
Medicare allowable charges for the case. In general, we use the LTCH's 
overall CCR, which is computed based on either the most recently 
settled cost report or the most recent tentatively settled cost report, 
whichever is from the latest cost reporting period, in accordance with 
Sec.  412.525(a)(4)(iv)(B), for HCOs, Sec.  412.529(f)(4)(ii) for SSOs, 
and Sec.  412.522(c)(1)(ii) for site neutral payment rate cases. (We 
note that, in some instances under the provisions of the regulations at 
Sec.  412.525(a)(4)(iv) and Sec.  412.529(f)(4), and Sec.  
412.522(c)(1)(ii), we may use an alternative CCR, such as the statewide 
average CCR, a CCR that is specified by CMS, or that is requested by 
the hospital.) Under the LTCH PPS, a single prospective payment per 
discharge is made for both inpatient operating and capital-related 
costs. Therefore, we compute a single ``overall'' or ``total'' LTCH-
specific CCR based on the sum of LTCH operating and capital costs (as 
described in

[[Page 49802]]

Section 150.24, Chapter 3, of the Medicare Claims Processing Manual 
(Pub. 100-4)) as compared to total charges. Specifically, an LTCH's CCR 
is calculated by dividing an LTCH's total Medicare costs (that is, the 
sum of its operating and capital inpatient routine and ancillary costs) 
by its total Medicare charges (that is, the sum of its operating and 
capital inpatient routine and ancillary charges).
b. LTCH Total CCR Ceiling
    Generally, an LTCH is assigned the applicable statewide average CCR 
if, among other things, an LTCH's CCR is found to be in excess of the 
applicable maximum CCR threshold (that is, the LTCH CCR ceiling). This 
is because CCRs above this threshold are most likely due to faulty data 
reporting or entry, and CCRs based on erroneous data should not be used 
to identify and make payments for outlier cases. Therefore, under our 
established policy, generally, if an LTCH's calculated CCR is above the 
applicable ceiling, the applicable LTCH PPS statewide average CCR is 
assigned to the LTCH instead of the CCR computed from its most recent 
(settled or tentatively settled) cost report data.
    In this final rule, using our established methodology for 
determining the LTCH total CCR ceiling, based on IPPS total CCR data 
from the March 2015 update of the PSF, we are establishing a total CCR 
ceiling of 1.335 under the LTCH PPS for FY 2016 in accordance with 
Sec.  412.525(a)(4)(iv)(C)(2) for HCOs, Sec.  412.529(f)(4)(iii)(B) for 
SSOs, and Sec.  412.522(c)(1)(ii) for site neutral payment rate cases. 
We also are, as proposed, using more recent data to determine the LTCH 
PPS CCR ceiling for this FY 2016 final rule.
c. LTCH Statewide Average CCRs
    Our general methodology established for determining the statewide 
average CCRs used under the LTCH PPS is similar to our established 
methodology for determining the LTCH total CCR ceiling (described 
above) because it is based on ``total'' IPPS CCR data. Under the LTCH 
PPS HCO policy at Sec.  412.525(a)(4)(iv)(C) the SSO policy at Sec.  
412.529(f)(4)(iii), and the site neutral payment rate policy at Sec.  
412.522(c)(1)(ii), the MAC may use a statewide average CCR, which is 
established annually by CMS, if it is unable to determine an accurate 
CCR for an LTCH in one of the following circumstances: (1) New LTCHs 
that have not yet submitted their first Medicare cost report (for this 
purpose, consistent with current policy, a new LTCH is defined as an 
entity that has not accepted assignment of an existing hospital's 
provider agreement in accordance with Sec.  489.18); (2) LTCHs whose 
CCR is in excess of the LTCH CCR ceiling; and (3) other LTCHs for whom 
data with which to calculate a CCR are not available (for example, 
missing or faulty data). (Other sources of data that the MAC may 
consider in determining an LTCH's CCR include data from a different 
cost reporting period for the LTCH, data from the cost reporting period 
preceding the period in which the hospital began to be paid as an LTCH 
(that is, the period of at least 6 months that it was paid as a short-
term, acute care hospital), or data from other comparable LTCHs, such 
as LTCHs in the same chain or in the same region.)
    Consistent with our historical practice of using the best available 
data and as we proposed, in this final rule, using our established 
methodology for determining the LTCH statewide average CCRs, based on 
the most recent complete IPPS ``total CCR'' data from the March 2015 
update of the PSF, we are establishing LTCH PPS statewide average total 
CCRs for urban and rural hospitals that will be effective for 
discharges occurring on or after October 1, 2015 through September 30, 
2016, in Table 8C listed in section VI. of the Addendum to this final 
rule (and available via the Internet). We also, as proposed, are using 
more recent data to determine the LTCH PPS statewide average total CCRs 
for FY 2016.
    Under the current LTCH PPS labor market areas, all areas in 
Delaware, the District of Columbia, New Jersey, and Rhode Island are 
classified as urban. Therefore, there are no rural statewide average 
total CCRs listed for those jurisdictions in Table 8C. This policy is 
consistent with the policy that we established when we revised our 
methodology for determining the applicable LTCH statewide average CCRs 
in the FY 2007 IPPS final rule (71 FR 48119 through 48121) and is the 
same as the policy applied under the IPPS. In addition, although 
Connecticut and Massachusetts have areas that are designated as rural, 
there are no short-term, acute care IPPS hospitals or LTCHs located in 
those areas as of March 2015. Therefore, consistent with our existing 
methodology and as we proposed, we are using the national average total 
CCR for rural IPPS hospitals for rural Connecticut and Massachusetts in 
Table 8C listed in section VI. of the Addendum to this final rule (and 
available via the Internet). In addition, consistent with our existing 
methodology as we proposed, in determining the urban and rural 
statewide average total CCRs for Maryland LTCHs paid under the LTCH 
PPS, we are continuing to use, as a proxy, the national average total 
CCR for urban IPPS hospitals and the national average total CCR for 
rural IPPS hospitals, respectively. We are using this proxy because we 
believe that the CCR data in the PSF for Maryland hospitals may not be 
entirely accurate (as discussed in greater detail in the FY 2007 IPPS 
final rule (71 FR 48120)).
d. Reconciliation of HCO and SSO Payments
    Under the HCO policy at Sec.  412.525(a)(4)(iv)(D) and the SSO 
policy at Sec.  412.529(f)(4)(iv), the payments for HCO and SSO, cases 
are subject to reconciliation. Specifically, any reconciliation of 
payments is based on the CCR that is calculated based on a ratio of 
cost-to-charge data computed from the relevant cost report determined 
at the time the cost report coinciding with the discharge is settled. 
(As discussed section VII.B.4.a. of the preamble of this final rule, 
after consideration of public comments we received, we are not 
finalizing our proposal to establish a reconciliation process for site 
neutral payment rate payments. However, we are finalizing the portion 
of our proposal to apply the existing HCO reconciliation policy to the 
HCO payments made to site neutral payment rate cases. For additional 
information on the existing reconciliation policy, we refer readers to 
sections 150.26 through 150.28 of the Medicare Claims Processing Manual 
(Pub. 100-4) as added by Change Request 7192 (Transmittal 2111; 
December 3, 2010) and the RY 2009 LTCH PPS final rule (73 FR 26820 
through 26821).
3. High-Cost Outlier Payments for LTCH PPS Standard Federal Payment 
Rate Cases
a. Establishment of the LTCH PPS Fixed-Loss Amount for LTCH PPS 
Standard Federal Payment Rate Cases for FY 2016
    When we implemented the LTCH PPS, under the broad authority of 
section 123 of the BBRA as amended by section 307(b) of BIPA, we 
established a fixed-loss amount so that total estimated outlier 
payments are projected to equal 8 percent of total estimated payments 
under the LTCH PPS (67 FR 56022 through 56026). To determine the fixed-
loss amount, we estimate outlier payments and total LTCH PPS payments 
for each case using claims data from the MedPAR files. Specifically, we 
estimate the cost of the

[[Page 49803]]

case by multiplying the Medicare covered charges from the claim by the 
LTCH's CCR. Under the HCO policy at Sec.  412.525(a), if the estimated 
cost of the case exceeds the outlier threshold, we make an outlier 
payment equal to 80 percent of the difference between the estimated 
cost of the case and the outlier threshold (that is, the sum of the 
adjusted standard Federal rate payment and the fixed-loss amount).
    As noted above and as discussed in greater detail in section 
VII.B.7.b. of the preamble of this final rule, under the new dual rate 
LTCH PPS payment structure, we are establishing two separate HCO 
targets--one for LTCH PPS standard Federal payment rate cases and one 
for site neutral payment rate cases. Under this finalized policy, for 
LTCH PPS standard Federal payment rate cases, we are establishing a 
fixed-loss amount and target using the current LTCH PPS HCO policy, but 
to limit the data used under that policy to LTCH cases that would have 
been paid as LTCH PPS standard Federal payment rate cases, if that 
payment rate had been in effect at the time of those discharges. 
Therefore, as we proposed, we are not making any modifications to the 
existing LTCH PPS HCO payment methodology as it applies to LTCH PPS 
standard Federal payment rate cases, other than determining a fixed-
loss amount using only data from LTCH PPS standard Federal payment rate 
cases (or cases that would have been LTCH PPS standard Federal payment 
rate cases had the new dual rate LTCH PPS payment structure been in 
effect at the time of those discharges). As such, LTCH PPS standard 
Federal payment rate cases will continue to receive an additional 
payment for any HCO case that is equal to 80 percent of the difference 
between the estimated cost of the case and the HCO threshold, which is 
the sum of the LTCH PPS payment for the LTCH PPS standard Federal 
payment rate case and the fixed-loss amount. The fixed-loss amount for 
LTCH PPS standard Federal payment rate cases will continue to be 
determined so that estimated HCO payments would be projected to equal 8 
percent of estimated total LTCH PPS standard Federal payment rate 
cases, and a budget neutrality factor will continue to be applied to 
LTCH PPS standard Federal payment rate cases to offset that 8 percent 
so that HCO payments for LTCH PPS standard Federal payment rate cases 
will be budget neutral. Below we present our calculation of the LTCH 
PPS fixed-loss amount for LTCH PPS standard Federal payment rate cases 
for FY 2016, which is consistent with the methodology used to establish 
the FY 2015 LTCH PPS fixed-loss amount. (Additional discussion of our 
HCO payment policy proposals for site neutral payment rate cases is 
discussed subsequently in section V.D.4. of this Addendum.)
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50399 through 
50400), we presented our policies regarding the methodology and data we 
used to establish a fixed-loss amount of $14,972 for FY 2015, which was 
calculated using our existing methodology (based on the data and the 
rates and policies presented in that final rule) in order to maintain 
estimated HCO payments at the projected 8 percent of total estimated 
LTCH PPS payments. Consistent with our historical practice of using the 
best data available, in determining the fixed-loss amount for FY 2015, 
we used the most recent available LTCH claims data and CCR data, that 
is, LTCH claims data from the March 2014 update of the FY 2013 MedPAR 
file and CCRs from the March 2014 update of the PSF, as these data were 
the most recent complete LTCH data available at that time.
    In this final rule, as we proposed, we are continuing to use our 
existing methodology to calculate a fixed-loss amount for LTCH PPS 
standard Federal payment rate cases for FY 2016 using the best 
available data that will maintain estimated HCO payments at the 
projected 8 percent of total estimated LTCH PPS payments for LTCH PPS 
standard Federal payment rate cases (based on the rates and policies 
for these cases presented in this final rule). Specifically, based on 
the most recent complete LTCH data available (that is, LTCH claims data 
from the March 2015 update of the FY 2014 MedPAR file and CCRs from the 
March 2015 update of the PSF), we determined a fixed-loss amount for 
LTCH PPS standard Federal payment rate cases for FY 2016 that will 
result in estimated outlier payments projected to be equal to 8 percent 
of estimated FY 2016 payments for such cases. Under the broad authority 
of section 123(a)(1) of the BBRA and section 307(b)(1) of the BIPA, we 
are establishing a fixed-loss amount of $16,423 for LTCH PPS standard 
Federal payment rate cases for FY 2016. We also will continue to make 
an additional HCO payment for the cost of an LTCH PPS standard Federal 
payment rate case that exceeds the HCO threshold amount that is equal 
to 80 percent of the difference between the estimated cost of the case 
and the outlier threshold (the sum of the adjusted LTCH PPS standard 
Federal payment rate payment and the fixed-loss amount for LTCH PPS 
standard Federal payment rate cases of $16,423).
    We note that the fixed-loss amount of $16,423 for FY 2016 for LTCH 
PPS standard Federal payment rate cases is lower than the proposed FY 
2016 fixed-loss amount for LTCH PPS standard Federal payment rate cases 
of $18,768. This decrease is primarily a result of updated data used to 
calculate the fixed-loss amount in this final rule, such as the most 
recent available LTCH claims data in the MedPAR file, CCRs in the PSF, 
and the estimate of the LTCH market basket increase. We also note that 
the fixed-loss amount of $16,423 for LTCH PPS standard Federal payment 
rate cases for FY 2016 is higher than the FY 2015 fixed-loss amount of 
$14,792. This increase is largely attributable to the implementation of 
the new dual rate LTCH PPS payment structure, under which we have 
established separate HCO target amounts for LTCH PPS standard Federal 
payment rate cases and site neutral payment rate cases. The FY 2015 
fixed-loss amount was determined based on data from all LTCH cases--
both those that would have been paid as site neutral payment rate cases 
and those that would have been paid as LTCH PPS standard Federal 
payment rate cases if the new dual rate LTCH PPS payment structure had 
been in effect at that time. However, under our finalized policy, the 
fixed-loss amount of $16,423 for FY 2016 will only be used to determine 
HCO payments made for LTCH PPS standard Federal payment rate cases. We 
currently estimate that the FY 2015 fixed-loss amount of $14,972 
results in estimated HCO payments for LTCH PPS standard Federal payment 
rate cases of approximately 8.1 percent of total estimated FY 2015 LTCH 
PPS payments to those cases, which exceeds the 8 percent target. 
Therefore, we believe that it is necessary and appropriate to increase 
the fixed-loss amount to maintain that, for LTCH PPS standard Federal 
payment rate cases, estimated HCO payments would equal 8 percent of 
estimated total LTCH PPS payments for those cases as required under the 
revisions to Sec.  412.525(a). (For further information on the existing 
8 percent HCO ``target'' requirement, we refer readers to the August 
30, 2002 LTCH PPS final rule (67 FR 56022 through 56024).) Maintaining 
the fixed-loss amount at the current level would result in HCO payments 
that are more than the current regulatory 8-percent target that we are 
applying to total payments for LTCH PPS standard Federal payment rate 
cases because a lower fixed-loss amount would result in more cases

[[Page 49804]]

qualifying as outlier cases, as well as higher outlier payments for 
qualifying HCO cases because the maximum loss that an LTCH must incur 
before receiving an HCO payment (that is, the fixed-loss amount) would 
be smaller.
b. Application of the High-Cost Outlier Policy to SSO Cases
    Under our finalized policies to implement the new dual rate LTCH 
PPS payment structure required by statute, we are establishing that 
LTCH PPS standard Federal payment rate cases (that is, LTCH discharges 
that meet the criteria for exclusion from the site neutral payment 
rate) will continue to be paid based on the LTCH PPS standard Federal 
payment rate, and will include all of the existing payment adjustments 
under Sec.  412.525(d), such as the adjustments for SSO cases under 
Sec.  412.529. (For additional information on our payments for LTCH PPS 
standard Federal payment rate cases, we refer readers to section 
VII.B.4.c. of the preamble of this final rule.) Under some rare 
circumstances, an LTCH discharge can qualify as an SSO case (as defined 
in the regulations at Sec.  412.529 in conjunction with Sec.  412.503) 
and also as an HCO case, as discussed in the August 30, 2002 final rule 
(67 FR 56026). In this scenario, a patient could be hospitalized for 
less than five-sixths of the geometric average length of stay for the 
specific MS-LTC-DRG, and yet incur extraordinarily high treatment 
costs. If the estimated costs exceeded the HCO threshold (that is, the 
SSO payment plus the fixed-loss amount), the discharge is eligible for 
payment as an HCO. Therefore, for an SSO case in FY 2016, the HCO 
payment will be 80 percent of the difference between the estimated cost 
of the case and the outlier threshold (the sum of the fixed-loss amount 
of $16,423 and the amount paid under the SSO policy as specified in 
Sec.  412.529).
4. High-Cost Outlier Payments for Site Neutral Payment Rate Cases
    Under the new dual rate LTCH PPS payment structure, the statute 
establishes two distinct payment rates for LTCH discharges beginning in 
FY 2016. Under this statutory change, as discussed in section VII.B. of 
the preamble of this final rule, we will pay for LTCH discharges that 
meet the criteria for exclusion from the site neutral payment rate 
(that is, LTCH PPS standard Federal payment rate cases) based on the 
LTCH PPS standard Federal payment rate. In addition, consistent with 
the statute, we are establishing that the site neutral payment rate is 
the lower of the IPPS comparable per diem amount as determined under 
Sec.  412.529(d)(4), including any applicable outlier payments as 
specified in Sec.  412.525(a); or 100 percent of the estimated cost of 
the case as determined under existing Sec.  412.529(d)(2). Furthermore, 
we are establishing two separate HCO targets-one for LTCH PPS standard 
Federal payment rate cases and one for site neutral payment rate cases.
    For site neutral payment rate cases, as we proposed, we are 
establishing that such cases will receive an additional HCO payment for 
costs that exceed the HCO threshold that is equal to 80 percent of the 
difference between the estimated cost of the case and the applicable 
HCO threshold. We are establishing that the applicable HCO threshold 
for site neutral payment rate cases is the sum of the site neutral 
payment rate for the case and the IPPS fixed-loss amount. As discussed 
in section II.A.4.g.(1) of this Addendum, we are establishing a fixed-
loss amount of $22,544 under the IPPS for FY 2016. Accordingly, under 
our finalized policies, for FY 2016 we will calculate HCO payments for 
site neutral payment rate cases with costs that exceed the HCO 
threshold amount, which is equal to 80 percent of the difference 
between the estimated cost of the case and the outlier threshold (the 
sum of site neutral payment rate payment and the fixed-loss amount for 
site neutral payment rate cases of $22,544). (We note that, as 
discussed in section VII.B.7.b. of the preamble of this final rule, in 
light of our HCO policies and in accordance with our implementation of 
the new dual rate LTCH PPS payment structure, any site neutral payment 
rate case that is paid 100 percent of the estimated cost of the case 
(because that amount is lower than the IPPS comparable per diem amount) 
will not be eligible to receive a HCO payment because, by definition, 
the estimated costs of such cases would never exceed the IPPS 
comparable per diem amount by any threshold.)
    Furthermore, under our finalized policy, after consideration of 
public comments as discussed in section VII.B.7.b. of the preamble of 
this final rule, we are establishing that HCO payments for site neutral 
payment rate cases will be budget neutral, such that the site neutral 
payment rate HCO payments will not result in any change in estimated 
aggregate LTCH PPS payments (For additional details on our HCO policy 
for site neutral payment rate cases, we refer readers to section 
VII.B.7.b. of the preamble of this final rule.) In order to achieve 
this, in the proposed rule (80 FR 24648 through 24649), under proposed 
new Sec.  412.522(c)(2)(i), we proposed to apply a budget neutrality 
factor to the payments for all site neutral payment rate cases, which 
would be established on an estimated basis. In addition, in order to 
estimate the magnitude a budget neutrality adjustment for HCO payments 
for site neutral payment rate cases, we relied on the assumption by our 
actuaries that site neutral payment rate cases would have lengths of 
stay and costs comparable to IPPS cases assigned to the same MS-DRG. 
Because site neutral payment rate cases are expected to have lengths of 
stay and costs comparable to IPPS cases assigned to the same MS DRG, we 
project that our policy to use the IPPS fixed-loss threshold for the 
site neutral payment rate cases will result in HCO payments for site 
neutral payment rate cases that are similar in proportion as is seen in 
IPPS cases assigned to the same MS-DRG; that is, 5.1 percent. 
Therefore, under new Sec.  412.522(c)(2)(i), we proposed to adjust all 
payments for site neutral payment rate cases by a budget neutrality 
factor so that the estimated HCO payments payable for site neutral 
payment rate cases do not result in any increase in aggregate LTCH PPS 
payments. That is, for FY 2016 we proposed to apply a budget neutrality 
adjustment for estimated HCO payments for site neutral payment rate 
cases to both the site neutral payment rate and the LTCH PPS standard 
Federal payment rate portions of the FY 2016 transitional blended rate 
paid to site neutral payment rate cases. (We refer readers to section 
VII.B.7.b. of this preamble for our discussion of the public comments 
we received, our responses to those comments, and our finalized policy 
for a budget neutrality requirement for site neutral payment rate 
cases' HCO payments.) Because the statutory LTCH PPS payment changes 
required by section 1886(m)(6) of the Act (that is, the application of 
the site neutral payment rate) are effective for LTCH PPS discharges 
occurring in cost reporting periods beginning on or after October 1, 
2015, in the proposed rule, our site neutral payment rate case HCO 
budget neutrality calculations also included a proposed approach to 
account for when LTCHs' first cost reporting period begins on or after 
October 1, 2015.
    Under our proposed approach (summarized above and described in more 
detail in section V.D.4. of the Addendum of the proposed rule (80 FR 
24649)) and based on the site neutral payment rate LTCH cases in our 
database from the FY 2014 MedPAR files (that is, cases that would have 
met

[[Page 49805]]

the new criteria had they been in effect at the time of the discharge), 
we estimated that site neutral payment rate HCO payments would be 
approximately 2.3 percent of total LTCH PPS payments for site neutral 
payment rate cases in FY 2016. Accordingly, we proposed to applying a 
budget neutrality factor of 0.976996 to all payments for site neutral 
payment rate cases in FY 2016 so that the estimated HCO payments 
payable to those cases would not result any increase in aggregate LTCH 
PPS payments.
    Comment: Several commenters disagreed with our proposed approach of 
adjusting all payments for site neutral payment rate cases in FY 2016 
(that is, both the site neutral payment rate and the LTCH PPS standard 
Federal payment rate portions of the transitional blended rate payment) 
by a budget neutrality factor for estimated HCO payments payable to 
site neutral payment rate cases. The reasons for the commenters' 
opposition to this proposal include: The LTCH PPS standard Federal 
payment rate portion under transitional blended rate would be lower 
than the LTCH PPS standard Federal payment rate used to pay cases that 
are excluded from the site neutral payment rate; and the comingling of 
site neutral payment rate and LTCH PPS standard Federal payment rate 
elements unnecessarily convolutes the proposed site neutral payment 
rate HCO calculations. Consequently, these commenters recommended that, 
if CMS finalizes its proposal to apply a budget neutrality factor to 
account for estimated site neutral payment case HCO payments, the site 
neutral payment rate and the LTCH PPS standard Federal payment rate 
portions of the transitional blended rate should be treated separately. 
That is, the budget neutrality adjustment for estimated HCO payments to 
site neutral payment rate cases should only be applied to the site 
neutral payment rate portion of the transitional blended rate payment 
(and not applied to the LTCH PPS standard Federal payment rate portion 
of the transitional blended rate payment).
    Furthermore, some commenters stated that the description of the 
calculation of the estimated percentage of site neutral payment rate 
case HCO payments for FY 2016 was too brief, and requested that CMS 
provide additional details on the steps used to calculate the budget 
neutrality adjustment for estimated HCO payments to site neutral 
payment rate cases. In addition, commenters believed that our proposed 
calculation of our estimate in the proposed rule of HCO payments to 
site neutral payment rate cases includes a technical error. That is, 
the commenters stated that the calculation of the percentage of 
estimated site neutral payment rate case HCO payments for FY 2016 of 
2.3 percent appears to be based on estimated HCO payments for site 
neutral payment rate cases before applying the transitional blended 
rate payment (rather than only 50 percent, consistent with the 
calculation of the transitional blended rate that is comprised of only 
50 percent of the site neutral payment rate payment amount). Lastly, 
some commenters agreed with the proposed approach to account for when 
LTCHs' first cost reporting period begins on or after October 1, 2015 
in estimating site neutral payment rate payments in FY 2016.
    Response: We agree that the approach recommended by commenters 
would lessen the complexity and increase the transparency of the 
calculation of the site neutral payment rate HCO payment budget 
neutrality adjustment. Such an approach simplifies the calculation 
because the adjustment to account for additional HCO payments to site 
neutral payment rate cases would only be applied to the portion of the 
blended rate payment that is based on the site neutral payment rate 
calculation under new Sec.  412.522(c)(1). Therefore, after 
consideration of public comments we received, we are modifying our 
proposal by adopting the commenters' recommended approach of applying 
the budget neutrality adjustment for estimated HCO payments for site 
neutral payment rate cases only to the site neutral payment rate 
portion of the transitional blended rate payment. As a result of this 
modification, we are making conforming changes to our proposed 
codification of this policy under new Sec.  412.522(c)(2)(i) to specify 
that the site neutral payment rate HCO budget neutrality adjustment 
does not include the portion of the blended payment rate described in 
new Sec.  412.522(c)(3)(ii).
    This modification to our proposed approach for applying the budget 
neutrality adjustment to the site neutral payment rate portion of the 
transitional blended rate payment eliminates the need to perform any 
calculation of the site neutral payment rate cases HCO payment budget 
neutrality adjustment under our finalized policy. This is, as discussed 
above and in greater detail in section VII.B.7.b. of the preamble of 
this final rule, because based on our actuarial assumptions we project 
that our finalized policy to use the IPPS fixed-loss threshold for the 
site neutral payment rate cases will result in HCO payments for those 
cases that are similar in proportion as is seen in IPPS cases assigned 
to the same MS-DRG; that is, 5.1 percent. In other words, we estimated 
that HCO payments for site neutral payment rate cases will be 5.1 
percent of the site neutral payment rate payments. As noted above, 
payments to site neutral payment rate cases in FY 2016 will be paid 
under the blended transitional rate. As such, estimated HCO payments 
for site neutral payment rate cases in FY 2016 under our finalized 
policies are equal to 5.1 percent of the portion of the blended rate 
payment that is based on the estimated site neutral payment rate 
payment amount (and does not include the LTCH PPS standard Federal 
payment rate payment amount, as we proposed). Therefore, to ensure that 
estimated HCO payments payable to site neutral payment rate cases in FY 
2016 do not result any increase in estimated aggregate FY 2016 LTCH PPS 
payments, it is necessary to reduce the site neutral payment rate 
portion of the blended rate payment by 5.1 percent to account for the 
estimated additional HCO payments payable to those cases in FY 2016. In 
order to achieve this, under Sec.  412.522(c)(2)(i) for FY 2016, we are 
applying a budget neutrality factor of 0.949 (that is, the decimal 
equivalent of a 5.1 percent reduction, determined as 1.0-5.1/100 = 
0.949). (We note, because this adjustment is intended to ensure that 
estimated HCO payments payable to site neutral payment rate cases are 
budget neutral (that is, do not result in any increase in aggregate 
LTCH PPS payments), the magnitude of the reduction is larger than it 
would be under our proposed approach as the adjustment is now only 
being applied to half of the transitional blended rate payment (rather 
than the whole transitional blended rate payment as it was under our 
proposal).
    Upon review of our calculation in the proposed rule of the 
estimated percentage of site neutral payment rate case HCO payments for 
FY 2016, we determined that our calculation of the proposed budget 
neutrality adjustment for estimated HCO payments for site neutral 
payment rate cases inadvertently contained the technical error pointed 
out by the commenters. We appreciate the commenters bringing that 
inadvertent error to our attention, and we have included the necessary 
correction in the calculation of our estimate of HCO payments for site 
neutral payment rate cases, which we discuss in the regulatory impact 
analyses presented in section I.J. of Appendix A of this final rule. 
(We note, as explained above, the modification to the proposed approach 
for applying the

[[Page 49806]]

budget neutrality adjustment for estimated HCO payments for site 
neutral payment rate cases that we are adopting in this final rule 
eliminates the need for calculation of the budget neutrality adjustment 
under our finalized policy.)
    We appreciate the commenters' support of our proposed approach to 
account for the fact that LTCHs whose cost reporting periods begin on 
or after October 1, 2015, will receive the LTCH PPS standard Federal 
payment rates for all of their LTCH PPS cases, including their cases 
that would be site neutral payment rate cases, until the start of their 
next cost reporting period when estimating site neutral payment rate 
payments in FY 2016. Because we are adopting a different, more direct 
approach in this final rule (as discussed above), in the applying the 
budget neutrality requirement for estimated HCO payments payable to 
site neutral payment rate cases in for FY 2016, it is no longer 
necessary to account for when LTCHs' first cost reporting period begins 
on or after October 1, 2015 (as we did to calculate the budget 
neutrality adjustment under our proposed approach). We note, however, 
for purposes of the impact analyses presented in section I.J. of 
Appendix A of this final rule, to estimate site neutral payment rate 
payments for FY 2016, it is still necessary to account for when LTCHs' 
first cost reporting period begins on or after October 1, 2015. 
Accordingly, in this final rule, when estimating total LTCH PPS site 
neutral payment rate payments in Federal FY 2016, as we proposed, we 
are applying an adjustment to account for the varying effective dates 
of the new dual rate LTCH PPS payment structure. We describe our 
application of this approach for purposes of the impact analyses 
presented in this final rule in section I.J. of Appendix A of this 
final rule. (For a description of our proposed approach to account for 
the statutory rolling effective date of the revisions to the LTCH PPS, 
we refer readers to section V.D.4. of the Addendum of the proposed rule 
(80 FR 24649).)
    In summary, after consideration of public comments we received, for 
the reasons discussed above, we are modifying our proposed application 
of the site neutral payment rate HCO payment budget neutrality 
adjustment. In this final rule, we are adopting an approach under which 
the budget neutrality adjustment for estimated HCO payments to site 
neutral payment rate cases will be applied to the site neutral payment 
rate portion of the transitional blended rate payment in FY 2016 (and 
will not applied to the LTCH PPS standard Federal payment rate portion 
of the transitional blended rate payment). Accordingly, to ensure that 
estimated HCO payments payable to site neutral payment rate cases in FY 
2016 do not result any increase in estimated aggregate FY 2016 LTCH PPS 
payments, we are reducing the site neutral payment rate portion of the 
blended rate payment in FY 2016 by 5.1 percent. In order to achieve 
this, we are applying a budget neutrality factor of 0.949 to the site 
neutral payment rate portion of the blended rate payment in FY 2016, in 
accordance with new Sec.  412.522(c)(2)(i).

E. Update to the IPPS Comparable/Equivalent Amounts to Reflect the 
Statutory Changes to the IPPS DSH Payment Adjustment Methodology

    In the FY 2014 IPPS/LTCH PPS final rule, we established a policy 
for reflecting the changes to the Medicare IPPS DSH payment adjustment 
methodology provided for by section 3133 of the Affordable Care Act in 
the calculation of the ``IPPS comparable amount'' under the SSO policy 
at Sec.  412.529 and the ``IPPS equivalent amount'' under the 25-
percent threshold payment adjustment policy at Sec.  412.534 and Sec.  
412.536. Historically, the determination of both the ``IPPS comparable 
amount'' and the ``IPPS equivalent amount'' includes an amount for 
inpatient operating costs ``for the costs of serving a disproportionate 
share of low-income patients.'' Under the statutory changes to the 
Medicare DSH payment adjustment methodology that began in FY 2014, in 
general, eligible IPPS hospitals receive an empirically justified 
Medicare DSH payment equal to 25 percent of the amount they otherwise 
would have received under the statutory formula for Medicare DSH 
payments prior to the amendments made by the Affordable Care Act. The 
remaining amount, equal to an estimate of 75 percent of the amount that 
otherwise would have been paid as Medicare DSH payments, reduced to 
reflect changes in the percentage of individuals under the age of 65 
who are uninsured, is made available to make additional payments to 
each hospital that qualifies for Medicare DSH payments and that has 
uncompensated care. The additional uncompensated care payments are 
based on the hospital's amount of uncompensated care for a given time 
period relative to the total amount of uncompensated care for that same 
time period reported by all IPPS hospitals that receive Medicare DSH 
payments.
    To reflect the statutory changes to the Medicare DSH payment 
adjustment methodology in the calculation of the ``IPPS comparable 
amount'' and the ``IPPS equivalent amount'' under the LTCH PPS, we 
stated that we will include a reduced Medicare DSH payment amount that 
reflects the projected percentage of the payment amount calculated 
based on the statutory Medicare DSH payment formula prior to the 
amendments made by the Affordable Care Act that will be paid to 
eligible IPPS hospitals as empirically justified Medicare DSH payments 
and uncompensated care payments in that year (that is, a percentage of 
the operating DSH payment amount that has historically been reflected 
in the LTCH PPS payments that is based on IPPS rates). We also stated 
that the projected percentage will be updated annually, consistent with 
the annual determination of the amount of uncompensated care payments 
that will be made to eligible IPPS hospitals. As explained in the FY 
2014 IPPS/LTCH PPS final rule (79 FR 50766 through 50767), we believe 
that this approach results in appropriate payments under the LTCH PPS 
and is consistent with our intention that the ``IPPS comparable 
amount'' and the ``IPPS equivalent amount'' under the LTCH PPS closely 
resemble what an IPPS payment would have been for the same episode of 
care, while recognizing that some features of the IPPS cannot be 
translated directly into the LTCH PPS.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50400 through 
50401), we discussed that, for FY 2015, based on the latest data 
available at that time, we projected that the reduction in the amount 
of Medicare DSH payments pursuant to section 1886(r)(1) of the Act, 
along with the proposed payments for uncompensated care under section 
1886(r)(2) of the Act, would result in overall Medicare DSH payments 
equaling 85.26 percent of the amount of Medicare DSH payments that 
would otherwise have been made in the absence of amendments made by the 
Affordable Care Act. Therefore, the calculation of the ``IPPS 
comparable amount'' under Sec.  412.529 and the ``IPPS equivalent 
amount'' under Sec.  412.534 and Sec.  412.536 for FY 2015 includes an 
applicable operating Medicare DSH payment amount that would be equal to 
85.26 percent of the operating Medicare DSH payment amount based on the 
statutory Medicare DSH payment formula prior to the amendments made by 
the Affordable Care Act.
    For FY 2016, as discussed in greater detail in section IV.D.3.d.(2) 
of the preamble of this final rule, based on the most recent data 
available, our estimate of 75 percent of the amount that would 
otherwise have been paid as Medicare

[[Page 49807]]

DSH payments (under the methodology outlined in section 1886(r)(2) of 
the Act) is adjusted to 63.69 percent of that amount to reflect the 
change in the percentage of individuals who are uninsured. The 
resulting amount is then used to determine the amount of uncompensated 
care payments that will be made to eligible IPPS hospitals in FY 2016. 
In other words, Medicare DSH payments prior to the amendments made by 
the Affordable Care Act will be adjusted to 47.77 percent (the product 
of 75 percent and 63.69 percent) and the resulting amount will be used 
to calculate the uncompensated care payments to eligible hospitals. As 
a result, for FY 2016, we project that the reduction in the amount of 
Medicare DSH payments pursuant to section 1886(r)(1) of the Act, along 
with the payments for uncompensated care under section 1886(r)(2) of 
the Act, will result in overall Medicare DSH payments of 72.77 percent 
of the amount of Medicare DSH payments that would otherwise have been 
made in the absence of amendments made by the Affordable Care Act (that 
is, 25 percent + 47.77 percent = 72.77 percent).
    As we proposed and consistent with our historical practice of using 
the most recent data available, in this final rule, for FY 2016, we are 
establishing that the calculation of the ``IPPS comparable amount'' 
under Sec.  412.529 and the ``IPPS equivalent amount'' under Sec.  
412.534 and Sec.  412.536 will include an applicable operating Medicare 
DSH payment amount that is equal to 72.77 percent of the operating 
Medicare DSH payment amount that would have been paid based on the 
statutory Medicare DSH payment formula but for the amendments made by 
the Affordable Care Act.

F. Computing the Adjusted LTCH PPS Federal Prospective Payments for FY 
2016

    Section 412.525 sets forth the adjustments to the LTCH PPS standard 
Federal payment rate. Under the new dual rate LTCH PPS payment 
structure that begins in FY 2016, only LTCH PPS cases that meet the 
statutory criteria to be excluded from the site neutral payment rate 
will be paid based on the LTCH PPS standard Federal payment rate (as 
discussed in section VII.B. of the preamble of this final rule). Under 
Sec.  412.525(c), the LTCH PPS standard Federal payment rate is 
adjusted to account for differences in area wages by multiplying the 
labor-related share of the LTCH PPS standard Federal payment for a case 
by the applicable LTCH PPS wage index (FY 2016 values are shown in 
Tables 12A through 12B listed in section VI. of the Addendum of this 
final rule and are available via the Internet). The LTCH PPS standard 
Federal payment is also adjusted to account for the higher costs of 
LTCHs located in Alaska and Hawaii by the applicable COLA factors (the 
FY 2016 factors are shown in the chart in section V.D. of this 
Addendum) in accordance with Sec.  412.525(b). In this final rule, we 
are establishing an LTCH PPS standard Federal payment rate for FY 2016 
of $41,762.85, as discussed in section V.A.2. of the Addendum to this 
final rule. We illustrate the methodology to adjust the LTCH PPS 
standard Federal payment rate for FY 2016 in the following example:

    Example: 
    During FY 2016, a Medicare discharge that meets the criteria to 
be excluded from the site neutral payment rate, that is an LTCH PPS 
standard Federal payment rate case, is from an LTCH that is located 
in Chicago, Illinois (CBSA 16974). The FY 2016 LTCH PPS wage index 
value for CBSA 16974 is 1.0401 (obtained from Table 12A listed in 
section VI. of the Addendum of this final rule and available via the 
Internet on the CMS Web site). The Medicare patient case is 
classified into MS-LTC-DRG 189 (Pulmonary Edema & Respiratory 
Failure), which has a relative weight for FY 2016 of 0.91548 
(obtained from Table 11 listed in section VI. of the Addendum of 
this final rule and available via the Internet on the CMS Web site). 
The LTCH submitted quality reporting data for FY 2016 in accordance 
with the LTCHQRP under section 1886(m)(5) of the Act.
    To calculate the LTCH's total adjusted Federal prospective 
payment for this Medicare patient case in FY 2016, we computed the 
wage-adjusted Federal prospective payment amount by multiplying the 
unadjusted FY 2016 LTCH PPS standard Federal payment rate 
($41,762.85) by the labor-related share (62.0 percent) and the wage 
index value (1.0401). This wage-adjusted amount was then added to 
the nonlabor-related portion of the unadjusted LTCH PPS standard 
Federal payment rate (38.0 percent; adjusted for cost of living, if 
applicable) to determine the adjusted LTCH PPS standard Federal 
payment rate, which was then multiplied by the MS-LTC-DRG relative 
weight (0.9148) to calculate the total adjusted LTCH PPS standard 
Federal prospective payment for FY 2016 ($39,154.50). The table 
below illustrates the components of the calculations in this 
example.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
LTCH PPS Standard Federal Prospective       $41,762.85
 Payment Rate.
Labor-Related Share.......................  x 0.620
Labor-Related Portion of the LTCH PPS       = $25,892.97
 Standard Federal Payment Rate.
Wage Index (CBSA 16974)...................  x 1.0401
Wage-Adjusted Labor Share of LTCH PPS       = $26,931.28
 Standard Federal Payment Rate.
Nonlabor-Related Portion of the LTCH PPS    + $15,869.88
 Standard Federal Payment Rate ($41,762.85
 x 0.380).
Adjusted LTCH PPS Standard Federal Payment  = $42,801.16
 Amount.
MS-LTC-DRG 189 Relative Weight............  x 0.9148
Total Adjusted LTCH PPS Standard Federal    = $39,154.50
 Prospective Payment.
------------------------------------------------------------------------

VI. Tables Referenced in This Final Rule and Available Only Through the 
Internet on the CMS Website

    This section lists the tables referred to throughout the preamble 
of this final rule and in this Addendum. In the past, a majority of 
these tables were published in the Federal Register as part of the 
annual proposed and final rules. However, similar to FYs 2012 through 
2015, for the FY 2016 rulemaking cycle, the IPPS and LTCH tables will 
not be published in the Federal Register in the annual IPPS/LTCH PPS 
proposed and final rules and will be available only through the 
Internet. Specifically, all IPPS tables listed below, with the 
exception of IPPS Tables 1A, 1B, 1C, and 1D, and LTCH PPS Table 1E will 
be available only through the Internet. IPPS Tables 1A, 1B, 1C, and 1D, 
and LTCH PPS Table 1E are displayed at the end of this section and will 
continue to be published in the Federal Register as part of the annual 
proposed and final rules.
    As discussed in section III.I. of the preamble to this final rule, 
we proposed to streamline and consolidate the wage index tables for FY 
2016 and subsequent fiscal years. In previous fiscal years, the wage 
index tables have consisted of the following 12 tables: Table 2 (acute 
care hospitals' case-mix indexes; hospital wage indexes; hospital 
average hourly wages, and 3-year average of hospital average hourly 
wages); Table 3A (relevant fiscal year and 3-year average hourly wage 
for acute care hospitals in urban areas by CBSA); Table 3B (relevant 
fiscal year and 3-year average hourly wage for acute care hospitals in 
rural areas by CBSA); Table 4A (wage index and capital geographic 
adjustment factor (GAF) for acute care hospitals in urban areas by CBSA 
and by State); Table 4B (wage index and capital GAF for acute care 
hospitals in rural areas by CBSA and by State); Table 4C (wage index 
and capital GAF for acute care hospitals that are reclassified by CBSA 
and by State); Table 4D (States designated as frontier, with acute care 
hospitals receiving at a minimum the frontier State floor wage index; 
urban areas with acute care hospitals receiving

[[Page 49808]]

the statewide rural floor or imputed rural floor wage index); Table 4E 
(urban CBSAs and constituent counties for acute care hospitals); Table 
4F (Puerto Rico wage index and capital GAF for acute care hospitals by 
CBSA); Table 4J (out-migration adjustment for acute care hospitals); 
Table 9A (hospital reclassifications and redesignations); and Table 9C 
(hospitals redesignated as rural under section 1886(d)(8)(e) of the 
Act). With the exception of Table 4E, we proposed to consolidate the 
information from the 11 other tables listed above into 2 new tables. 
The wage index tables provided in previous fiscal years either display 
information by CMS Certification Number (CCN) or by CBSA number. The 
new Table 2 contains information by CCN and information from the 
following tables that have been provided in previous fiscal years: 
Tables 2, 4J, 9A, and 9C. The new Table 3 contains information by CBSA 
and information from the following tables that have been provided in 
previous fiscal years: Tables 3A, 3B, 4A, 4B, 4C, 4D, and 4F. We 
believe these two new tables will be easier for the public to navigate 
and find all the relevant data and information from the tables provided 
in previous fiscal years. Finally, in previous fiscal years, Table 4E 
provided a list of urban CBSAs and constituent counties. Because of 
formatting technicalities, we found it difficult to consolidate the 
information from Table 4E into the two new tables. Therefore, we 
proposed to provide the data previously published as Table 4E for each 
annual proposed and final rule as one of our data files on our Web page 
(the same Web page where the county to CBSA crosswalk is posted).
    We did not receive any public comments on our proposals for the 
tables. Therefore, we are finalizing our proposals to streamline and 
consolidate the wage index tables for FY 2016 and subsequent fiscal 
years by consolidating the information from the 11 tables listed above 
(excluding Table 4E) into 2 new tables. The new Table 2 contains 
information by CCN and information from the following tables that have 
been provided in previous fiscal years: Tables 2, 4J, 9A, and 9C. The 
new Table 3 contains information by CBSA and information from the 
following tables that have been provided in previous fiscal years: 
Tables 3A, 3B, 4A, 4B, 4C, 4D, and 4F. We are providing the data 
previously published as Table 4E for each annual proposed and final 
rule as one of our data files on the CMS Web page.
    As discussed in sections II.G.3.e., II.G.10.a., II.G.11., and 
II.G.13. of the preamble of this final rule, we developed the following 
ICD-10-CM and ICD-10-PCS code tables for FY 2016: Table 6B--New 
Procedure Codes; Table 6I--Complete MCC List; Table 6J--Complete CC 
List; Table 6K--Complete List of CC Exclusions; Table 6L--Principal 
Diagnosis Is Its Own MCC List; Table 6M--Principal Diagnosis Is Its Own 
CC List; Table 6M.1--Additions to the Principal Diagnosis Is Its Own CC 
List; and Table 6P--ICD-10-PCS Code Translations for MS-DRG Changes. 
Table 6P contains multiple tables 6P.1a through 6P.2a that list the 
ICD-10-PCS code translations relating to specific MS-DRG changes. In 
addition, under the HAC Reduction Program established by section 3008 
of the Affordable Care Act, a hospital's total payment may be reduced 
by 1 percent if it is in the lowest HAC performance quartile. However, 
as discussed in section IV.G. of the preamble of this final rule, we 
are not providing the hospital-level data as a table associated with 
this final rule. The hospital-level data for the FY 2016 HAC Reduction 
Program will be made publicly available once it has undergone the 
review and corrections process.
    Finally, a hospital's Factor 3 is the proportion of the 
uncompensated care amount that a DSH eligible hospital will receive 
under section 3133 of the Affordable Care Act. Factor 3 is the 
hospital's estimated number of Medicaid days and Medicare SSI days 
relative to the estimate of all DSH hospitals' Medicaid days and 
Medicare SSI days. Table 18 associated with this final rule contains 
the FY 2016 Medicare DSH uncompensated care payment Factor 3 for all 
hospitals and identifies whether or not a hospital is projected to 
receive DSH and, therefore, eligible to receive the additional payment 
for uncompensated care for FY 2016.
    Readers who experience any problems accessing any of the tables 
that are posted on the CMS Web sites identified below should contact 
Michael Treitel at (410) 786-4552.
    The following IPPS tables for this FY 2016 final rule are available 
only through the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. 
Click on the link on the left side of the screen titled, ``FY 2016 IPPS 
Final Rule Home Page'' or ``Acute Inpatient--Files for Download''.

Table 2--Case-Mix Index and Wage Index Table by CCN--FY 2016
Table 3--Wage Index Table by CBSA--FY 2016
Table 5--List of Medicare Severity Diagnosis-Related Groups (MS-
DRGs), Relative Weighting Factors, and Geometric and Arithmetic Mean 
Length of Stay--FY 2016.
Table 6B--New Procedure Codes--FY 2016
Table 6I-- Complete Major CC List--FY 2016
Table 6J--Complete CC List--FY 2016
Table 6K--Complete List of CC Exclusions--FY 2016
Table 6L--Principal Diagnosis Is Its Own MCC List--FY 2016
Table 6M--Principal Diagnosis Is Its Own CC List--FY 2016
Table 6M1--Additions to the Principal Diagnosis Is Its Own CC List--
FY 2016
Table 6P--ICD-10-PCS Code Translations for MS-DRG Changes--FY 2016
Table 7A--Medicare Prospective Payment System Selected Percentile 
Lengths of Stay: FY 2014 MedPAR Update--March 2015 GROUPER V32.0 MS-
DRGs
Table 7B--Medicare Prospective Payment System Selected Percentile 
Lengths of Stay: FY 2014 MedPAR Update--March 2015 GROUPER V33.0 MS-
DRGs
Table 8A--FY 2016 Statewide Average Operating Cost-to-Charge Ratios 
(CCRs) for Acute Care Hospitals (Urban and Rural)
Table 8B--FY 2016 Statewide Average Capital Cost-to-Charge Ratios 
(CCRs) for Acute Care Hospitals
Table 10--New Technology Add-On Payment Thresholds for Applications 
for FY 2017
Table 14--List of Hospitals with Fewer Than 1,600 Medicare 
Discharges Based on the March 2015 Update of the FY 2014 MedPAR File 
and Potentially Eligible Hospitals for the FY 2016 Low-Volume 
Hospital Payment Adjustment (Eligibility for the low-volume hospital 
payment adjustment is also dependent upon meeting the mileage 
criteria specified at 42 CFR 412.101(b)(2)(ii))
Table 15--FY 2016 Readmissions Adjustment Factors
Table 16A--Updated Proxy Hospital Value-Based Purchasing (VBP) 
Program Adjustment Factors for FY 2016
Table 18--FY 2016 Medicare DSH Uncompensated Care Payment Factor 3

    The following LTCH PPS tables for this FY 2016 final rule are 
available only through the Internet on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the list item for 
Regulation Number CMS-1632-F:

Table 8C--FY 2016 Statewide Average Total Cost-to-Charge Ratios 
(CCRs) for LTCHs (Urban and Rural)
Table 11--MS-LTC-DRGs, Relative Weights, Geometric Average Length of 
Stay, Short-Stay Outlier (SSO) Threshold, and ``IPPS Comparable 
Threshold'' for LTCH PPS Discharges Occurring from October 1, 2015 
through September 30, 2016
Table 12A--LTCH PPS Wage Index for Urban Areas for Discharges 
Occurring From October 1, 2015 through September 30, 2016
Table 12B--LTCH PPS Wage Index for Rural Areas for Discharges 
Occurring from October 1, 2015 through September 30, 2016
Table 13A--Composition of Low-Volume Quintiles for MS-LTC-DRGs--FY 
2016
Table 13B--No-Volume MS-LTC-DRG Crosswalk for FY 2016


[[Page 49809]]



    Table 1A--National Adjusted Operating Standardized Amounts, Labor/Nonlabor (69.6 Percent Labor Share/30.4
                        Percent Nonlabor Share if Wage Index Is Greater Than 1)--FY 2016
----------------------------------------------------------------------------------------------------------------
 Hospital submitted quality     Hospital did NOT submit   Hospital submitted quality    Hospital did NOT submit
data and is a meaningful EHR     quality data and is a         data and is NOT a       quality data and is NOT a
User  (update = 1.7 percent)      meaningful EHR user         meaningful EHR user         meaningful EHR user
-----------------------------   (update = 1.1 percent)      (update = 0.5 percent)      (update = -0.1 percent)
                             -----------------------------------------------------------------------------------
    Labor         Nonlabor        Labor       Nonlabor        Labor       Nonlabor        Labor       Nonlabor
----------------------------------------------------------------------------------------------------------------
   $3,804.40      $1,466.69     $3,781.96     $1,651.89     $3,759.51     $1,642.08     $3,737.07     $1,632.28
----------------------------------------------------------------------------------------------------------------


 Table 1B--National Adjusted Operating Standardized Amounts, Labor/Nonlabor (62 Percent Labor Share/38 Percent Nonlabor Share if Wage Index Is Less Than
                                                                 or Equal To 1)--FY 2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
    Hospital submitted quality data and is a  meaningful EHR User       Hospital did NOT submit   Hospital submitted quality    Hospital did NOT submit
                       (update = 1.7 percent)                            quality data and is a         data and is NOT a       quality data and is NOT a
---------------------------------------------------------------------     meaningful EHR user         meaningful EHR user         meaningful EHR user
                                                                        (update = 1.1 percent)      (update = 0.5 percent)      (update = -0.1 percent)
                         Labor                            Nonlabor   -----------------------------------------------------------------------------------
                                                                          Labor       Nonlabor        Labor       Nonlabor        Labor       Nonlabor
--------------------------------------------------------------------------------------------------------------------------------------------------------
$3,388.98.............................................    $2,077.11     $3,368.99     $2,064.86     $3,348.99     $2,052.60     $3,329.00     $2,040.35
--------------------------------------------------------------------------------------------------------------------------------------------------------


  Table 1C--Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor (National: 62 Percent Labor
 Share/38 Percent Nonlabor Share Because Wage Index is Less Than or Equal to 1; Puerto Rico: 63.2 Percent Labor
 Share/36.8 Percent Nonlabor Share if Wage Index is Greater Than 1 or 62 Percent Labor Share/38 Percent Nonlabor
                             Share if Wage Index is Less Than or Equal to 1--FY 2016
----------------------------------------------------------------------------------------------------------------
                                            Rates if wage index is greater     Rates if wage index is  less than
                                                        than 1                           or equal to 1
           Standardized amount           -----------------------------------------------------------------------
                                                Labor           Nonlabor            Labor           Nonlabor
----------------------------------------------------------------------------------------------------------------
National \1\............................               (*)               (*)         $3,388.98         $2,077.11
Puerto Rico.............................         $1,648.66           $959.98          1,617.36            991.28
----------------------------------------------------------------------------------------------------------------
\1\ For FY 2016, there are no CBSAs in Puerto Rico with a national wage index greater than 1.
* Not Applicable.


        Table 1D--Capital Standard Federal Payment Rates--FY 2016
------------------------------------------------------------------------
                                                              Rate
------------------------------------------------------------------------
National.............................................            $438.65
Puerto Rico..........................................             212.56
------------------------------------------------------------------------


            Table 1E--LTCH PPS Standard Federal Rate--FY 2016
------------------------------------------------------------------------
                                   Full update  (1.7   Reduced update *
                                       percent)         (-0.3 percent)
------------------------------------------------------------------------
Standard Federal Rate...........         $41,762.85          $40,941.55
------------------------------------------------------------------------
* For LTCHs that fail to submit quality reporting data for FY 2016 in
  accordance with the LTCH Quality Reporting Program (LTCH QRP), the
  annual update is reduced by 2.0 percentage points as required by
  section 1886(m)(5) of the Act.

Appendix A: Economic Analyses

I. Regulatory Impact Analysis

A. Introduction

    We have examined the impacts 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 (February 2, 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). 
Executive Order 13563 emphasizes the importance of quantifying both 
costs and benefits, of reducing costs, of harmonizing rules, and of 
promoting flexibility. A regulatory impact analysis (RIA) must be 
prepared for major rules with economically significant effects ($100 
million or more in any 1 year).
    We have determined that this final rule is a major rule as 
defined in 5 U.S.C. 804(2). We estimate that the final changes for 
FY 2016 acute care hospital operating and capital payments will 
redistribute amounts in excess of $100 million to acute care 
hospitals. The applicable percentage increase to the IPPS rates 
required by the statute, in conjunction with other payment changes 
in this final rule, will result in an estimated $378 million 
increase in FY 2016 operating payments (or 0.4 percent change) and 
an estimated $187 million increase in FY 2016 capital payments (or 
2.3 percent change). These changes are

[[Page 49810]]

relative to payments made in FY 2015. The impact analysis of the 
capital payments can be found in section I.I. of this Appendix. In 
addition, as described in section I.J. of this Appendix, LTCHs are 
expected to experience a decrease in payments by $250 million in FY 
2016 relative to FY 2015.
    Our operating impact estimate includes the -0.8 percent 
documentation and coding adjustment applied to the IPPS standardized 
amount, which represents part of the recoupment required under 
section 631 of the ATRA. In addition, our operating payment impact 
estimate includes the 1.7 percent hospital update to the 
standardized amount (which includes the estimated 2.4 percent market 
basket update less 0.5 percentage point for the multifactor 
productivity adjustment and less 0.2 percentage point required under 
the Affordable Care Act). The estimates of IPPS operating payments 
to acute care hospitals do not reflect any changes in hospital 
admissions or real case-mix intensity, which will also affect 
overall payment changes.
    The analysis in this Appendix, in conjunction with the remainder 
of this document, demonstrates that this final rule is consistent 
with the regulatory philosophy and principles identified in 
Executive Orders 12866 and 13563, the RFA, and section 1102(b) of 
the Act. This final rule will affect payments to a substantial 
number of small rural hospitals, as well as other classes of 
hospitals, and the effects on some hospitals may be significant. 
Finally, in accordance with the provisions of Executive Order 12866, 
the Executive Office of Management and Budget has reviewed this 
final rule.

B. Statement of Need

    This final rule is necessary in order to make payment and policy 
changes under the Medicare IPPS for Medicare acute care hospital 
inpatient services for operating and capital-related costs as well 
as for certain hospitals and hospital units excluded from the IPPS. 
This final rule also is necessary to make payment and policy changes 
for Medicare hospitals under the LTCH PPS payment system.

C. Objectives of the IPPS

    The primary objective of the IPPS is to create incentives for 
hospitals to operate efficiently and minimize unnecessary costs 
while at the same time ensuring that payments are sufficient to 
adequately compensate hospitals for their legitimate costs in 
delivering necessary care to Medicare beneficiaries. In addition, we 
share national goals of preserving the Medicare Hospital Insurance 
Trust Fund.
    We believe that the changes in this final rule will further each 
of these goals while maintaining the financial viability of the 
hospital industry and ensuring access to high quality health care 
for Medicare beneficiaries. We expect that these changes will ensure 
that the outcomes of the prospective payment systems are reasonable 
and equitable while avoiding or minimizing unintended adverse 
consequences.

D. Limitations of Our Analysis

    The following quantitative analysis presents the projected 
effects of our policy changes, as well as statutory changes 
effective for FY 2016, on various hospital groups. We estimate the 
effects of individual proposed policy changes by estimating payments 
per case while holding all other payment policies constant. We use 
the best data available, but, generally, we do not attempt to make 
adjustments for future changes in such variables as admissions, 
lengths of stay, or case-mix.

E. Hospitals Included in and Excluded From the IPPS

    The prospective payment systems for hospital inpatient operating 
and capital-related costs of acute care hospitals encompass most 
general short-term, acute care hospitals that participate in the 
Medicare program. There were 32 Indian Health Service hospitals in 
our database, which we excluded from the analysis due to the special 
characteristics of the prospective payment methodology for these 
hospitals. Among other short-term, acute care hospitals, hospitals 
in Maryland are paid in accordance with the Maryland All-Payer 
Model, and hospitals located outside the 50 States, the District of 
Columbia, and Puerto Rico (that is, 5 short-term acute care 
hospitals located in the U.S. Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa) receive payment for inpatient 
hospital services they furnish on the basis of reasonable costs, 
subject to a rate-of-increase ceiling.
    As of July 2015, there were 3,369 IPPS acute care hospitals 
included in our analysis. This represents approximately 56 percent 
of all Medicare-participating hospitals. The majority of this impact 
analysis focuses on this set of hospitals. There also are 
approximately 1,334 CAHs. These small, limited service hospitals are 
paid on the basis of reasonable costs rather than under the IPPS. 
IPPS-excluded hospitals and units, which are paid under separate 
payment systems, include IPFs, IRFs, LTCHs, RNHCIs, children's 
hospitals, 11 cancer hospitals, and 5 short-term acute care 
hospitals located in the Virgin Islands, Guam, the Northern Mariana 
Islands, and American Samoa. Changes in the prospective payment 
systems for IPFs and IRFs are made through separate rulemaking. 
Payment impacts for these IPPS-excluded hospitals and units are not 
included in this final rule. The impact of the update and policy 
changes to the LTCH PPS for FY 2016 is discussed in section I.J. of 
this Appendix.

F. Effects on Hospitals and Hospital Units Excluded From the IPPS

    As of July 2015, there were 98 children's hospitals, 11 cancer 
hospitals, 5 short-term acute care hospitals located in the Virgin 
Islands, Guam, the Northern Mariana Islands and American Samoa, and 
18 RNHCIs being paid on a reasonable cost basis subject to the rate-
of-increase ceiling under Sec.  413.40. (In accordance with Sec.  
403.752(a) of the regulation, RNHCIs are paid under Sec.  413.40.) 
Among the remaining providers, 251 rehabilitation hospitals and 884 
rehabilitation units, and approximately 429 LTCHs, are paid the 
Federal prospective per discharge rate under the IRF PPS and the 
LTCH PPS, respectively, and 495 psychiatric hospitals and 1,122 
psychiatric units are paid the Federal per diem amount under the IPF 
PPS. As stated above, IRFs and IPFs are not affected by the rate 
updates discussed in this rule. The impacts of the changes on LTCHs 
are discussed in section I.J. of this Appendix.
    For children's hospitals, the 11 cancer hospitals, the 5 short-
term acute care hospitals located in the Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa, and RNHCIs, the update 
of the rate-of-increase limit (or target amount) is the estimated FY 
2016 percentage increase in the IPPS operating market basket, 
consistent with section 1886(b)(3)(B)(ii) of the Act, and Sec. Sec.  
403.752(a) and 413.40 of the regulations. As discussed in section 
IV. of the preamble of the FY 2014 IPPS/LTCH PPS final rule, we 
rebased the IPPS operating market basket to a FY 2010 base year. 
Therefore, we are using the percentage increase in the FY 2010-based 
IPPS operating market basket to update the target amounts for FY 
2016 and subsequent fiscal years for children's hospitals, the 11 
cancer hospitals, the 5 short-term acute care hospitals located in 
the Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa, and RNHCIs that are paid based on reasonable costs subject to 
the rate-of-increase limits. Consistent with current law, based on 
IHS Global Insight, Inc.'s second quarter 2015 forecast of the FY 
2010-based market basket increase, we are estimating that the FY 
2016 update based on the IPPS operating market basket is 2.4 percent 
(that is, the current estimate of the market basket rate-of-
increase). However, the Affordable Care Act requires an adjustment 
for multifactor productivity (currently estimated to be 0.5 
percentage point for FY 2016) and a 0.2 percentage point reduction 
to the market basket update resulting in a 1.7 percent applicable 
percentage increase for IPPS hospitals that submit quality data and 
are meaningful EHR users, as discussed in section IV.A. of the 
preamble of this final rule. Children's hospitals, the 11 cancer 
hospitals, the 5 short-term acute care hospitals located in the 
Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa, and RNCHIs that continue to be paid based on reasonable costs 
subject to rate-of-increase limits under Sec.  413.40 of the 
regulations are not subject to the reductions in the applicable 
percentage increase required under the Affordable Care Act. 
Therefore, for those hospitals paid under Sec.  413.40 of the 
regulations, the update is the percentage increase in the FY 2016 
IPPS operating market basket, estimated at 2.4 percent, without the 
reductions described above under the Affordable Care Act.
    The impact of the update in the rate-of-increase limit on those 
excluded hospitals depends on the cumulative cost increases 
experienced by each excluded hospital since its applicable base 
period. For excluded hospitals that have maintained their cost 
increases at a level below the rate-of-increase limits since their 
base period, the major effect is on the level of incentive payments 
these excluded hospitals receive. Conversely, for excluded hospitals 
with cost increases above the cumulative update in their rate-of-
increase limits, the major effect is the amount of excess costs that 
will not be paid.

[[Page 49811]]

    We note that, under Sec.  413.40(d)(3), an excluded hospital 
that continues to be paid under the TEFRA system and whose costs 
exceed 110 percent of its rate-of-increase limit receives its rate-
of-increase limit plus the lesser of: (1) 50 percent of its 
reasonable costs in excess of 110 percent of the limit, or (2) 10 
percent of its limit. In addition, under the various provisions set 
forth in Sec.  413.40, hospitals can obtain payment adjustments for 
justifiable increases in operating costs that exceed the limit.

G. Quantitative Effects of the Policy Changes Under the IPPS for 
Operating Costs

1. Basis and Methodology of Estimates

    In this final rule, we are announcing final policy changes and 
final payment rate updates for the IPPS for FY 2016 for operating 
costs of acute care hospitals. The FY 2016 updates to the capital 
payments to acute care hospitals are discussed in section I.I. of 
this Appendix.
    Based on the overall percentage change in payments per case 
estimated using our payment simulation model, we estimate that total 
FY 2016 operating payments will increase by 0.4 percent compared to 
FY 2015. In addition to the applicable percentage increase, this 
amount reflects the FY 2016 recoupment adjustment for documentation 
and coding described in section II.D. of the preamble of this final 
rule of -0.8 percent to the IPPS national standardized amounts. The 
impacts do not reflect changes in the number of hospital admissions 
or real case-mix intensity, which will also affect overall payment 
changes.
    We have prepared separate impact analyses of the changes to each 
system. This section deals with the changes to the operating 
inpatient prospective payment system for acute care hospitals. Our 
payment simulation model relies on the most recent available data to 
enable us to estimate the impacts on payments per case of certain 
changes in this final rule. However, there are other changes for 
which we do not have data available that will allow us to estimate 
the payment impacts using this model. For those changes, we have 
attempted to predict the payment impacts based upon our experience 
and other more limited data.
    The data used in developing the quantitative analyses of changes 
in payments per case presented below are taken from the FY 2014 
MedPAR file and the most current Provider-Specific File (PSF) that 
is used for payment purposes. Although the analyses of the changes 
to the operating PPS do not incorporate cost data, data from the 
most recently available hospital cost reports were used to 
categorize hospitals. Our analysis has several qualifications. 
First, in this analysis, we do not make adjustments for future 
changes in such variables as admissions, lengths of stay, or 
underlying growth in real case-mix. Second, due to the 
interdependent nature of the IPPS payment components, it is very 
difficult to precisely quantify the impact associated with each 
change. Third, we use various data sources to categorize hospitals 
in the tables. In some cases, particularly the number of beds, there 
is a fair degree of variation in the data from the different 
sources. We have attempted to construct these variables with the 
best available source overall. However, for individual hospitals, 
some miscategorizations are possible.
    Using cases from the FY 2014 MedPAR file, we simulated payments 
under the operating IPPS given various combinations of payment 
parameters. As described above, Indian Health Service hospitals and 
hospitals in Maryland were excluded from the simulations. The impact 
of payments under the capital IPPS, or the impact of payments for 
costs other than inpatient operating costs, are not analyzed in this 
section. Estimated payment impacts of the capital IPPS for FY 2016 
are discussed in section I.I. of this Appendix.
    We discuss the following changes below:
     The effects of the application of the documentation and 
coding adjustment and the applicable percentage increase (including 
the market basket update, the multifactor productivity adjustment, 
and the applicable percentage reduction in accordance with the 
Affordable Care Act) to the standardized amount and hospital-
specific rates.
     The effects of the changes to the relative weights and 
MS-DRG GROUPER.
     The effects of the changes in hospitals' wage index 
values reflecting updated wage data from hospitals' cost reporting 
periods beginning during FY 2012, compared to the FY 2011 wage data, 
to calculate the FY 2016 wage index.
     The combined effects of the recalibration of the MS-DRG 
relative weights as required by section 1886(d)(4)(C) of the Act and 
the wage index (including the updated wage data and the continued 
implementation of the new OMB labor market area delineations), 
including the wage and recalibration budget neutrality factors.
     The effects of the geographic reclassifications by the 
MGCRB (as of publication of this final rule) that will be effective 
for FY 2016.
     The effects of the rural floor and imputed floor with 
the application of the national budget neutrality factor to the wage 
index.
     The effects of the second year of the 3-year transition 
for urban hospitals that were located in an urban county that become 
rural under the new OMB delineations or hospitals deemed urban where 
the urban area became rural under the new OMB delineations.
     The effects of the frontier State wage index adjustment 
under the statutory provision that requires that hospitals located 
in States that qualify as frontier States to not have a wage index 
less than 1.0. This provision is not budget neutral.
     The effects of the implementation of section 
1886(d)(13) of the Act, as added by section 505 of Public Law 108-
173, which provides for an increase in a hospital's wage index if a 
threshold percentage of residents of the county where the hospital 
is located commute to work at hospitals in counties with higher wage 
indexes. This provision is not budget neutral.
     The total estimated change in payments based on the FY 
2016 policies relative to payments based on FY 2015 policies that 
include the applicable percentage increase of 1.7 percent (or 2.4 
percent market basket update with a reduction of 0.5 percentage 
point for the multifactor productivity adjustment, and a 0.2 
percentage point reduction, as required under the Affordable Care 
Act).
    To illustrate the impact of the FY 2016 changes, our analysis 
begins with a FY 2015 baseline simulation model using: The FY 2015 
applicable percentage increase of 2.2 percent and the documentation 
and coding recoupment adjustment of -0.8 percent to the Federal 
standardized amount; the FY 2015 MS-DRG GROUPER (Version 32); the FY 
2015 CBSA designations for hospitals based on the new OMB 
definitions; the FY 2015 wage index; and no MGCRB reclassifications. 
Outlier payments are set at 5.1 percent of total operating MS-DRG 
and outlier payments for modeling purposes.
    Section 1886(b)(3)(B)(viii) of the Act, as added by section 
5001(a) of Public Law 109-171, as amended by section 4102(b)(1)(A) 
of the ARRA (Pub. L. 111-5) and by section 3401(a)(2) of the 
Affordable Care Act (Pub. L. 111-148), provides that, for FY 2007 
and each subsequent year through FY 2014, the update factor will 
include a reduction of 2.0 percentage points for any subsection (d) 
hospital that does not submit data on measures in a form and manner 
and at a time specified by the Secretary. Beginning in FY 2015, the 
reduction is one-quarter of such applicable percentage increase 
determined without regard to section 1886(b)(3)(B)(ix), (xi), or 
(xii) of the Act, or one-quarter of the market basket update. 
Therefore, for FY 2016, we are establishing that hospitals that do 
not submit quality information under rules established by the 
Secretary and that are meaningful EHR users under section 
1886(b)(3)(B)(ix) of the Act will receive an applicable percentage 
increase of 1.1 percent. At the time that this impact was prepared, 
26 hospitals are estimated to not receive the full market basket 
rate-of-increase for FY 2015 because they failed the quality data 
submission process or did not choose to participate. For purposes of 
the simulations shown below, we modeled the payment changes for FY 
2016 using a reduced update for these 26 hospitals. However, we do 
not have enough information at this time to determine which 
hospitals will not receive the full update factor for FY 2016.
    For FY 2016, in accordance with section 1886(b)(3)(B)(ix) of the 
Act, a hospital that has been identified as not an meaningful EHR 
user will be subject to a reduction of one-half of such applicable 
percentage increase determined without regard to section 
1886(b)(3)(B)(ix), (xi), or (xii) of the Act. Therefore, for FY 
2016, we are establishing that hospitals that are identified as not 
meaningful EHR users and do submit quality information under section 
1886(b)(3)(B)(viii) of the Act will receive an applicable percentage 
increase of 0.5 percent. At the time that this impact analysis was 
prepared, 153 hospitals are estimated to not receive the full market 
basket rate-of-increase for FY 2015 because they are identified as 
not meaningful EHR users that do submit quality information under 
section 1886(b)(3)(B)(viii) of the Act. For purposes of the 
simulations shown below, we modeled the payment changes for FY 2016 
using a reduced update for these 153 hospitals. We did not include 
these hospitals in the model for estimation

[[Page 49812]]

purposes for FY 2015 because that was the first year hospitals 
experienced a reduction to their applicable percentage increase due 
to whether they are meaningful EHR users and data were not available 
at that time. However, we believe it is appropriate to include these 
153 hospitals for estimation purposes in FY 2016 because FY 2016 
will be the second year in which hospitals will experience this 
reduction and data on the prior year's performance are now 
available. For purposes of the simulations shown below, we modeled 
the payment changes for FY 2016 using a reduced update for these 153 
hospitals. However, we do not have enough information at this time 
to determine which hospitals will not receive the full update 
increase for FY 2016.
    Hospitals that are identified as not meaningful EHR users under 
section 1886(b)(3)(B)(ix) of the Act and also do not submit quality 
data under section 1886(b)(3)(B)(viii) of the Act will receive an 
applicable percentage increase of -0.1 percent, which reflects a 
one-quarter reduction of the market basket update for failure to 
submit quality data and a one-half reduction of the market basket 
update for being identified as not a meaningful EHR user. At the 
time that this impact was prepared, 24 hospitals are estimated to 
not receive the full market basket rate-of-increase for FY 2016 
because they are identified as not meaningful EHR users that do not 
submit quality data under section 1886(b)(3)(B)(viii) of the Act. We 
did not include these hospitals in the model for estimation purposes 
for FY 2015 because that was the first year hospitals experienced a 
reduction to their applicable percentage increase due to whether 
they are meaningful EHR users and data were not available at that 
time. However, we believe it is appropriate to include these 24 
hospitals for estimation purposes in FY 2016 because FY 2016 will be 
the second year in which hospitals will experience this reduction 
and data on the prior year's performance are now available. For 
purposes of the simulations shown below, we modeled the payment 
changes for FY 2016 using a reduced update for these 24 hospitals. 
However, we do not have enough information at this time to determine 
which hospitals will not receive the full update increase for FY 
2016.
    Each policy change, statutory or otherwise, is then added 
incrementally to this baseline, finally arriving at an FY 2016 model 
incorporating all of the changes. This simulation allows us to 
isolate the effects of each change.
    Our final comparison illustrates the percent change in payments 
per case from FY 2015 to FY 2016. Three factors not discussed 
separately have significant impacts here. The first factor is the 
update to the standardized amount. In accordance with section 
1886(b)(3)(B)(i) of the Act, we are updating the standardized 
amounts for FY 2016 using an applicable percentage increase of 1.7 
percent. This includes our forecasted IPPS operating hospital market 
basket increase of 2.4 percent with a reduction of 0.5 percentage 
point for the multifactor productivity adjustment and a 0.2 
percentage point reduction as required under the Affordable Care 
Act. Hospitals that fail to comply with the quality data submission 
requirements and are meaningful EHR users will receive an update of 
1.1 percent. This update includes a reduction of one-quarter of the 
market basket update for failure to submit these data. Hospitals 
that do comply with the quality data submission requirements but are 
not meaningful EHR users will receive an update of 0.5 percent, 
which includes a reduction of one-half of the market basket update. 
Furthermore, hospitals that do not comply with the quality data 
submission requirements and also are not meaningful EHR users will 
receive an update of -0.1 percent. Under section 1886(b)(3)(B)(iv) 
of the Act, the update to the hospital-specific amounts for SCHs and 
MDHs also are equal to the applicable percentage increase, or 1.7 
percent if the hospital submits quality data and is a meaningful EHR 
user. In addition, we are updating the Puerto Rico-specific amount 
by an applicable percentage increase of 1.7 percent.
    A second significant factor that affects the changes in 
hospitals' payments per case from FY 2015 to FY 2016 is the change 
in hospitals' geographic reclassification status from one year to 
the next. That is, payments may be reduced for hospitals 
reclassified in FY 2015 that are no longer reclassified in FY 2016. 
Conversely, payments may increase for hospitals not reclassified in 
FY 2015 that are reclassified in FY 2016.
    A third significant factor is that we currently estimate that 
actual outlier payments during FY 2015 will be 4.6 percent of total 
MS-DRG payments. When the FY 2015 IPPS/LTCH PPS final rule was 
published, we projected FY 2015 outlier payments would be 5.1 
percent of total MS-DRG plus outlier payments; the average 
standardized amounts were offset correspondingly. The effects of the 
lower than expected outlier payments during FY 2015 (as discussed in 
the Addendum to this final rule) are reflected in the analyses below 
comparing our current estimates of FY 2015 payments per case to 
estimated FY 2016 payments per case (with outlier payments projected 
to equal 5.1 percent of total MS-DRG payments).

2. Analysis of Table I

    Table I displays the results of our analysis of the changes for 
FY 2016. The table categorizes hospitals by various geographic and 
special payment consideration groups to illustrate the varying 
impacts on different types of hospitals. The top row of the table 
shows the overall impact on the 3,369 acute care hospitals included 
in the analysis.
    The next four rows of Table I contain hospitals categorized 
according to their geographic location: all urban, which is further 
divided into large urban and other urban; and rural. There are 2,533 
hospitals located in urban areas included in our analysis. Among 
these, there are 1,393 hospitals located in large urban areas 
(populations over 1 million), and 1,140 hospitals in other urban 
areas (populations of 1 million or fewer). In addition, there are 
836 hospitals in rural areas. The next two groupings are by bed-size 
categories, shown separately for urban and rural hospitals. The 
final groupings by geographic location are by census divisions, also 
shown separately for urban and rural hospitals.
    The second part of Table I shows hospital groups based on 
hospitals' FY 2016 payment classifications, including any 
reclassifications under section 1886(d)(10) of the Act. For example, 
the rows labeled urban, large urban, other urban, and rural show 
that the numbers of hospitals paid based on these categorizations 
after consideration of geographic reclassifications (including 
reclassifications under sections 1886(d)(8)(B) and 1886(d)(8)(E) of 
the Act that have implications for capital payments) are 2,476; 
1,386; 1,090; and 893, respectively.
    The next three groupings examine the impacts of the changes on 
hospitals grouped by whether or not they have GME residency programs 
(teaching hospitals that receive an IME adjustment) or receive 
Medicare DSH payments, or some combination of these two adjustments. 
There are 2,326 nonteaching hospitals in our analysis, 794 teaching 
hospitals with fewer than 100 residents, and 249 teaching hospitals 
with 100 or more residents.
    In the DSH categories, hospitals are grouped according to their 
DSH payment status, and whether they are considered urban or rural 
for DSH purposes. The next category groups together hospitals 
considered urban or rural, in terms of whether they receive the IME 
adjustment, the DSH adjustment, both, or neither.
    The next three rows examine the impacts of the changes on rural 
hospitals by special payment groups (SCHs, RRCs, and MDHs). There 
were 189 RRCs, 327 SCHs, 150 MDHs, 126 hospitals that are both SCHs 
and RRCs, and 13 hospitals that are both MDHs and RRCs.
    The next series of groupings are based on the type of ownership 
and the hospital's Medicare utilization expressed as a percent of 
total patient days. These data were taken from the FY 2013 or FY 
2012 Medicare cost reports.
    The next two groupings concern the geographic reclassification 
status of hospitals. The first grouping displays all urban hospitals 
that were reclassified by the MGCRB for FY 2016. The second grouping 
shows the MGCRB rural reclassifications. The final category shows 
the impact of the policy changes on the 14 cardiac hospitals.

[[Page 49813]]



                                                         Table I--Impact Analysis of Changes to the IPPS for Operating Costs for FY 2016
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                     Rural and
                                                                                        FY 2016     FY 2016 wage   FY 2016 DRG,                       imputed
                                                                                      weights and    data under     rel. wts.,                       floor with
                                                                      Hospital rate   DRG changes     new CBSA      wage index                      application  Application of the
                                                          Number of     update and        with      designations   changes with    FY 2016 MGCRB    of national     frontier wage    All FY 2016
                                                          hospitals   documentation   application       with         wage and    reclassifications   rural and        index and        changes
                                                             \1\        and coding         of        application  recalibration                       imputed    out[dash]migration
                                                                        adjustment   recalibration     of wage        budget                           floor         adjustment
                                                                                         budget        budget       neutrality                         budget
                                                                                       neutrality    neutrality                                      neutrality
                                                         ...........       (1) \2\        (2) \3\        (3) \4\       (4) \5\          (5) \6\         (6) \7\          (7) \8\         (8) \9\
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
All Hospitals..........................................        3,369           0.9              0              0             0                0               0              0.1             0.4
By Geographic Location:
    Urban hospitals....................................        2,533           0.9              0              0           0.1             -0.1               0              0.1             0.4
    Large urban areas..................................        1,393           0.9            0.1            0.1           0.2             -0.3               0              0.1             0.4
    Other urban areas..................................        1,140           0.9              0           -0.1          -0.2              0.1             0.1              0.2             0.4
    Rural hospitals....................................          836           1.3           -0.2           -0.3          -0.5              1.4            -0.2              0.1             0.2
Bed Size (Urban):
    0-99 beds..........................................          668           0.9           -0.3           -0.2          -0.4             -0.6             0.1              0.3             0.2
    100-199 beds.......................................          778           0.9           -0.1            0.1           0.1                0             0.3              0.2             0.4
    200-299 beds.......................................          445           0.9              0              0             0              0.1               0              0.1             0.4
    300-499 beds.......................................          428           0.9              0              0             0             -0.2             0.1              0.2             0.4
    500 or more beds...................................          214           0.9            0.1            0.1           0.2             -0.2            -0.2              0.1             0.4
Bed Size (Rural):
    0-49 beds..........................................          329           1.3           -0.2           -0.3          -0.5              0.3            -0.2              0.3            -0.1
    50-99 beds.........................................          297           1.4           -0.3           -0.2          -0.5              0.7            -0.2              0.1             0.2
    100-149 beds.......................................          121           1.4           -0.2           -0.2          -0.5              1.7            -0.3              0.2             0.4
    150-199 beds.......................................           48           1.2           -0.2           -0.4          -0.5              1.9            -0.3              0.1             0.3
    200 or more beds...................................           41           1.1           -0.1           -0.5          -0.5              2.5            -0.2             -0.1             0.1
Urban by Region:
    New England........................................          120           0.9              0            0.7           0.7              1.3             1.6                0            -0.1
    Middle Atlantic....................................          318           0.9            0.1            0.2           0.3              0.8            -0.4              0.2               1
    South Atlantic.....................................          407           0.9              0            0.1           0.1             -0.5            -0.4              0.1             0.2
    East North Central.................................          396           0.9              0              0           0.1             -0.3            -0.5                0             0.5
    East South Central.................................          150           0.9              0           -0.4          -0.4             -0.7            -0.4                0            -0.4
    West North Central.................................          166           0.9              0           -0.6          -0.5             -0.8            -0.4              0.8             0.3
    West South Central.................................          384           0.9              0           -0.5          -0.4             -0.6            -0.5                0            -0.4
    Mountain...........................................          161             1           -0.1           -0.3          -0.3                0            -0.1              0.2             0.2
    Pacific............................................          380           0.9              0            0.4           0.3             -0.3             1.7              0.1               1
    Puerto Rico........................................           51             1            0.1           -0.9          -0.7               -1             0.1              0.1            -2.4
Rural by Region:
    New England........................................           22           1.2           -0.1           -0.6          -0.7              1.7            -0.4                0            -0.1
    Middle Atlantic....................................           55           1.4           -0.1            0.2             0              0.8            -0.2              0.2             0.2
    South Atlantic.....................................          128           1.2           -0.2           -0.1          -0.3              2.4            -0.2                0             0.6
    East North Central.................................          116           1.4           -0.2           -0.1          -0.4                1            -0.2              0.1             0.9
    East South Central.................................          164           0.9              0           -0.7          -0.7              2.5            -0.4              0.1              -1
    West North Central.................................          101           1.7           -0.4           -0.2          -0.5              0.2               0              0.3             0.8
    West South Central.................................          165           1.2           -0.1           -0.9          -0.9              1.5            -0.3              0.1            -0.8
    Mountain...........................................           61           1.4           -0.3           -0.1          -0.4              0.2            -0.1              0.2             0.7
    Pacific............................................           24           1.4           -0.4            0.1          -0.3              0.6            -0.2                0             1.5
By Payment Classification:
    Urban hospitals....................................        2,476           0.9              0              0           0.1             -0.1               0              0.1             0.4
    Large urban areas..................................        1,386           0.9            0.1            0.1           0.2             -0.3               0              0.1             0.4
    Other urban areas..................................        1,090           0.9              0           -0.1          -0.1              0.1             0.1              0.2             0.4
    Rural areas........................................          893           1.3           -0.2           -0.3          -0.4              1.1            -0.2              0.3             0.3
Teaching Status:

[[Page 49814]]

 
    Nonteaching........................................        2,326             1           -0.1           -0.1          -0.1              0.1             0.2              0.1             0.3
    Fewer than 100 residents...........................          794           0.9              0           -0.1          -0.1             -0.1               0              0.2             0.4
    100 or more residents..............................          249           0.9            0.2            0.1           0.3                0            -0.2              0.1             0.4
Urban DSH:
    Non-DSH............................................          653           0.9           -0.2            0.1          -0.1              0.1            -0.1              0.1             1.1
    100 or more beds...................................        1,593           0.9            0.1              0           0.1             -0.1               0              0.1             0.3
    Less than 100 beds.................................          328           0.9           -0.1              0          -0.1             -0.7               0              0.3             0.2
Rural DSH:
    SCH................................................          260           1.6           -0.3              0          -0.4                0               0                0             0.7
    RRC................................................          347           1.3           -0.2           -0.3          -0.4              1.5            -0.2              0.4             0.4
    100 or more beds...................................           31           0.7            0.1           -0.6          -0.5              2.4            -0.5              0.1            -0.9
    Less than 100 beds.................................          157           0.8              0           -0.7          -0.6              1.7            -0.5              0.6            -1.2
Urban teaching and DSH:
    Both teaching and DSH..............................          855           0.9            0.1              0           0.1             -0.2            -0.1              0.1             0.3
    Teaching and no DSH................................          122           0.9           -0.1              0          -0.1              0.8             0.1              0.1             1.3
    No teaching and DSH................................        1,066           0.9              0              0          -0.1             -0.1             0.4              0.1             0.2
    No teaching and no DSH.............................          433           0.9           -0.2            0.1          -0.1             -0.4            -0.2              0.1               1
Special Hospital Types:
    RRC................................................          189           0.9           -0.1           -0.6          -0.6              2.1            -0.3              0.6            -0.4
    SCH................................................          327           1.6           -0.3           -0.1          -0.3             -0.1            -0.1                0             0.8
    MDH................................................          150           1.3           -0.3           -0.2          -0.4              0.2            -0.2              0.2             0.6
    SCH and RRC........................................          126           1.6           -0.3           -0.1          -0.4              0.4               0                0             0.9
    MDH and RRC........................................           13           1.5           -0.3              0          -0.4              0.1            -0.2                0             0.6
Type of Ownership:
    Voluntary..........................................        1,934           0.9              0              0             0                0               0              0.1             0.5
    Proprietary........................................          879           0.9              0           -0.1          -0.1                0             0.1              0.1            -0.1
    Government.........................................          529           0.9            0.1           -0.1             0             -0.2             0.1              0.1               0
Medicare Utilization as a Percent of Inpatient Days:
    0-25...............................................          533           0.9            0.1           -0.1             0             -0.4             0.2                0            -0.6
    25-50..............................................        2,134           0.9              0              0             0                0               0              0.1             0.5
    50-65..............................................          571             1           -0.1            0.1             0              0.6               0              0.1             0.8
    Over 65............................................           97           1.1           -0.1           -0.2          -0.4             -0.4             0.3              0.1             0.4
FY 2016 Reclassifications by the Medicare Geographic
 Classification Review Board:
    All Reclassified Hospitals.........................          830             1              0           -0.1          -0.1              2.2             0.1                0             0.7
    Non-Reclassified Hospitals.........................        2,539           0.9              0              0           0.1             -0.9               0              0.2             0.2
    Urban Hospitals Reclassified.......................          551           0.9              0           -0.1             0              2.2             0.1                0             0.8
    Urban Nonreclassified Hospitals....................        1,925           0.9              0            0.1           0.1             -0.9               0              0.1             0.2
    Rural Hospitals Reclassified Full Year.............          279           1.2           -0.2           -0.3          -0.5              2.3            -0.2                0             0.4
    Rural Nonreclassified Hospitals Full Year..........          504           1.4           -0.3           -0.3          -0.5             -0.3            -0.2              0.3               0
    All Section 401 Reclassified Hospitals:............           64           1.4           -0.3              0          -0.2             -0.4               0              1.4             0.6
    Other Reclassified Hospitals (Section                         53             1           -0.1           -0.5          -0.6              3.4            -0.4                0            -0.3
     1886(d)(8)(B))....................................
Specialty Hospitals:

[[Page 49815]]

 
    Cardiac specialty Hospitals........................           14           0.9            0.2           -0.9          -0.6             -1.1               0              0.9             0.7
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Because data necessary to classify some hospitals by category were missing, the total number of hospitals in each category may not equal the national total. Discharge data are from FY
  2014, and hospital cost report data are from reporting periods beginning in FY 2013 and FY 2012.
\2\ This column displays the payment impact of the hospital rate update and the documentation and coding adjustment including the 1.7 percent adjustment to the national standardized amount and
  hospital-specific rate (the estimated 2.4 percent market basket update reduced by the 0.5 percentage point for the multifactor productivity adjustment and the 0.2 percentage point reduction
  under the Affordable Care Act) and the -0.8 percent documentation and coding adjustment to the national standardized amount.
\3\ This column displays the payment impact of the changes to the Version 33 GROUPER, the changes to the relative weights and the recalibration of the MS-DRG weights based on FY 2014 MedPAR
  data in accordance with section 1886(d)(4)(C)(iii) of the Act. This column displays the application of the recalibration budget neutrality factor of 0.998399 in accordance with section
  1886(d)(4)(C)(iii) of the Act.
\4\ This column displays the payment impact of the update to wage index data using FY 2012 cost report data and the OMB labor market area delineations based on 2010 Decennial Census data. This
  column displays the payment impact of the application of the wage budget neutrality factor, which is calculated separately from the recalibration budget neutrality factor, and is calculated
  in accordance with section 1886(d)(3)(E)(i) of the Act. The wage budget neutrality factor is 0.998749.
\5\ This column displays the combined payment impact of the changes in Columns 2 through 3 and the cumulative budget neutrality factor for MS-DRG and wage changes in accordance with section
  1886(d)(4)(C)(iii) of the Act and section 1886(d)(3)(E) of the Act. The cumulative wage and recalibration budget neutrality factor of 0.997150 is the product of the wage budget neutrality
  factor and the recalibration budget neutrality factor.
\6\ Shown here are the effects of geographic reclassifications by the Medicare Geographic Classification Review Board (MGCRB) along with the effects of the continued implementation of the new
  OMB labor market area delineations on these reclassifications. The effects demonstrate the FY 2016 payment impact of going from no reclassifications to the reclassifications scheduled to be
  in effect for FY 2016. Reclassification for prior years has no bearing on the payment impacts shown here. This column reflects the geographic budget neutrality factor of 0.987905.
\7\ This column displays the effects of the rural floor and imputed floor based on the continued implementation of the new OMB labor market area delineations. The Affordable Care Act requires
  the rural floor budget neutrality adjustment to be 100 percent national level adjustment. The rural floor budget neutrality factor (which includes the imputed floor) applied to the wage
  index is 0.990298. This column also shows the effect of the 3-year transition for hospitals that were located in urban counties that became rural under the new OMB delineations or hospitals
  deemed urban where the urban area became rural under the new OMB delineations, with a budget neutrality factor of 0.999996.
\8\ This column shows the combined impact of the policy required under section 10324 of the Affordable Care Act that hospitals located in frontier States have a wage index no less than 1.0 and
  of section 1886(d)(13) of the Act, as added by section 505 of Public Law 108-173, which provides for an increase in a hospital's wage index if a threshold percentage of residents of the
  county where the hospital is located commute to work at hospitals in counties with higher wage indexes. These are nonbudget neutral policies.
\9\ This column shows the changes in payments from FY 2015 to FY 2016. It reflects the impact of the FY 2016 hospital update and the adjustment for documentation and coding. It also reflects
  changes in hospitals' reclassification status in FY 2016 compared to FY 2015. It incorporates all of the changes displayed in Columns 1, 4, 5, 6, and 7, (the changes displayed in Columns 2
  and 3 are included in Column 4). The sum of these impacts may be different from the percentage changes shown here due to rounding and interactive effects.


[[Page 49816]]

a. Effects of the Hospital Update and Documentation and Coding 
Adjustment (Column 1)

    As discussed in section II.D. of the preamble of this final 
rule, this column includes the hospital update, including the 2.4 
percent market basket update, the reduction of 0.5 percentage point 
for the multifactor productivity adjustment, and the 0.2 percentage 
point reduction in accordance with the Affordable Care Act. In 
addition, this column includes the FY 2016 documentation and coding 
recoupment adjustment of -0.8 percent on the national standardized 
amount as part of the recoupment required by section 631 of the 
ATRA. As a result, we are making a 0.9 percent update to the 
national standardized amount. This column also includes the 1.7 
percent update to the hospital-specific rates which includes the 2.4 
percent market basket update, the reduction of 0.5 percentage point 
for the multifactor productivity adjustment, and the 0.2 percentage 
point reduction in accordance with the Affordable Care Act.
    Overall, hospitals will experience a 0.9 percent increase in 
payments primarily due to the combined effects of the hospital 
update and the documentation and coding adjustment on the national 
standardized amount and the hospital update to the hospital-specific 
rate. Hospitals that are paid under the hospital-specific rate, 
namely SCHs, will experience a 1.6 percent increase in payments; 
therefore, hospital categories with SCHs paid under the hospital-
specific rate will experience increases in payments of more than 0.9 
percent.

b. Effects of the Changes to the MS-DRG Reclassifications and Relative 
Cost-Based Weights with Recalibration Budget Neutrality (Column 2)

    Column 2 shows the effects of the changes to the MS-DRGs and 
relative weights with the application of the recalibration budget 
neutrality factor to the standardized amounts. Section 
1886(d)(4)(C)(i) of the Act requires us annually to make appropriate 
classification changes in order to reflect changes in treatment 
patterns, technology, and any other factors that may change the 
relative use of hospital resources. Consistent with section 
1886(d)(4)(C)(iii) of the Act, we are calculating a recalibration 
budget neutrality factor to account for the changes in MS-DRGs and 
relative weights to ensure that the overall payment impact is budget 
neutral.
    As discussed in section II.E. of the preamble of this final 
rule, the FY 2016 MS-DRG relative weights will be 100 percent cost-
based and 100 percent MS-DRGs. For FY 2016, the MS-DRGs are 
calculated using the FY 2014 MedPAR data grouped to the Version 33 
(FY 2016) MS-DRGs. The methodology to calculate the relative weights 
and the reclassification changes to the GROUPER are described in 
more detail in section II.H. of the preamble of this final rule.
    The ``All Hospitals'' line in Column 2 indicates that changes 
due to the MS-DRGs and relative weights will result in a 0.0 percent 
change in payments with the application of the recalibration budget 
neutrality factor of 0.998399 on to the standardized amount. 
Hospital categories that generally treat more surgical cases than 
medical cases will experience increases in their payments under the 
relative weights. Rural hospitals will experience a 0.2 percent 
decrease in payments because rural hospitals tend to treat fewer 
surgical cases than medical cases, while teaching hospitals with 
more than 100 residents will experience an increase in payments by 
0.2 percent as those hospitals treat more surgical cases than 
medical cases.

c. Effects of the Wage Index Changes (Column 3)

    Column 3 shows the impact of updated wage data using FY 2012 
cost report data, with the application of the wage budget neutrality 
factor. The wage index is calculated and assigned to hospitals on 
the basis of the labor market area in which the hospital is located. 
Under section 1886(d)(3)(E) of the Act, beginning with FY 2005, we 
delineate hospital labor market areas based on the Core Based 
Statistical Areas (CBSAs) established by OMB. The current 
statistical standards used in FY 2016 are based on OMB standards 
published on February 28, 2013 (75 FR 37246 and 37252), and 2010 
Decennial Census data (OMB Bulletin No. 13-01). (We refer readers to 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951 through 49963) for 
a full discussion on our adoption of the OMB labor market area 
delineations based on the 2010 Decennial Census data, effective 
beginning with the FY 2015 IPPS wage index).
    Section 1886(d)(3)(E) of the Act requires that, beginning 
October 1, 1993, we annually update the wage data used to calculate 
the wage index. In accordance with this requirement, the wage index 
for acute care hospitals for FY 2016 is based on data submitted for 
hospital cost reporting periods beginning on or after October 1, 
2011 and before October 1, 2012. The estimated impact of the updated 
wage data using the FY 2012 cost report data and the OMB labor 
market area delineations on hospital payments is isolated in Column 
3 by holding the other payment parameters constant in this 
simulation. That is, Column 3 shows the percentage change in 
payments when going from a model using the FY 2015 wage index, based 
on FY 2011 wage data, the labor-related share of 69.6 percent, under 
the OMB delineations and having a 100-percent occupational mix 
adjustment applied, to a model using the FY 2016 pre-
reclassification wage index based on FY 2012 wage data with the 
labor-related share of 69.6 percent, under the OMB delineations, 
also having a 100-percent occupational mix adjustment applied, while 
holding other payment parameters such as use of the Version 33 MS-
DRG GROUPER constant. The FY 2016 occupational mix adjustment is 
based on the CY 2013 occupational mix survey.
    In addition, the column shows the impact of the application of 
the wage budget neutrality to the national standardized amount. In 
FY 2010, we began calculating separate wage budget neutrality and 
recalibration budget neutrality factors, in accordance with section 
1886(d)(3)(E) of the Act, which specifies that budget neutrality to 
account for wage index changes or updates made under that 
subparagraph must be made without regard to the 62 percent labor-
related share guaranteed under section 1886(d)(3)(E)(ii) of the Act. 
Therefore, for FY 2016, we are calculating the wage budget 
neutrality factor to ensure that payments under updated wage data 
and the labor-related share of 69.6 percent are budget neutral 
without regard to the lower labor-related share of 62 percent 
applied to hospitals with a wage index less than or equal to 1.0. In 
other words, the wage budget neutrality is calculated under the 
assumption that all hospitals receive the higher labor-related share 
of the standardized amount. The FY 2016 wage budget neutrality 
factor is 0.998749, and the overall payment change is 0.0 percent.
    Column 3 shows the impacts of updating the wage data using FY 
2012 cost reports. Overall, the new wage data and the labor-related 
share, combined with the wage budget neutrality adjustment, will 
lead to no change for all hospitals as shown in Column 3.
    In looking at the wage data itself, the national average hourly 
wage increased 1.03 percent compared to FY 2015. Therefore, the only 
manner in which to maintain or exceed the previous year's wage index 
was to match or exceed the national 1.03 percent increase in average 
hourly wage. Of the 3,328 hospitals with wage data for both FYs 2015 
and 2016, 1.594 or 47.9 percent will experience an average hourly 
wage increase of 1.03 percent or more.
    The following chart compares the shifts in wage index values for 
hospitals due to changes in the average hourly wage data for FY 2016 
relative to FY 2015. Among urban hospitals, 5 will experience a 
decrease of 10 percent or more, and 13 urban hospitals will 
experience an increase of 10 percent or more. One hundred and forty-
four urban hospitals will experience an increase or decrease of at 
least 5 percent or more but less than 10 percent. Among rural 
hospitals, 9 will experience a decrease of at least 5 percent but 
less than 10 percent, but no rural hospitals will experience an 
increase of greater than or equal to 5 percent but less than 10 
percent. No rural hospital will experience increases or decreases of 
10 percent or more. However, 809 rural hospitals will experience 
increases or decreases of less than 5 percent, while 2,341 urban 
hospitals will experience increases or decreases of less than 5 
percent. Seven urban hospitals will not experience a change in their 
wage index, and all rural hospitals will experience a change in 
their wage indexes. These figures reflect changes in the ``pre-
reclassified, occupational mix-adjusted wage index,'' that is, the 
wage index before the application of geographic reclassification, 
the rural and imputed floors, the out-migration adjustment, and 
other wage index exceptions and adjustments. (We refer readers to 
sections III.G.2. through III.I. of the preamble of this final rule 
for a complete discussion of the exceptions and adjustments to the 
wage index.) We note that the ``post-reclassified wage index'' or 
``payment wage index,'' which is the wage index that includes all 
such exceptions and adjustments (as reflected in Tables 2 and 3 
associated with this final rule, which are available via the 
Internet on the CMS Web site) is used to

[[Page 49817]]

adjust the labor-related share of a hospital's standardized amount, 
either 69.6 percent or 62 percent, depending upon whether a 
hospital's wage index is greater than 1.0 or less than or equal to 
1.0. Therefore, the pre-reclassified wage index figures in the chart 
below may illustrate a somewhat larger or smaller change than will 
occur in a hospital's payment wage index and total payment.
    The following chart shows the projected impact of changes in the 
area wage index values for urban and rural hospitals.

------------------------------------------------------------------------
                                             Number of hospitals
 FY 2016 percentage change in area -------------------------------------
         wage index values                Urban              Rural
------------------------------------------------------------------------
Increase 10 percent or more.......                 13                  0
Increase greater than or equal to                  64                  0
 5 percent and less than 10
 percent..........................
Increase or decrease less than 5                2,341                809
 percent..........................
Decrease greater than or equal to                  80                  9
 5 percent and less than 10
 percent..........................
Decrease 10 percent or more.......                  5                  0
Unchanged.........................                  7                  0
------------------------------------------------------------------------

d. Combined Effects of the MS-DRG and Wage Index Changes (Column 4)

    Section 1886(d)(4)(C)(iii) of the Act requires that changes to 
MS-DRG reclassifications and the relative weights cannot increase or 
decrease aggregate payments. In addition, section 1886(d)(3)(E) of 
the Act specifies that any updates or adjustments to the wage index 
are to be budget neutral. We computed a wage budget neutrality 
factor of 0.998749 and a recalibration budget neutrality factor of 
0.998399 (which is also applied to the Puerto Rico-specific 
standardized amount and the hospital-specific rates). The product of 
the two budget neutrality factors is the cumulative wage and 
recalibration budget neutrality factor. The cumulative wage and 
recalibration budget neutrality adjustment is 0.997150, or 
approximately 0.3 percent, which is applied to the national 
standardized amounts. Because the wage budget neutrality and the 
recalibration budget neutrality are calculated under different 
methodologies according to the statute, when the two budget 
neutralities are combined and applied to the standardized amount, 
the overall payment impact is not necessarily budget neutral. 
However, in this final rule, we are estimating that the changes in 
the MS-DRG relative weights and updated wage data with wage and 
budget neutrality applied will result in a 0.0 percent change in 
payments.

e. Effects of MGCRB Reclassifications (Column 5)

    Our impact analysis to this point has assumed acute care 
hospitals are paid on the basis of their actual geographic location 
(with the exception of ongoing policies that provide that certain 
hospitals receive payments on bases other than where they are 
geographically located). The changes in Column 5 reflect the per 
case payment impact of moving from this baseline to a simulation 
incorporating the MGCRB decisions for FY 2016.
    By spring of each year, the MGCRB makes reclassification 
determinations that will be effective for the next fiscal year, 
which begins on October 1. The MGCRB may approve a hospital's 
reclassification request for the purpose of using another area's 
wage index value. Hospitals may appeal denials of MGCRB decisions to 
the CMS Administrator. Further, hospitals have 45 days from 
publication of the IPPS proposed rule in the Federal Register to 
decide whether to withdraw or terminate an approved geographic 
reclassification for the following year.
    The overall effect of geographic reclassification is required by 
section 1886(d)(8)(D) of the Act to be budget neutral. Therefore, 
for purposes of this impact analysis, we are applying an adjustment 
of 0.987905 to ensure that the effects of the reclassifications 
under section 1886(d)(10) of the Act are budget neutral (section 
II.A. of the Addendum to this final rule). Geographic 
reclassification generally benefits hospitals in rural areas. We 
estimate that the geographic reclassification will increase payments 
to rural hospitals by an average of 1.4 percent. By region, all the 
rural hospital categories will experience increases in payments due 
to MGCRB reclassifications.
    New Table 2 listed in section VI. of the Addendum to this final 
rule and available via the Internet on the CMS Web site reflects the 
reclassifications for FY 2016.

f. Effects of the Rural and Imputed Floor, Including Application of 
National Budget Neutrality (Column 6)

    As discussed in section III.B. of the preamble of the FY 2009 
IPPS final rule, the FY 2010 IPPS/RY 2010 LTCH PPS final rule, the 
FYs 2011, 2012, 2013, 2014, and 2015 IPPS/LTCH PPS final rules, and 
this final rule, section 4410 of Public Law 105-33 established the 
rural floor by requiring that the wage index for a hospital in any 
urban area cannot be less than the wage index received by rural 
hospitals in the same State. We apply a uniform budget neutrality 
adjustment to the wage index. The imputed floor, which is also 
included in the calculation of the budget neutrality adjustment to 
the wage index, was extended in FY 2012 for 2 additional years and 
in FY 2014 and FY 2015 for 1 additional year. Prior to FY 2013, only 
urban hospitals in New Jersey received the imputed floor. As 
discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53369), we 
established an alternative temporary methodology for the imputed 
floor, which resulted in an imputed floor for Rhode Island for FY 
2013. For FY 2014 and FY 2015, we extended the imputed rural floor, 
as calculated under the original methodology and the alternative 
methodology. Due to the adoption of the new OMB labor market area 
delineations in FY 2015, the State of Delaware also became an all-
urban state and thus eligible for an imputed floor. For FY 2016, we 
are extending the imputed rural floor for 1 year, as calculated 
under the original methodology and the alternative methodology. As a 
result, New Jersey, Rhode Island, and Delaware are able to receive 
an imputed floor. In New Jersey, 21 out of 64 hospitals will receive 
the imputed floor, and 4 out of 11 hospitals in Rhode Island will 
receive the imputed floor for FY 2016. For FY 2016, no hospitals 
will benefit from the imputed floor in Delaware because the CBSA 
wage index for each CBSA in Delaware under the new OMB delineations 
is equal to or higher than the imputed rural floor.
    The Affordable Care Act requires that we apply one rural floor 
budget neutrality factor to the wage index nationally, and the 
imputed floor is part of the rural floor budget neutrality factor 
applied to the wage index nationally. We have calculated a FY 2016 
rural floor budget neutrality factor to be applied to the wage index 
of 0.990298, which will reduce wage indexes by 0.99 percent.
    Column 6 shows the projected impact of the rural floor and 
imputed floor with the national rural floor budget neutrality factor 
applied to the wage index based on the OMB labor market area 
delineations. The column compares the post-reclassification FY 2016 
wage index of providers before the rural floor and imputed floor 
adjustment and the post-reclassification FY 2016 wage index of 
providers with the rural floor and imputed floor adjustment based on 
the OMB labor market area delineations. Only urban hospitals can 
benefit from the rural and imputed floors. Because the provision is 
budget neutral, all other hospitals (that is, all rural hospitals 
and those urban hospitals to which the adjustment is not made) will 
experience a decrease in payments due to the budget neutrality 
adjustment that is applied nationally to their wage index.
    We estimate that 371 hospitals will benefit from the rural and 
imputed floors in FY 2016, while the remaining 2,998 IPPS hospitals 
in our model will have their wage index reduced by the rural floor 
budget neutrality adjustment of 0.990298 (or 0.99 percent). We 
project that, in aggregate, rural hospitals will experience a 0.2 
percent decrease in payments as a result of the application of the 
rural floor budget neutrality because the rural hospitals do not 
benefit from the rural floor, but have their wage indexes downwardly 
adjusted to ensure that the application of the rural floor is

[[Page 49818]]

budget neutral overall. We project hospitals located in urban areas 
will experience no change in payments because increases in payments 
by hospitals benefitting from the rural floor offset decreases in 
payments by nonrural floor urban hospitals whose wage index is 
downwardly adjusted by the rural floor budget neutrality factor. 
Urban hospitals in the New England region will experience a 1.6 
percent increase in payments primarily due to the application of the 
rural floor in Massachusetts. Thirty-nine urban providers in 
Massachusetts are expected to receive the rural floor wage index 
value, including the rural floor budget neutrality of 0.990298, 
increasing payments overall to Massachusetts by an estimated $98 
million. We estimate that Massachusetts hospitals will receive 
approximately a 3.1 percent increase in IPPS payments due to the 
application of the rural floor in FY 2016.
    Urban Puerto Rico hospitals are expected to experience a 0.1 
percent change in payments as a result of the application of the 
Puerto Rico rural floor with the application of the Puerto Rico 
rural floor budget neutrality adjustment. We are applying a rural 
floor budget neutrality factor to the Puerto Rico-specific wage 
index of 0.987646 or 1.2 percent. The Puerto Rico-specific wage 
index adjusts the Puerto Rico-specific standardized amount, which 
represents 25 percent of payments to Puerto Rico hospitals. The 
increases in payments experienced by the urban Puerto Rico hospitals 
that benefit from a rural floor are offset by the decreases in 
payments by the urban Puerto Rico hospitals that do not benefit from 
the rural floor that have their wage indexes downwardly adjusted by 
the rural floor budget neutrality adjustment. As a result, overall, 
urban Puerto Rico hospitals will experience a 0.1 percent change in 
payments due to the application of the rural floor with rural floor 
budget neutrality.
    There are 21 hospitals out of the 64 hospitals in New Jersey 
that will benefit from the extension of the imputed floor and will 
receive the imputed floor wage index value under the OMB labor 
market area delineations, including the rural floor budget 
neutrality of 0.990298 which we estimate will increase payments to 
those imputed floor hospitals by $27 million (overall, the State 
will receive an increase of $9 million in payments due to the other 
hospitals in the State that will experience decreases in payments 
due to the rural floor budget neutrality adjustment). Four Rhode 
Island hospitals will benefit from the imputed rural floor 
calculated under the alternative methodology and will receive an 
additional $4.5 million (overall, the State will receive an 
additional $2.6 million). While some hospitals in Delaware are 
geographically located in CBSAs that are assigned the imputed floor, 
none of these hospitals benefit from the imputed floor since they 
are reclassifying to CBSAs with a higher wage index than the imputed 
floor.
    Column 6 also shows the projected effects of the second year of 
the 3-year hold harmless provision for hospitals that were located 
in an urban county that became rural under the new OMB delineations 
or hospitals deemed urban where the urban area became rural under 
the new OMB delineations. As discussed in section III.G.2. of the 
preamble of this final rule, under this transition, hospitals that 
were located in an urban county that became rural under the new OMB 
delineations will generally be assigned the urban wage index value 
of the CBSA in which they are physically located in FY 2014 for a 
period of 3 fiscal years (that is, FYs 2015, 2016, and 2017). In 
addition, as discussed in section III.G.3. of the preamble of this 
final rule, under this transition, hospitals that were deemed urban 
where the urban area became rural under the new OMB delineations 
will generally be assigned the area wage index value of hospitals 
reclassified to the urban CBSA (that is, the attaching wage index, 
if applicable) to which they were designated in FY 2014. For FY 
2016, we are applying the 3-year transition wage index adjustments 
in a budget neutral manner, with a budget neutrality factor of 
0.999996.
    In response to a public comment addressed in the FY 2012 IPPS/
LTCH PPS final rule (76 FR 51593), we are providing the payment 
impact of the rural floor and imputed floor with budget neutrality 
at the State level. Column 1 of the table below displays the number 
of IPPS hospitals located in each State. Column 2 displays the 
number of hospitals in each State that will receive the rural floor 
or imputed floor wage index for FY 2016. Column 3 displays the 
percentage of total payments each State will receive or contribute 
to fund the rural floor and imputed floor with national budget 
neutrality. The column compares the post-reclassification FY 2016 
wage index of providers before the rural floor and imputed floor 
adjustment and the post-reclassification FY 2016 wage index of 
providers with the rural floor and imputed floor adjustment. Column 
4 displays the estimated payment amount that each State will gain or 
lose due to the application of the rural floor and imputed floor 
with national budget neutrality.

      FY 2016 IPPS Estimated Payments Due to Rural Floor and Imputed Floor With National Budget Neutrality
----------------------------------------------------------------------------------------------------------------
                                                                            Percent change in
                                                             Number of       payments due to
                                                           hospitals that     application of
                State                     Number of      will receive  the   rural floor and     Difference (in
                                          hospitals       rural  floor or     imputed floor        millions)
                                                           imputed floor       with budget
                                                                                neutrality
                                                    (1)                (2)                (3)                (4)
----------------------------------------------------------------------------------------------------------------
Alabama.............................                 86                  3               -0.4             $-6.72
Alaska..............................                  6                  1               -0.3              -0.51
Arizona.............................                 55                  5               -0.3              -5.65
Arkansas............................                 46                  0               -0.4               -.43
California..........................                303                203                2.2             220.65
Colorado............................                 47                  5                0.4               4.51
Connecticut.........................                 31                  7               -0.5              -8.06
Delaware............................                  6                  0               -0.5              -2.41
Washington, DC......................                  7                  0               -0.5              -2.37
Florida.............................                170                 14               -0.3             -18.34
Georgia.............................                105                  0               -0.5             -11.96
Hawaii..............................                 12                  1               -0.4              -1.11
Idaho...............................                 14                  0               -0.4              -1.15
Illinois............................                127                  2               -0.5             -24.07
Indiana.............................                 91                  0               -0.5             -11.65
Iowa................................                 35                  0               -0.4              -4.15
Kansas..............................                 53                  0               -0.4               -3.5
Kentucky............................                 65                  1               -0.4              -6.76
Louisiana...........................                 99                  3               -0.5              -6.39
Maine...............................                 20                  0               -0.5              -2.22
Massachusetts.......................                 61                 39                3.1              97.64
Michigan............................                 96                  0               -0.5             -21.43
Minnesota...........................                 50                  0               -0.3              -5.99

[[Page 49819]]

 
Mississippi.........................                 64                  0               -0.5              -4.75
Missouri............................                 78                  0               -0.4              -9.54
Montana.............................                 12                  2                0.1               0.19
Nebraska............................                 26                  0               -0.4              -2.43
Nevada..............................                 24                  3                0.2                1.8
New Hampshire.......................                 13                  3               -0.1              -0.53
New Jersey..........................                 64                 21                0.2               8.95
New Mexico..........................                 25                  0               -0.3              -1.35
New York............................                156                  2               -0.6             -43.23
North Carolina......................                 84                  0               -0.4             -13.95
North Dakota........................                  6                  0               -0.3               -0.8
Ohio................................                132                  6               -0.4             -16.71
Oklahoma............................                 86                  4               -0.3              -4.21
Oregon..............................                 34                  0               -0.5              -4.65
Pennsylvania........................                153                  3               -0.5             -21.99
Puerto Rico.........................                 51                 10                0.1               0.17
Rhode Island........................                 11                  4                0.7               2.57
South Carolina......................                 56                  5               -0.2              -2.73
South Dakota........................                 19                  0               -0.3              -0.97
Tennessee...........................                 99                 10               -0.4              -9.69
Texas...............................                318                  3               -0.5             -29.15
Utah................................                 34                  2               -0.4              -1.91
Vermont.............................                  6                  0               -0.3              -0.57
Virginia............................                 78                  1               -0.4             -11.13
Washington..........................                 49                  6                0.1               1.47
West Virginia.......................                 29                  2                0.1               1.04
Wisconsin...........................                 66                  0               -0.5              -7.85
Wyoming.............................                 11                  0               -0.2              -0.22
----------------------------------------------------------------------------------------------------------------

g. Effects of the Application of the Frontier State Wage Index and Out-
Migration Adjustment (Column 7)

    This column shows the combined effects of the application of 
section 10324(a) of the Affordable Care Act, which requires that we 
establish a minimum post-reclassified wage-index of 1.00 for all 
hospitals located in ``frontier States,'' and the effects of section 
1886(d)(13) of the Act, as added by section 505 of Public Law 108-
173, which provides for an increase in the wage index for hospitals 
located in certain counties that have a relatively high percentage 
of hospital employees who reside in the county, but work in a 
different area with a higher wage index. These two wage index 
provisions are not budget neutral and increase payments overall by 
0.1 percent compared to the provisions not being in effect.
    The term ``frontier States'' is defined in the statute as States 
in which at least 50 percent of counties have a population density 
less than 6 persons per square mile. Based on these criteria, 4 
States (Montana, North Dakota, South Dakota, and Wyoming) are 
considered frontier States and 48 hospitals located in those States 
will receive a frontier wage index of 1.0000. Nevada is also, by 
definition, a frontier State and was assigned a frontier floor value 
of 1.0000 for FY 2012, but since then and including in this final 
rule, its rural floor value has been greater than 1.0000 so it has 
not been subject to the frontier wage index. Overall, this provision 
is not budget neutral and is estimated to increase IPPS operating 
payments by approximately $60 million. Rural and urban hospitals 
located in the West North Central region will experience an increase 
in payments by 0.3 and 0.8 percent, respectively, because many of 
the hospitals located in this region are frontier State hospitals.
    In addition, section 1886(d)(13) of the Act, as added by section 
505 of Public Law 108-173, provides for an increase in the wage 
index for hospitals located in certain counties that have a 
relatively high percentage of hospital employees who reside in the 
county, but work in a different area with a higher wage index. 
Hospitals located in counties that qualify for the payment 
adjustment are to receive an increase in the wage index that is 
equal to a weighted average of the difference between the wage index 
of the resident county, post-reclassification and the higher wage 
index work area(s), weighted by the overall percentage of workers 
who are employed in an area with a higher wage index. There are an 
estimated 336 providers that will receive the out-migration wage 
adjustment in FY 2016. Rural hospitals generally qualify for the 
adjustment, resulting in a 0.1 percent increase in payments. This 
provision appears to benefit Section 401 hospitals and RRCs in that 
they will experience a 1.4 percent and 0.6 percent increase in 
payments, respectively. This out-migration wage adjustment also is 
not budget neutral, and we estimate the impact of these providers 
receiving the out-migration increase will be approximately $45 
million.

h. Effects of All FY 2016 Changes (Column 8)

    Column 8 shows our estimate of the changes in payments per 
discharge from FY 2015 and FY 2016, resulting from all changes 
reflected in this final rule for FY 2016. It includes combined 
effects of the previous columns in the table.
    The average increase in payments under the IPPS for all 
hospitals is approximately 0.4 percent for FY 2016 relative to FY 
2015. As discussed in section II.D. of the preamble of this final 
rule, this column includes the FY 2016 documentation and coding 
recoupment adjustment of -0.8 percent on the national standardized 
amount as part of the recoupment required under section 631 of the 
ATRA. In addition, this column includes the annual hospital update 
of 1.7 percent to the national standardized amount. This annual 
hospital update includes the 2.4 percent market basket update, the 
reduction of 0.5 percentage point for the multifactor productivity 
adjustment, and the 0.2 percentage point reduction under section

[[Page 49820]]

3401 of the Affordable Care Act. Hospitals paid under the hospital-
specific rate will receive a 1.7 percent hospital update described 
above. As described in Column 1, the annual hospital update with the 
documentation and coding recoupment adjustment for hospitals paid 
under the national standardized amount combined with the annual 
hospital update for hospitals paid under the hospital-specific rate 
will result in a 0.9 percent increase in payments in FY 2016 
relative to FY 2015. The impact of moving from our estimate of FY 
2015 outlier payments, 4.6 percent, to the estimate of FY 2016 
outlier payments, 5.1 percent, will result in an increase of 0.4 
percent in FY 2016 payments relative to FY 2015. There also might be 
interactive effects among the various factors comprising the payment 
system that we are not able to isolate. For these reasons, the 
values in Column 8 may not equal the sum of the estimated percentage 
changes described above.
    Overall payments to hospitals paid under the IPPS due to the 
applicable percentage increase and changes to policies related to 
MS-DRGs, geographic adjustments, and outliers are estimated to 
increase by 0.4 percent for FY 2016. Hospitals in urban areas will 
experience a 0.4 percent increase in payments per discharge in FY 
2016 compared to FY 2015. Hospital payments per discharge in rural 
areas are estimated to increase by 0.2 percent in FY 2016.

3. Impact Analysis of Table II

    Table II presents the projected impact of the changes for FY 
2016 for urban and rural hospitals and for the different categories 
of hospitals shown in Table I. It compares the estimated average 
payments per discharge for FY 2015 with the estimated average 
payments per discharge for FY 2016, as calculated under our models. 
Therefore, this table presents, in terms of the average dollar 
amounts paid per discharge, the combined effects of the changes 
presented in Table I. The estimated percentage changes shown in the 
last column of Table II equal the estimated percentage changes in 
average payments per discharge from Column 8 of Table I.

    Table II--Impact Analysis of Changes for FY 2016 Acute Care Hospital Operating Prospective Payment System
                                            [Payments per discharge]
----------------------------------------------------------------------------------------------------------------
                                                         Estimated average  Estimated average
                                          Number of       FY 2015 payment    FY 2016 payment    FY 2016 changes
                                          hospitals        per discharge      per discharge
                                                    (1)                (2)                (3)                (4)
----------------------------------------------------------------------------------------------------------------
All Hospitals.......................              3,369             11,329             11,370                0.4
By Geographic Location:
    Urban hospitals.................              2,533             11,680             11,724                0.4
    Large urban areas...............              1,393             12,434             12,482                0.4
    Other urban areas...............              1,140             10,766             10,804                0.4
    Rural hospitals.................                836              8,424              8,441                0.2
Bed Size (Urban):
    0-99 beds.......................                668              9,254              9,273                0.2
    100-199 beds....................                778              9,863              9,900                0.4
    200-299 beds....................                445             10,589             10,633                0.4
    300-499 beds....................                428             11,927             11,972                0.4
    500 or more beds................                214             14,285             14,340                0.4
Bed Size (Rural):
    0-49 beds.......................                329              7,048              7,043               -0.1
    50-99 beds......................                297              7,972              7,988                0.2
    100-149 beds....................                121              8,290              8,325                0.4
    150-199 beds....................                 48              9,109              9,132                0.3
    200 or more beds................                 41              9,996             10,004                0.1
Urban by Region:
    New England.....................                120             12,850             12,836               -0.1
    Middle Atlantic.................                318             13,156             13,282                  1
    South Atlantic..................                407             10,387             10,410                0.2
    East North Central..............                396             10,950             11,009                0.5
    East South Central..............                150              9,998              9,958               -0.4
    West North Central..............                166             11,438             11,470                0.3
    West South Central..............                384             10,590             10,548               -0.4
    Mountain........................                161             12,013             12,036                0.2
    Pacific.........................                380             14,889             15,035                  1
    Puerto Rico.....................                 51              7,648              7,469               -2.4
Rural by Region:
    New England.....................                 22             11,441             11,429               -0.1
    Middle Atlantic.................                 55              8,545              8,565                0.2
    South Atlantic..................                128              7,868              7,916                0.6
    East North Central..............                116              8,775              8,852                0.9
    East South Central..............                164              7,524              7,449                 -1
    West North Central..............                101              9,280              9,350                0.8
    West South Central..............                165              7,218              7,160               -0.8
    Mountain........................                 61              9,730              9,796                0.7
    Pacific.........................                 24             11,500             11,671                1.5
By Payment Classification:
    Urban hospitals.................              2,476             11,700             11,743                0.4
    Large urban areas...............              1,386             12,440             12,488                0.4
    Other urban areas...............              1,090             10,771             10,809                0.4
    Rural areas.....................                893              8,687              8,709                0.3
Teaching Status:
    Nonteaching.....................              2,326              9,450              9,479                0.3
    Fewer than 100 residents........                794             10,999             11,041                0.4
    100 or more residents...........                249             16,424             16,493                0.4

[[Page 49821]]

 
Urban DSH:
    Non-DSH.........................                653              9,946             10,052                1.1
    100 or more beds................              1,593             12,080             12,114                0.3
    Less than 100 beds..............                328              8,526              8,546                0.2
Rural DSH:
    SCH.............................                260              8,859              8,917                0.7
    RRC.............................                347              9,023              9,055                0.4
    100 or more beds................                 31              7,544              7,479               -0.9
    Less than 100 beds..............                157              6,774              6,696               -1.2
Urban teaching and DSH:
    Both teaching and DSH...........                855             13,217             13,261                0.3
    Teaching and no DSH.............                122             11,161             11,300                1.3
    No teaching and DSH.............              1,066              9,878              9,894                0.2
    No teaching and no DSH..........                433              9,415              9,511                  1
Special Hospital Types:
    RRC.............................                189              9,449              9,408               -0.4
    SCH.............................                327              9,951             10,034                0.8
    MDH.............................                150              6,968              7,010                0.6
    SCH and RRC.....................                126             10,591             10,691                0.9
    MDH and RRC.....................                 13              8,621              8,669                0.6
Type of Ownership:
    Voluntary.......................              1,934             11,498             11,559                0.5
    Proprietary.....................                879              9,997              9,984               -0.1
    Government......................                529             12,240             12,243                  0
Medicare Utilization as a Percent of
 Inpatient Days:
    0-25............................                533             14,719             14,625               -0.6
    25-50...........................              2,134             11,265             11,321                0.5
    50-65...........................                571              9,180              9,249                0.8
    Over 65.........................                 97              6,883              6,909                0.4
FY 2016 Reclassifications by the
 Medicare Geographic Classification
 Review Board:
    All Reclassified Hospitals......                830             11,288             11,370                0.7
    Non-Reclassified Hospitals......              2,539             11,346             11,370                0.2
    Urban Hospitals Reclassified....                551             11,925             12,020                0.8
    Urban Nonreclassified Hospitals.              1,925             11,620             11,646                0.2
    Rural Hospitals Reclassified                    279              8,836              8,870                0.4
     Full Year......................
    Rural Nonreclassified Hospitals                 504              7,926              7,924                  0
     Full Year......................
    All Section 401 Reclassified                     64             10,427             10,492                0.6
     Hospitals:.....................
    Other Reclassified Hospitals                     53              7,855              7,830               -0.3
     (Section 1886(d)(8)(B))........
Specialty Hospitals
    Cardiac specialty Hospitals.....                 14             12,640             12,723                0.7
----------------------------------------------------------------------------------------------------------------

H. Effects of Other Policy Changes

    In addition to those policy changes discussed above that we are 
able to model using our IPPS payment simulation model, we are making 
various other changes in this final rule. Generally, we have limited 
or no specific data available with which to estimate the impacts of 
these changes. Our estimates of the likely impacts associated with 
these other changes are discussed below.

1. Effects of Policy on MS-DRGs for Preventable HACs, Including 
Infections

    In section II.F. of the preamble of this final rule, we discuss 
our implementation of section 1886(d)(4)(D) of the Act, which 
requires the Secretary to identify conditions that are: (1) High 
cost, high volume, or both; (2) result in the assignment of a case 
to an MS-DRG that has a higher payment when present as a secondary 
diagnosis; and (3) could reasonably have been prevented through 
application of evidence-based guidelines. For discharges occurring 
on or after October 1, 2008, hospitals will not receive additional 
payment for cases in which one of the selected conditions was not 
present on admission, unless, based on data and clinical judgment, 
it cannot be determined at the time of admission whether a condition 
is present. That is, the case will be paid as though the secondary 
diagnosis were not present. However, the statute also requires the 
Secretary to continue counting the condition as a secondary 
diagnosis that results in a higher IPPS payment when doing the 
budget neutrality calculations for MS-DRG reclassifications and 
recalibration. Therefore, we will perform our budget neutrality 
calculations as though the payment provision did not apply, but 
Medicare will make a lower payment to the hospital for the specific 
case that includes the secondary diagnosis. Thus, the provision 
results in cost savings to the Medicare program.
    We note that the provision will only apply when one or more of 
the selected conditions are the only secondary diagnosis or 
diagnoses present on the claim that will lead to higher payment. 
Medicare beneficiaries will generally have multiple secondary 
diagnoses during a hospital stay, such that beneficiaries having one 
MCC or CC will frequently have additional conditions that also will 
generate higher payment. Only a small percentage of the cases will 
have only one secondary diagnosis that would lead to a higher 
payment. Therefore, if at least one nonselected secondary diagnosis 
that leads to higher payment is on the claim, the case will continue 
to be assigned to the higher paying MS-DRG and there will be no 
Medicare savings from that case. In addition, as discussed in 
section II.F.3. of the preamble of this final rule, it is possible 
to have two

[[Page 49822]]

severity levels where the HAC does not affect the MS-DRG assignment 
or for an MS-DRG not to have severity levels. In either of these 
circumstances, the case will continue to be assigned to the higher 
paying MS-DRG and there will be no Medicare savings from that case.
    As discussed in section II.F. of the preamble of this final 
rule, for FY 2016, we are not adding or removing any categories of 
HACs for FY 2016.
    The HAC payment provision went into effect on October 1, 2008. 
Our savings estimates for the next 5 fiscal years are shown below:

------------------------------------------------------------------------
                                                            Savings (in
                          Year                               millions)
------------------------------------------------------------------------
FY 2016.................................................              28
FY 2017.................................................              29
FY 2018.................................................              31
FY 2019.................................................              32
FY 2020.................................................              34
------------------------------------------------------------------------

2. Effects of Policy Relating to New Medical Service and Technology 
Add-On Payments

    In section II.I. of the preamble to this final rule, we discuss 
six applications (Blinatumomab (BLINCYTO TM), 
DIAMONDBACK[supreg] 360 Coronary Orbital Atherectomy System, 
CRESEMBA[supreg] (Isavuconazonium), LUTONIX[supreg] Drug Coated 
Balloon (DCB) Percutaneous Transluminal Angioplasty (PTA) and 
IN.PACT TMAdmiral TM Pacliaxel Coated 
Percutaneous Transluminal Angioplasty (PTA) Balloon Catheter, 
VERASENSETM Knee Balancer System (VKS), and 
WATCHMAN[supreg] Left Atrial Appendage Closure Technology) for add-
on payments for new medical services and technologies for FY 2016, 
as well as the status of the new technologies that were approved to 
receive new technology add-on payments in FY 2015. We note that two 
of the applications (the Angel Medical Guardian[supreg] Ischemia 
Monitoring Device and Ceftazidime Avibactam (AVYCAZ)) discussed in 
the proposed rule withdrew their applications prior to the 
publication of this final rule. In addition, Idarucizumab did not 
receive FDA approval by July 1, 2015 in accordance with the 
regulations under Sec.  412.87(c) and, therefore, is ineligible for 
consideration for new technology add-on payments for FY 2016.
    As explained in the preamble to this final rule, add-on payments 
for new medical services and technologies under section 
1886(d)(5)(K) of the Act are not required to be budget neutral. As 
discussed in section II.I.4. of the preamble of this final rule, we 
are approving two of the six applications (BLINCYTO TM 
and LUTONIX [supreg] DCB PTA and IN.PACT TMAdmiral 
TM Pacliaxel Coated PTA Balloon Catheter) for new 
technology add-on payments for FY 2016. As we proposed, in this 
final rule, we also are continuing to make new technology add-on 
payments in FY 2016 for Kcentra TM, Argus[supreg] II 
Retinal Prosthesis System, the CardioMEMSTM HF (Heart 
Failure) Monitoring System, MitraClip[supreg] System, and the 
Responsive Neurostimulator (RNS[supreg]) System (because all of 
these technologies are still within the 3-year anniversary of the 
product's entry onto the market). We note that new technology add-on 
payments per case are limited to the lesser of: (1) 50 percent of 
the costs of the new technology; or (2) 50 percent of the amount by 
which the costs of the case exceed the standard MS-DRG payment for 
the case. Because it is difficult to predict the actual new 
technology add-on payment for each case, our estimates below are 
based on the increase in add-on payments for FY 2016 as if every 
claim that would qualify for a new technology add-on payment would 
receive the maximum add-on payment. Based on the applicant's 
estimate for FY 2014, we currently estimate that new technology add-
on payments for Kcentra TM will increase overall FY 2016 
payments by $5,449,888. Based on the applicant's estimate for FY 
2014, we currently estimate that new technology add-on payments for 
the Argus[supreg] II Retinal Prosthesis System will increase overall 
FY 2016 payments by $3,601,437. Based on the applicant's estimate 
for FY 2015, we currently estimate that new technology add-on 
payments for the CardioMEMSTM HF Monitoring System will 
increase overall FY 2016 payments by $11,315,625. Based on the 
applicant's estimate for FY 2015, we currently estimate that new 
technology add-on payments for the MitraClip[supreg] System will 
increase overall FY 2016 payments by $27,000,000. Based on the 
applicant's estimate for FY 2015, we currently estimate that new 
technology add-on payments for the RNS[supreg] System will increase 
overall FY 2015 payments by $12,932,500. Based on the applicant's 
estimate for FY 2016, we currently estimate that new technology add-
on payments for BLINCYTO TM will increase overall FY 2016 
payments by $4,593,034 (maximum add-on payment of $27,017.85 * 170 
patients). Based on the weighted cost average for FY 2016 described 
in section II.I.4. of the preamble to this final rule, we currently 
estimate that new technology add-on payments for LUTONIX [supreg] 
DCB PTA and IN.PACT TMAdmiral TM Pacliaxel 
Coated PTA Balloon Catheter will increase overall FY 2016 payments 
by $36,120,735 (maximum add-on payment of $1,035.72 * 8,875 patients 
for LUTONIX [supreg] DCB PTA Balloon Catheter; maximum add-on 
payment of $1,035.72 * 26,000 patients for IN.PACT 
TMAdmiral TM Pacliaxel Coated PTA Balloon 
Catheter).

3. Effects of the Changes to Medicare DSH Payments for FY 2016

    As discussed in section IV.D. of the preamble of this final 
rule, under section 3133 of the Affordable Care Act, hospitals that 
are eligible to receive Medicare DSH payments will receive 25 
percent of the amount they previously would have received under the 
former statutory formula for Medicare DSH payments. The remainder, 
equal to an estimate of 75 percent of what formerly would have been 
paid as Medicare DSH payments (Factor 1), reduced to reflect changes 
in the percentage of individuals under age 65 who are uninsured and 
additional statutory adjustments (Factor 2), is available to make 
additional payments to each hospital that qualifies for Medicare DSH 
payments and that has uncompensated care. Each Medicare DSH hospital 
will receive an additional payment based on its estimated share of 
the total amount of uncompensated care for all Medicare DSH 
hospitals. The uncompensated care payment methodology has 
redistributive effects based on the proportion of a Medicare DSH 
hospital's low-income insured patient days (sum of Medicaid patient 
days and Medicare SSI patient days) relative to the low-income 
insured patient days for all Medicare DSH hospitals (Factor 3). The 
reduction to Medicare DSH payments under section 3133 of the 
Affordable Care Act is not budget neutral.
    In this FY 2016 IPPS/LTCH PPS final rule, we are establishing 
the amount to be distributed as uncompensated care payments to DSH 
eligible hospitals, which for FY 2016 is $6,406,145,534.04, or 75 
percent of what otherwise would have been paid for Medicare DSH 
payment adjustments adjusted by a Factor 2 of 63.69 percent; for FY 
2015, the amount available to be distributed for uncompensated care 
was $7,647,644,885.18, or 75 percent of what otherwise would have 
been paid for Medicare DSH payment adjustments adjusted by a Factor 
2 of 76.19 percent. To calculate Factor 3 for FY 2016, we are using 
Medicaid days from the more recent of hospitals' full year 2012 or 
full year 2011 cost reports from the March 2015 update of the HCRIS 
database (that is, we are holding constant the 2012 and 2011 cost 
report years used in the FY 2015 IPPS/LTCH PPS final rule, but using 
updated cost report data from a later extract of the HCRIS), 
Medicaid days from 2012 cost report data submitted to CMS by IHS 
hospitals, and SSI days from the 2013 SSI ratios. This is in 
contrast to FY 2015, when we used Medicaid days from the hospitals' 
full year 2012 or 2011 cost reports from the March 2014 update of 
the HCRIS database, Medicaid days from 2012 cost report data 
submitted to CMS by IHS hospitals, and SSI days from the 2012 SSI 
ratios to calculate Factor 3. The uncompensated care payment 
methodology is discussed in more detail in section IV.D. of the 
preamble of this final rule.
    To estimate the impact of the combined effect of reductions in 
the percent of individuals under age 65 who are uninsured and 
additional statutory adjustments (Factor 2) and changes in Medicaid 
and SSI patient days (components of Factor 3) on the calculation of 
Medicare DSH payments, including both empirically justified Medicare 
DSH payments and uncompensated care payments, we compared total DSH 
payments estimated in the FY 2015 IPPS/LTCH PPS final rule and 
correction notice to total DSH payments estimated in this FY 2016 
IPPS/LTCH PPS final rule. For FY 2015, for each hospital, we 
calculated the sum of (I) 25 percent of the estimated amount of what 
would have been paid as Medicare DSH in FY 2015 in the absence of 
section 3133 of the Affordable Care Act and (II) 75 percent of the 
estimated amount of what would have been paid as Medicare DSH 
payments in the absence of section 3133, adjusted by a Factor 2 of 
76.19 percent and multiplied by a Factor 3 as stated in the FY 2015 
IPPS/LTCH PPS final rule and correction notice. For FY 2016, we 
calculated the sum of (I) 25 percent of the estimated amount of what 
would be paid as Medicare DSH payments in FY 2016 absent

[[Page 49823]]

section 3133 and (II) 75 percent of the estimated amount of what 
would have been paid as Medicare DSH payments absent section 3133, 
adjusted by a Factor 2 of 63.69 percent and multiplied by a Factor 3 
as stated above.
    Our analysis included 2,418 hospitals that are projected to be 
eligible for DSH in FY 2016. It did not include hospitals in the 
Rural Community Hospital Demonstration, hospitals that departed the 
Medicare program as of July 7, 2015, Maryland hospitals, and SCHs 
that are expected to be paid based on their hospital-specific rates. 
In addition, low-income insured days from merged or acquired 
hospitals were combined into the surviving hospital's CCN, and the 
nonsurviving CCN was excluded from the analysis. The estimated 
impact of changes in Factors 1, 2, and 3 across all FY 2016 DSH 
eligible hospitals, by hospital characteristic, is presented in the 
table below.

Modeled Disproportionate Share Hospital Payments for Estimated FY 2016 DSH Hospitals by Hospital Type: Model DSH
                                     $ (in millions) From FY 2015 to FY 2016
----------------------------------------------------------------------------------------------------------------
                                                     Number of
                                                   estimated FY       FY 2015         FY 2016       Percentage
                                                     2016 DSH     estimated  DSH  estimated  DSH     change **
                                                     hospitals          $ *             $ *
                                                             (1)             (2)             (3)             (4)
----------------------------------------------------------------------------------------------------------------
Total...........................................          $2,418         $10,993          $9,733           -11.5
----------------------------------------------------------------------------------------------------------------
By Geographic Location:                           ..............  ..............  ..............  ..............
    Urban Hospitals.............................           1,892          10,453           9,260           -11.4
        Large Urban Areas.......................           1,024           6,629           5,858           -11.6
        Other Urban Areas.......................             868           3,823           3,402           -11.0
    Rural Hospitals.............................             526             540             473           -12.5
Bed Size (Urban):                                 ..............  ..............  ..............  ..............
    0-99 Beds...................................             327             211             186           -11.8
    100-249 Beds................................             827           2,514           2,196           -12.6
    250-499 Beds................................             738           7,728           6,878           -11.0
Bed Size (Rural):                                 ..............  ..............  ..............  ..............
    0-99 Beds...................................             392             235             206           -12.1
    100-249 Beds................................             120             246             211          -14. 5
    250-499 Beds................................              14              59              56            -5.6
Urban by Region:                                  ..............  ..............  ..............  ..............
    East North Central..........................             308           1,421           1,268           -10.8
    East South Central..........................             131             649             575           -11.4
    Middle Atlantic.............................             231           1,804           1,603           -11.1
    Mountain....................................             115             504             447           -11.3
    New England.................................              86             440             388           -11.9
    Pacific.....................................             298           1,649           1,454           -11.8
    Puerto Rico.................................              39             108             100            -8.1
    South Atlantic..............................             318           2,012           1,772           -11.9
    West North Central..........................             105             507             455           -10.1
    West South Central..........................             261           1,357           1,197           -11.8
Rural by Region:                                  ..............  ..............  ..............  ..............
    East North Central..........................              67              55              49           -10.9
    East South Central..........................             147             174             149           -14.0
    Middle Atlantic.............................              27              40              34           -14.5
    Mountain....................................              22              18              16           -13.1
    New England.................................              10              17              15           -13.7
    Pacific.....................................              10               6               8            35.3
    South Atlantic..............................              88             107              96            -9.5
    West North Central..........................              38              27              21           -20.1
    West South Central..........................             117              97              84           -13.6
By Payment Classification:                        ..............  ..............  ..............  ..............
    Urban Hospitals.............................           1,860          10,448           9,205           -11.9
        Large Urban Areas.......................           1,021           6,640           5,856           -11.8
        Other Urban Areas.......................             839           3,809           3,349           -12.1
    Rural Hospitals.............................             558             545             527            -3.2
Teaching Status:                                  ..............  ..............  ..............  ..............
    Nonteaching.................................           1,548           3,578           3,106           -13.2
    Fewer than 100 residents....................             630           3,585           3,194           -10.9
    100 or more residents.......................             240           3,831           3,432           -10.4
Type of Ownership:                                ..............  ..............  ..............  ..............
    Voluntary...................................           1,388           6,770           6,028           -11.0
    Proprietary.................................             541           1,904           1,661           -12.7
    Government..................................             487           2,290           2,017           -11.9
    Unknown.....................................               2              30              27           -10.4
----------------------------------------------------------------------------------------------------------------
Source: Dobson DaVanzo analysis of 2011-2012 Hospital Cost Reports, 2015 Provider of Services File, FY 2015 IPPS
  Final Rule CN Impact File, and FY 2016 NPRM Impact File.
* Dollar DSH calculated by [0.25 * estimated section 1886(d)(5)(F) payments] + [0.75 * estimated section
  1886(d)(5)(F) payments * Factor 2 * Factor 3]. When summed across all hospitals projected to receive DSH
  payments, the Model DSH is $10,993 million in FY 2015 and $9,733 million in FY 2016.
** Percentage change is determined as the difference between Medicare DSH payments modeled for the FY 2016 IPPS/
  LTCH PPS final rule (column 3) and Medicare DSH payments modeled for the FY 2015 IPPS/LTCH final rule (column
  2) divided by Medicare DSH payments modeled for the FY 2015 final rule (column 3) 1 times 100 percent.


[[Page 49824]]

    The impact analysis found that changes from the FY 2015 IPPS/
LTCH PPS final rule were primarily driven by three components: (1) A 
reduction in Factor 2 from 76.19 percent in the FY 2015 IPPS/LTCH 
PPS final rule to 63.69 percent in this FY 2016 IPPS/LTCH PPS final 
rule, (2) changes in the number of Medicaid days for 2012 (or 2011) 
obtained from the March 2014 HCRIS update of providers' Medicare 
cost report (used in the FY 2015 IPPS/LTCH PPS final rule) to the 
number of Medicaid days reported in the March 2015 HCRIS update of 
providers' Medicare cost report (used in this FY 2016 final rule); 
and (3) changes in SSI days from 2012 (used in the FY 2015 IPPS/LTCH 
PPS final rule and correction notice) to 2013 (used in this FY 2016 
IPPS/LTCH PPS final rule). The change in the percentage of 
individuals who are uninsured is a national estimate affecting all 
hospitals equally, while the change in Medicaid days and SSI days is 
hospital-specific and drives the change in the Factor 3 computed for 
each hospital. Additionally, we note that several hospitals had a 
change in at least one of their payment or geographic 
characteristics from FY 2015 to FY 2016. Therefore, the number of 
hospitals within a given hospital characteristic may have changed 
from the FY 2015 final rule and correction notice. These changes 
also impact the distribution of Medicare DSH payments.
    The impact analysis table above shows that across all DSH-
eligible hospitals, FY 2016 DSH payments, including both empirically 
justified DSH payments and uncompensated care payments, are 
estimated at approximately $9.733 billion, or a decrease of 
approximately 11.5 percent from FY 2015 DSH payments ($10.993 
billion). As a result, we project that payments for FY 2016 to 
hospitals paid under the IPPS will be reduced by 1.0 percent overall 
as compared to overall payments to hospitals paid under the IPPS in 
FY 2015.
    Percent reductions greater than 11.5 percent in column 4 of the 
table above indicate that hospitals within the specified category 
are projected to experience a greater reduction in DSH payments, on 
average, relative to all of the FY 2016 DSH hospitals included in 
this analysis. Likewise, reductions less than 11.5 percent indicate 
that hospitals within each category, on average, are projected to 
receive a smaller reduction in DSH payments relative to all FY 2016 
DSH hospitals. The variation in DSH payment reductions by hospital 
characteristic, as shown in column 4, is largely dependent on the 
change in a given hospital's number of SSI and Medicaid days, as 
well as variations in hospital characteristics or classification 
between FY 2015 and FY 2016 and the number of DSH-eligible 
hospitals. On average across all hospitals, the number of SSI days 
increased by 0.026 percent from FY 2015. On average across all 
hospitals, the number of Medicaid days increased by 0.621 percent 
from FY 2015. In conjunction with this FY 2016 IPPS/LTCH PPS final 
rule, we will publish an impact table as well as a supplemental data 
file that can be used to further analyze the distribution of DSH 
payments and variation in DSH payment reductions.

4. Effects of Reduction Under the Hospital Readmissions Reduction 
Program

    In section IV.E. of the preamble of this final rule, we discuss 
our policies for FY 2016 for the Hospital Readmissions Reduction 
Program (established under section 3025 of the Affordable Care Act), 
which requires a reduction to a hospital's base operating DRG 
payments to account for excess readmissions. For FY 2016, the 
reduction is based on a hospital's risk-adjusted readmission rate 
during a 3-year period for five applicable conditions: acute 
myocardial infarction, heart failure, pneumonia, total hip and total 
knee arthroplasty and chronic obstructive pulmonary disease. This 
provision is not budget neutral. A hospital's readmission adjustment 
is the higher of a ratio of the hospital's aggregate payments for 
excess readmissions to their aggregate payments for all discharges, 
or a floor, which has been defined in the statute as 0.97 (or a 3.0 
percent reduction). A hospital's base operating DRG payment (that 
is, wage-adjusted DRG payment amount, as discussed in section IV.E. 
of the preamble of this final rule) is the portion of the IPPS 
payment subject to the readmissions payment adjustment (DSH, IME, 
outliers and low-volume add-on payments are not subject to the 
readmissions adjustment). In this final rule, we estimate that 2,666 
hospitals will have their base operating DRG payments reduced by 
their proxy FY 2016 hospital-specific readmissions adjustment. As a 
result, we estimate that the Hospital Readmissions Reduction Program 
will save approximately $420 million in FY 2016, an increase of $6 
million over the estimated FY 2015 savings.

5. Effects of Changes Under the FY 2016 Hospital Value-Based Purchasing 
(VBP) Program

    In section IV.F. of the preamble of this final rule, we discuss 
the Hospital VBP Program under which the Secretary makes value-based 
incentive payments to hospitals based on their performance on 
measures during the performance period with respect to a fiscal 
year. These incentive payments will be funded for FY 2016 through a 
reduction to the FY 2016 base operating DRG payment for each 
discharge of 1.75 percent, as required by section 1886(o)(7)(B) of 
the Act. The applicable percentage for FY 2017 and subsequent years 
is 2 percent. The total amount available for value-based incentive 
payments must be equal to the total amount of reduced payments for 
all hospitals for the fiscal year, as estimated by the Secretary.
    We estimate the available pool of funds for value-based 
incentive payments in the FY 2016 program year, which, in accordance 
with section 1886(o)(7)(C)(iv) of the Act, will be 1.75 percent of 
base operating DRG payments, or a total of approximately $1.50 
billion. This estimated available pool for FY 2016 is based on the 
historical pool of hospitals that were eligible to participate in 
the FY 2015 program year and the payment information from the March 
2015 update to the FY 2014 MedPAR file.
    The estimated impacts of the FY 2016 program year by hospital 
characteristic, found in the table below, are based on historical 
TPSs. We used the FY 2015 program year's TPSs to calculate the proxy 
adjustment factors used for this impact analysis. These are the most 
recently available scores that hospitals were given an opportunity 
to review and correct. The proxy adjustment factors use estimated 
annual base operating DRG payment amounts derived from the March 
2015 update to the FY 2014 MedPAR file. The proxy adjustment factors 
can be found in Table 16A associated with this final rule (available 
via the Internet on the CMS Web site).
    The impact analysis shows that, for the FY 2016 program year, 
the number of hospitals that will receive an increase in base 
operating DRG payment amount is higher than the number of hospitals 
that will receive a decrease. Among urban hospitals, those in the 
New England, South Atlantic, East North Central, East South Central, 
West North Central, West South Central, Mountain, and Pacific 
regions will have an increase, on average, in the base operating DRG 
payment amount. Urban hospitals in the Middle Atlantic region will 
receive an average decrease in the base operating payment amount. 
Among rural hospitals, those in all regions will have an increase, 
on average, in base operating DRG payment amounts.
    On average, hospitals that receive a higher percent of DSH 
payments will receive decreases in the base operating DRG payment 
amount. With respect to hospitals' Medicare utilization (MCR), those 
hospitals with an MCR above 65 percent will have the largest 
increase, on average, in base operating DRG payment amounts.
    Nonteaching hospitals will have an average increase, and 
teaching hospitals will experience an average decrease, in the base 
operating DRG payment amount.

 Impact Analysis of Base Operating DRG Payment Amount Changes Resulting
                  From the FY 2016 Hospital VBP Program
------------------------------------------------------------------------
                                                              Average
                                             Number of      percentage
                                             hospitals        change
------------------------------------------------------------------------
By Geographic Location:
    All Hospitals.......................           3,089           0.132
    Large Urban.........................           1,263           0.046

[[Page 49825]]

 
    Other Urban.........................           1,066           0.137
    Rural Area..........................             760           0.269
    Urban hospitals.....................           2,329           0.088
        0-99 beds.......................             524           0.492
        100-199 beds....................             735           0.028
        200-299 beds....................             437          -0.054
        300-499 beds....................             422          -0.079
        500 or more beds................             211          -0.082
    Rural hospitals.....................             760           0.269
        0-49 beds.......................             258           0.445
        50-99 beds......................             298           0.251
        100-149 beds....................             119           0.079
        150-199 beds....................              46           0.035
        200 or more beds................              39           0.094
By Region:
    Urban by Region.....................           2,329           0.088
        New England.....................             116           0.045
        Middle Atlantic.................             306          -0.058
        South Atlantic..................             389           0.037
        East North Central..............             376           0.106
        East South Central..............             139           0.042
        West North Central..............             154           0.366
        West South Central..............             332           0.178
        Mountain........................             157           0.047
        Pacific.........................             360           0.095
    Rural by Region.....................             760           0.269
        New England.....................              20           0.384
        Middle Atlantic.................              55           0.170
        South Atlantic..................             123           0.330
        East North Central..............             114           0.280
        East South Central..............             135           0.269
        West North Central..............              93           0.333
        West South Central..............             140           0.161
        Mountain........................              56           0.346
        Pacific.........................              24           0.228
By MCR Percent:
    0-25................................             583           0.110
    25-50...............................           2,041           0.107
    50-65...............................             322           0.204
    Over 65.............................              72           0.323
    Missing.............................              71           0.513
BY DSH Percent:
    0-25................................           1,462           0.254
    25-50...............................           1,336           0.054
    50-65...............................             149          -0.107
    Over 65.............................             142          -0.139
By Teaching Status:
    Non-Teaching........................           2,077           0.208
    Teaching............................           1,012          -0.023
------------------------------------------------------------------------

    Actual FY 2016 program year's TPSs will not be reviewed and 
corrected by hospitals until after this FY 2016 IPPS/LTCH PPS final 
rule has been published. Therefore, the same historical universe of 
eligible hospitals and corresponding TPSs from the FY 2015 program 
year are used for the updated impact analysis in this final rule.

6. Effects of Changes to the HAC Reduction Program for FY 2016

    In section IV.G. of the preamble of this final rule, we discuss 
the changes to the HAC Reduction Program for FY 2016. We note that 
section 3008 of the Affordable Care Act added section 1886(p) to the 
Act to provide an incentive for certain hospitals to reduce the 
incidence of HACs. Section 1886(p) of the Act requires the Secretary 
to make an adjustment to payments to ``applicable hospitals'' 
effective beginning on October 1, 2014 and for subsequent program 
years. We refer readers to section V.I.1.a. of the FY 2014 IPPS/LTCH 
PPS final rule (78 FR 50707 through 50708) for a general overview of 
the HAC Reduction Program. For a further description of our policies 
for the HAC Reduction Program, we refer readers to the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50707 through 50729) and the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50087 through 50104). These policies 
describe The general framework for implementation of the HAC 
Reduction Program including: (a) The relevant definitions applicable 
to the program; (b) the payment adjustment under the program; (c) 
the measure selection and conditions for the program, including a 
risk-adjustment and scoring methodology; (d) performance scoring; 
(e) the process for making hospital-specific performance information 
available to the public, including the opportunity for a hospital to 
review the information and submit corrections; and (f) limitation of 
administrative and judicial review. We are not making any changes to 
these policies for the implementation of the FY 2016 HAC Reduction 
Program.
    We note that hospitals received a payment reduction for the 
first time in FY 2015. The table and analysis that we are presenting

[[Page 49826]]

below are a simulation of the FY 2016 HAC Reduction Program using 
historical data. We note that, as described earlier in this final 
rule, because scores will undergo 30-day review and correction by 
the hospitals that will not conclude until after the publication of 
this final rule, we are not providing hospital-level data or a 
hospital-level payment impact in conjunction with this FY 2016 IPPS/
LTCH PPS final rule.
    For FY 2016, we note that we finalized a Total HAC Score 
methodology in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50087 
through 50104) that assigns weights for Domain 1 and Domain 2 at 25 
percent and 75 percent, respectively. The table below presents data 
on the estimated proportion of hospitals in the worst-performing 
quartile of the Total HAC Score by hospital characteristic, based on 
this methodology.
    To estimate the impact of the FY 2016 HAC Reduction Program, we 
used AHRQ Patient Safety Indicator (PSI) 90 measure results based on 
Medicare fee-for-service (FFS) discharges from July 2012 through 
June 2014 and version 4.5a of the AHRQ software. For CDC Central 
Line-Associated Bloodstream Infection (CLABSI), Catheter-Associated 
Urinary Tract Infection (CAUTI), and Surgical Site Infection (SSI) 
measure results, we used standardized infection ratios (SIRs) 
calculated with hospital surveillance data reported to the National 
Healthcare Safety Network (NHSN) for infections occurring between 
January 1, 2013 and December 31, 2014. To analyze the results by 
hospital characteristic, we used the FY 2016 Proposed Rule Impact 
File. Of the 3,272 hospitals included in this analysis, 3,269 
hospitals had information for geographic location, region, bed size, 
DSH percent, and teaching status; 3,256 had information for 
ownership; and 3,137 had information for MCR percent. These 
differences in the number of hospitals listed for each 
characteristic are due to the source of the hospital characteristic 
data. Maryland hospitals and hospitals without a Total HAC score are 
not included in the identification of the worst-performing quartile 
for the HAC Reduction Program in FY 2016, and therefore are not 
represented in the table below. (For a discussion of the program's 
applicability to Maryland hospitals, we refer readers to the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50089.)
    The third column in the table (Percent) indicates the percent of 
hospitals in each category of the specified characteristic. For 
example, within geographic location, 40.5 percent of hospitals (or 
1,323 hospitals) are characterized as large urban, 33.9 percent of 
hospitals (or 1,109 hospitals) are characterized as other urban, and 
25.6 percent of hospitals (or 837 hospitals) are characterized as 
rural. The fifth column in the table (Percent with characteristic) 
indicates the proportion of hospitals for each characteristic that 
we estimate will be in the worst-performing quartile of Total HAC 
Scores and will receive a payment reduction under the FY 2016 HAC 
Reduction Program. For example, with regards to geographic location, 
27.4 percent of hospitals (or 362 hospitals) characterized as large 
urban will be subject to a payment reduction; 25.2 percent of 
hospitals (or 279 hospitals) characterized as other urban will be 
subject to a payment reduction; and 19.5 percent of hospitals (or 
163 hospitals) characterized as rural will be subject to a payment 
reduction.

Estimated Proportion of Hospitals in the Worst-Performing Quartile (>75th Percentile) of the Total HAC Score for
                                        the FY 2016 HAC Reduction Program
                                          [by hospital characteristic]
----------------------------------------------------------------------------------------------------------------
                                                                                     Number of      Percent of
                                                                                   hospitals in    hospitals in
             Hospital characteristic                 Number of      Percent \b\     the worst-      the worst-
                                                   hospitals \a\                    performing      performing
                                                                                     quartile      quartile \c\
----------------------------------------------------------------------------------------------------------------
Total \d\.......................................           3,272           100.0             807            24.4
By Geographic Location
    All hospitals:
    Large urban \e\.............................           1,323            40.5             362            27.4
    Other urban.................................           1,109            33.9             279            25.2
    Rural.......................................             837            25.6             163            19.5
    Urban hospitals:
        1-99 beds...............................             619            25.5             140            22.6
        100-199 beds............................             739            30.4             158            21.4
        200-299 beds............................             438            18.0             108            24.7
        300-399 beds............................             272            11.2              87            32.0
        400-499.................................             152             6.3              67            44.1
        500 or more beds........................             212             8.7              81            38.2
    Rural hospitals:
        1-49 beds...............................             332            39.7              90            27.1
        50-99 beds..............................             298            35.6              46            15.4
        100-149 beds............................             120            14.3              10             8.3
        150-199 beds............................              47             5.6               8            17.0
        200 or more beds........................              40             4.8               9            22.5
By Region:
    Urban by region
        New England.............................             115             4.7              42            36.5
        Mid-Atlantic............................             315            13.0             102            32.4
        South Atlantic..........................             397            16.3              94            23.7
        East North Central......................             388            16.0              79            20.4
        East South Central......................             147             6.0              31            21.1
        West North Central......................             161             6.6              35            21.7
        West South Central......................             369            15.2              87            23.6
        Mountain................................             165             6.8              54            32.7
        Pacific.................................             375            15.4             117            31.2
    Rural by region:............................
        New England.............................              20             2.4               7            35.0
        Mid-Atlantic............................              55             6.6              11            20.0
        South Atlantic..........................             127            15.2              21            16.5
        East North Central......................             115            13.7              22            19.1
        East South Central......................             157            18.8              17            10.8
        West North Central......................             105            12.5              34            32.4
        West South Central......................             162            19.4              28            17.3

[[Page 49827]]

 
        Mountain................................              70             8.4              20            28.6
        Pacific.................................              26             3.1               3            11.5
By DSH Percent \f\
    0-24........................................           1,563            47.8             349            22.3
    25-49.......................................           1,379            42.2             342            24.8
    50-64.......................................             163             5.0              55            33.7
    65 and over.................................             164             5.0              58            35.4
By Teaching Status: \g\
    Non-teaching................................           2,247            68.7             464            20.6
    Fewer than 100 residents....................             776            23.7             216            27.8
    100 or more residents.......................             246             7.5             124            50.4
By Urban Teaching and DSH:f, g
    Teaching and DSH............................             841            25.7             298            35.4
    Teaching and no DSH.........................             126             3.9              33            26.2
    No teaching and DSH.........................           1,043            31.9             212            20.3
    No teaching and no DSH......................             422            12.9              98            23.2
    Non-urban...................................             837            25.6             163            19.5
By Type of Ownership:
    Voluntary...................................           1,889            58.0             467            24.7
    Proprietary.................................             856            26.3             186            21.7
    Government..................................             511            15.7             142            27.8
By MCR Percent:
    0-24........................................             637            20.3             208            32.7
    25-49.......................................           2,081            66.3             465            22.3
    50-64.......................................             328            10.5              55            16.8
    65 and over.................................              91             2.9              18            19.8
----------------------------------------------------------------------------------------------------------------
Source: Scores are based on AHRQ PSI 90 data from July 2012 through June 2014 and CLABSI, CAUTI, and SSI results
  from January 2013 to December 2014. Hospital Characteristics are based on the FY 2016 Proposed Rule Impact
  File.
\a\ The total number of non-Maryland hospitals with a Total HAC Score and hospital characteristic data (3,269
  for geographic location, bed size, and teaching status; 3,256 for type of ownership; and 3,137 for MCR) does
  not add up to the total number of non-Maryland hospitals with a Total HAC Score for the FY 2016 HAC Reduction
  Program (3,272) because 3 hospitals are not included in the FY 2016 Proposed Rule Impact File and not all
  hospitals have data for all characteristics.
\b\ This column is the percent of all non-Maryland hospitals with each characteristic that have a Total HAC
  Score for the FY 2016 HAC Reduction Program and are included in the FY 2016 Proposed Rule Impact File.
  Percentages may not sum to 100 due to rounding.
\c\ This column is the percent of hospitals within each characteristic that we estimate would be in the worst-
  performing quartile.
\d\ Total excludes the 47 Maryland hospitals and 36 hospitals without a Total HAC Score for FY 2016.
\e\ Large urban hospitals are hospitals located in large urban areas (populations over 1 million).
\f\ A hospital is considered to be a DSH hospital if it has a DSH patient percentage greater than zero.
\g\ A hospital is considered to be a teaching hospital if it has an IME adjustment factor for Operation PPS
  (TCHOP) greater than zero.

7. Effects of Modification of the Simplified Cost Allocation 
Methodology Used by Hospitals

    In section IV.H. of the preamble of this final rule, we discuss 
our modification of the simplified cost allocation methodology set 
forth in CMS Pub. 15-2, Chapter 40, Section 4020. In the FY 2016 
IPPS/LTCH PPS proposed rule (80 FR 24514 through 24515), we had 
proposed to limit the election of the simplified cost allocation 
methodology to cost reporting periods beginning before October 1, 
2015, because the allocation of the costs of capital-related movable 
equipment using this methodology yields less precise calculated 
CCRs. After consideration of the public comments we received, we are 
not finalizing the proposal to limit the election of the simplified 
cost allocation methodology. Instead, we are retaining the 
simplified cost allocation methodology with some modifications to 
afford hospitals using the simplified cost allocation methodology 
flexibility to obtain approval from their MACs to use dollar value 
as an alternative statistical basis to square footage for capital-
related moveable equipment. Based on FY 2013 HCRIS data, less than 
100 hospitals are using the simplified cost allocation methodology. 
Hospitals using the simplified cost allocation methodology (that is, 
hospitals using each and every statistical basis within the list of 
cost centers under the simplified cost allocation methodology) may 
continue their use of these statistical bases, with the added 
flexibility to request approval from their MACs to use the dollar 
value statistical basis for capital-related moveable equipment in 
accordance with the instructions set forth in CMS Pub. 15-1, Section 
2313. In this regard, hospitals using the simplified cost allocation 
methodology will no longer be required to use the square footage 
statistical basis for capital-related moveable equipment but will be 
provided greater flexibility to request approval to use the 
statistical basis of dollar value, which may be better suited to 
their cost allocation needs. With this modification, we believe 
there will be no disruption of cost reporting practices for 
hospitals, regardless of whether or not they use the simplified cost 
allocation methodology. Hospitals using one or more, but not all, of 
the statistical bases under the simplified cost allocation 
methodology are not considered to be using the simplified cost 
allocation methodology. Rather, they are considered to be using the 
standard cost-finding methodology with approved alternative bases. 
These hospitals may continue to use these previously approved 
statistical bases, consistent with current manual instructions set 
forth in CMS Pub. 15-1, Section 2313. We believe that these 
finalized changes will not have a significant impact on the 
operations of a substantial number of small rural hospitals. We also 
do not believe that the finalized changes will affect beneficiary 
access to care, as affected hospitals will continue to be paid for 
services provided to Medicare beneficiaries.

8. Effects of Implementation of Rural Community Hospital Demonstration 
Program

    In section IV.I. of the preamble of this final rule, for FY 
2016, we discuss our

[[Page 49828]]

implementation of section 410A of Public Law 108-173, as amended, 
which requires the Secretary to conduct a demonstration that would 
modify reimbursement for inpatient services for up to 30 rural 
community hospitals. Section 410A(c)(2) requires that in conducting 
the demonstration program under this section, the Secretary shall 
ensure that the aggregate payments made by the Secretary do not 
exceed the amount which the Secretary would have paid if the 
demonstration program under this section was not implemented. As 
discussed in section IV.I. of the preamble of this final rule, in 
the IPPS final rules for each of the previous 11 fiscal years, we 
have estimated the additional payments made by the program for each 
of the participating hospitals as a result of the demonstration. In 
order to achieve budget neutrality, we are adjusting the national 
IPPS rates by an amount sufficient to account for the added costs of 
this demonstration. In other words, we are applying budget 
neutrality across the payment system as a whole rather than across 
the participants of this demonstration. The language of the 
statutory budget neutrality requirement permits the agency to 
implement the budget neutrality provision in this manner. The 
statutory language requires that aggregate payments made by the 
Secretary do not exceed the amount which the Secretary would have 
paid if the demonstration was not implemented but does not identify 
the range across which aggregate payments must be held equal.
    We are adjusting the national IPPS rates according to the 
methodology set forth in section IV.I.2. of the preamble of this 
final rule. We note that the phase-out of the demonstration has 
begun with the 7 ``pre-expansion'' participating hospitals that were 
selected for the demonstration during 2004 and 2008 concluding their 
participation during FY 2015. Therefore, we have not included the 
financial experience of these hospitals in the estimated 
demonstration cost for FY 2016. Of the 15 hospitals that entered the 
demonstration in 2011 and 2012 under the Affordable Care Act 
expansion, 11 hospitals are scheduled to end their participation in 
the demonstration during FY 2016. Eight of these 11 hospitals are 
scheduled to end their participation in the demonstration prior to 
September 30, 2016. For each of these 8 hospitals, we estimate the 
reasonable cost amount and the amount that would otherwise be paid 
without the demonstration for FY 2016 on a prorated basis, 
multiplying the estimated amounts for each hospital (as derived from 
``as submitted'' cost reports for cost reporting periods ending in 
CY 2013) by the fraction of the number of months that it will 
participate in the demonstration during FY 2016 in relation to the 
total 12-month period. Accordingly, the budget neutrality offset 
amount used to determine the adjustment to the national IPPS rates 
to account for estimated demonstration costs for FY 2016 for these 
15 hospitals is $26,044,620. In addition, in this final rule, we are 
subtracting from the budget neutrality offset amount for FY 2016 the 
following: (1) The amount by which the budget neutrality offset 
amount that was finalized in the FY 2009 IPPS/LTCH PPS final rule 
exceeded the actual costs of the demonstration for FY 2009 (as shown 
in the finalized cost reports for hospitals that participated in FY 
2009 and had cost reporting periods beginning in FY 2009) 
($8,457,452); and (2) the amount by which the budget neutrality 
offset amount that was finalized for FY 2010 to account for the 
demonstration costs in FY 2010 (as set forth in the FY 2010 and 2011 
IPPS final rules) exceeded the actual costs of the demonstration 
during FY 2010 (similarly as shown in the finalized cost reports for 
hospitals that participated in FY 2010 and had for cost reporting 
periods beginning in 2010). This amount is $4,751,550. Therefore, 
the resulting total ($12,835,618) is the amount for which an 
adjustment to the IPPS rates for FY 2016 is calculated.

9. Effects of the Changes to MS-DRGs Subject to the Postacute Care 
Transfer Policy and the Special Payment Policy

    In section IV.J. of the preamble to this final rule, we discuss 
changes to the list of MS-DRGs subject to the postacute care 
transfer policy and the DRG special payment policy. As reflected in 
Table 5 listed in section VI. of the Addendum to this final rule 
(which is available via the Internet on the CMS Web site), using 
criteria set forth in regulations at Sec.  412.4, we evaluated MS-
DRG charge, discharge, and transfer data to determine which MS-DRGs 
qualify for the postacute care transfer and DRG special payment 
policies. We note that we are not making any changes in these 
payment policies in this FY 2016 final rule. We are including two 
new MS-DRGs on the list of MS-DRGs subject to the postacute care 
transfer policy and the DRG special payment policy as a result of 
our revisions of the MS-DRG classifications for FY 2016. 
Specifically, we are establishing that two new MS-DRGs will qualify 
for the postacute care transfer policy and the DRG special payment 
policy in FY 2016. Column 4 of Table I in this Appendix A shows the 
effects of the changes to the MS-DRGs and the relative payment 
weights and the application of the recalibration budget neutrality 
factor to the standardized amounts. Section 1886(d)(4)(C)(i) of the 
Act requires us annually to make appropriate DRG classification 
changes in order to reflect changes in treatment patterns, 
technology, and any other factors that may change the relative use 
of hospital resources. The analysis and methods for determining the 
changes due to the MS-DRGs and relative payment weights account for 
and include changes in the status of MS-DRG postacute care transfer 
and special payment policies. We refer readers to section I.G. of 
this Appendix A for a detailed discussion of payment impacts due to 
MS-DRG reclassification policies.

I. Effects of Changes in the Capital IPPS

1. General Considerations

    For the impact analysis presented below, we used data from the 
March 2015 update of the FY 2014 MedPAR file and the March 2015 
update of the Provider-Specific File (PSF) that is used for payment 
purposes. Although the analyses of the changes to the capital 
prospective payment system do not incorporate cost data, we used the 
March 2015 update of the most recently available hospital cost 
report data (FYs 2012 and 2013) to categorize hospitals. Our 
analysis has several qualifications. We use the best data available 
and make assumptions about case-mix and beneficiary enrollment as 
described below.
    Due to the interdependent nature of the IPPS, it is very 
difficult to precisely quantify the impact associated with each 
change. In addition, we draw upon various sources for the data used 
to categorize hospitals in the tables. In some cases (for instance, 
the number of beds), there is a fair degree of variation in the data 
from different sources. We have attempted to construct these 
variables with the best available sources overall. However, it is 
possible that some individual hospitals are placed in the wrong 
category.
    Using cases from the March 2015 update of the FY 2014 MedPAR 
file, we simulated payments under the capital IPPS for FY 2015 and 
FY 2016 for a comparison of total payments per case. Any short-term, 
acute care hospitals not paid under the general IPPS (for example, 
Indian Health Service hospitals and hospitals in Maryland) are 
excluded from the simulations.
    The methodology for determining a capital IPPS payment is set 
forth at Sec.  412.312. The basic methodology for calculating the 
capital IPPS payments in FY 2016 is as follows:

    (Standard Federal Rate) x (DRG weight) x (GAF) x (COLA for 
hospitals located in Alaska and Hawaii) x (1 + DSH Adjustment Factor 
+ IME adjustment factor, if applicable).

    In addition to the other adjustments, hospitals may receive 
outlier payments for those cases that qualify under the threshold 
established for each fiscal year. We modeled payments for each 
hospital by multiplying the capital Federal rate by the GAF and the 
hospital's case-mix. We then added estimated payments for indirect 
medical education, disproportionate share, and outliers, if 
applicable. For purposes of this impact analysis, the model includes 
the following assumptions:
     We estimate that the Medicare case-mix index will 
increase by 0.5 percent in both FYs 2015 and 2016.
     We estimate that Medicare discharges will be 
approximately 11.3 million in FY 2015 and 11.2 million in FY 2016.
     The capital Federal rate was updated beginning in FY 
1996 by an analytical framework that considers changes in the prices 
associated with capital-related costs and adjustments to account for 
forecast error, changes in the case-mix index, allowable changes in 
intensity, and other factors. As discussed in section III.A.1.a. of 
the Addendum to this final rule, the update is 1.3 percent for FY 
2016.
     In addition to the FY 2016 update factor, the FY 2016 
capital Federal rate was calculated based on a GAF/DRG budget 
neutrality adjustment factor of 0.9973 and an outlier adjustment 
factor of 0.9365. As discussed in section VI.C. of the preamble of 
this final rule, we are not making an additional MS-DRG 
documentation and coding adjustment to the capital IPPS Federal 
rates for FY 2016.

[[Page 49829]]

2. Results

    We used the actuarial model described above to estimate the 
potential impact of our changes for FY 2016 on total capital 
payments per case, using a universe of 3,369 hospitals. As described 
above, the individual hospital payment parameters are taken from the 
best available data, including the March 2015 update of the FY 2014 
MedPAR file, the March 2015 update to the PSF, and the most recent 
cost report data from the March 2015 update of HCRIS. In Table III, 
we present a comparison of estimated total payments per case for FY 
2015 and estimated total payments per case for FY 2016 based on the 
FY 2016 payment policies. Column 2 shows estimates of payments per 
case under our model for FY 2015. Column 3 shows estimates of 
payments per case under our model for FY 2016. Column 4 shows the 
total percentage change in payments from FY 2015 to FY 2016. The 
change represented in Column 4 includes the 1.3 percent update to 
the capital Federal rate and other changes in the adjustments to the 
capital Federal rate. The comparisons are provided by: (1) 
Geographic location; (2) region; and (3) payment classification.
    The simulation results show that, on average, capital payments 
per case in FY 2016 are expected to increase as compared to capital 
payments per case in FY 2015. This expected increase is due to the 
approximately 0.85 percent increase in the capital Federal rate for 
FY 2016 as compared to the FY 2015 capital Federal rate and, to a 
lesser degree, changes to the MS-DRG reclassifications and 
recalibrations and changes in outlier payments. (For a discussion of 
the determination of the capital Federal rate, we refer readers to 
section III.A. of the Addendum to this final rule.) The increase in 
capital payments per case due to the effects of changes to the MS-
DRG reclassifications and recalibrations is expected to be slightly 
greater for urban hospitals, as are the increases in capital 
payments per case due to changes in outlier payments. However, half 
of the urban areas and most of the rural areas are expected to 
experience a somewhat smaller projected increase in capital payments 
per case due to the effects of changes to the GAFs. These regional 
effects of the changes to the GAFs on capital payments are 
consistent with the projected changes in payments due to changes in 
the wage index (and policies affecting the wage index) as shown in 
Table I in section I.G. of this Appendix.
    The net impact of these changes is an estimated 2.3 percent 
change in capital payments per case from FY 2015 to FY 2016 for all 
hospitals (as shown below in Table III).
    The geographic comparison shows that, on average, hospitals in 
all classifications (urban and rural) will experience an increase in 
capital IPPS payments per case in FY 2016 as compared to FY 2015. 
Capital IPPS payments per case for hospitals in ``large urban 
areas'' have an estimated increase of 2.5 percent, while hospitals 
in rural areas, on average, are expected to experience a 1.4 percent 
increase in capital payments per case from FY 2015 to FY 2016. 
Capital IPPS payments per case for ``other urban hospitals'' are 
estimated to increase 2.1 percent. The primary factor contributing 
to the difference in the projected increase in capital IPPS payments 
per case for urban hospitals as compared to rural hospitals is the 
changes in the GAFs. Rural hospitals in all but two rural regions 
are projected to experience a decrease in capital payments due to 
the effect of changes in the GAFs, while hospitals in only half of 
the urban regions are projected to experience a decrease in capital 
payments due to the effect of the changes in the GAFs.
    The comparisons by region show that the estimated increases in 
capital payments per case from FY 2015 to FY 2016 in urban areas 
range from a 3.1 percent increase for the Pacific urban region to a 
1.1 percent increase for the New England urban region. For rural 
regions, the Pacific rural region is projected to experience the 
largest increase in capital IPPS payments per case of 3.0 percent; 
the West South Central rural region is projected to experience the 
smallest increase in capital IPPS payments per case of 0.1 percent. 
The change in the GAFs is the main factor for the West South Central 
rural region experiencing the smallest projected increase in capital 
IPPS payments among rural regions, and it is also the main 
contributor for the smallest projected increase in capital IPPS 
payments for the New England urban region. However, the changes in 
the GAFs have the opposite effect for both the Pacific urban and 
Pacific rural regions where they are a primary contributor to the 
expected larger than average increase in capital IPPS payments per 
case.
    Hospitals of all types of ownership (that is, voluntary 
hospitals, government hospitals, and proprietary hospitals) are 
expected to experience an increase in capital payments per case from 
FY 2015 to FY 2016. The increase in capital payments for voluntary 
and proprietary hospitals is estimated to be 2.3 percent. For 
government hospitals, the increase is estimated to be 2.4 percent.
    Section 1886(d)(10) of the Act established the MGCRB. Hospitals 
may apply for reclassification for purposes of the wage index for FY 
2016. Reclassification for wage index purposes also affects the GAFs 
because that factor is constructed from the hospital wage index. To 
present the effects of the hospitals being reclassified as of the 
publication of this final rule for FY 2016, we show the average 
capital payments per case for reclassified hospitals for FY 2016. 
Urban reclassified hospitals are expected to experience an increase 
in capital payments of 2.8 percent; urban nonreclassified hospitals 
are expected to experience an increase in capital payments of 2.2 
percent. The estimated percentage increase for rural reclassified 
hospitals is 1.8 percent, and for rural nonreclassified hospitals, 
the estimated percentage increase is 1.1 percent.

                                Table III--Comparison of Total Payments per Case
                                 [FY 2015 Payments Compared to FY 2016 Payments]
----------------------------------------------------------------------------------------------------------------
                                                                         Average  FY     Average  FY
                                                          Number of    2015 payments/  2016 payments/    Change
                                                          hospitals         case            case
----------------------------------------------------------------------------------------------------------------
By Geographic Location:
    All hospitals....................................           3,369             871             890        2.3
    Large urban areas (populations over 1 million)...           1,393             963             987        2.5
    Other urban areas (populations of 1 million of              1,140             833             851        2.1
     fewer)..........................................
    Rural areas......................................             836             591             599        1.4
    Urban hospitals..................................           2,533             904             925        2.3
        0-99 beds....................................             668             736             750        1.9
        100-199 beds.................................             778             788             805        2.2
        200-299 beds.................................             445             825             844        2.3
        300-499 beds.................................             428             920             943        2.4
        500 or more beds.............................             214           1,080           1,106        2.4
    Rural hospitals..................................             836             591             599        1.4
        0-49 beds....................................             329             490             497        1.5
        50-99 beds...................................             297             549             557        1.6
        100-149 beds.................................             121             591             598        1.2
        150-199 beds.................................              48             645             652        1.0
        200 or more beds.............................              41             706             715        1.3
By Region:
    Urban by Region..................................           2,533             904             925        2.3
        New England..................................             120             996           1,008        1.1

[[Page 49830]]

 
        Middle Atlantic..............................             318           1,001           1,032        3.0
        South Atlantic...............................             407             805             823        2.2
        East North Central...........................             396             868             889        2.3
        East South Central...........................             150             768             780        1.6
        West North Central...........................             166             887             902        1.6
        West South Central...........................             384             817             835        2.1
        Mountain.....................................             161             936             956        2.0
        Pacific......................................             380           1,150           1,186        3.1
        Puerto Rico..................................              51             403             408        1.4
    Rural by Region..................................             836             591             599        1.4
        New England..................................              22             822             828        0.7
        Middle Atlantic..............................              55             580             582        0.3
        South Atlantic...............................             128             554             566        2.3
        East North Central...........................             116             616             626        1.6
        East South Central...........................             164             536             542        1.1
        West North Central...........................             101             635             643        1.3
        West South Central...........................             165             524             524        0.1
        Mountain.....................................              61             660             674        2.1
        Pacific......................................              24             768             791        3.0
By Payment Classification:
    All hospitals....................................           3,369             871             890        2.3
    Large urban areas (populations over 1 million)...           1,386             964             988        2.5
    Other urban areas (populations of 1 million of              1,090             837             855        2.2
     fewer)..........................................
    Rural areas......................................             893             608             615        1.0
Teaching Status:
    Non-teaching.....................................           2,326             739             754        2.1
    Fewer than 100 Residents.........................             794             848             866        2.2
    100 or more Residents............................             249           1,227           1,259        2.6
    Urban DSH:
        100 or more beds.............................           1,593             928             950        2.4
        Less than 100 beds...........................             328             662             677        2.3
    Rural DSH:
        Sole Community (SCH/EACH)....................             260             576             580        0.7
        Referral Center (RRC/EACH)...................             347             639             647        1.2
    Other Rural:
        100 or more beds.............................              31             575             573       -0.4
        Less than 100 beds...........................             157             504             512        1.7
    Urban teaching and DSH:
        Both teaching and DSH........................             855           1,003           1,027        2.5
        Teaching and no DSH..........................             122             899             919        2.2
        No teaching and DSH..........................           1,066             780             797        2.3
        No teaching and no DSH.......................             433             797             816        2.3
    Rural Hospital Types:
        Non special status hospitals.................           2,562             904             926        2.4
        RRC/EACH.....................................             189             729             737        1.1
        SCH/EACH.....................................             327             665             672        1.1
        SCH, RRC and EACH............................             126             721             733        1.6
Hospitals Reclassified by the Medicare Geographic
 Classification Review Board:
    FY2016 Reclassifications:
        All Urban Reclassified.......................             551             923             948        2.8
        All Urban Non-Reclassified...................           1,925             902             922        2.2
        All Rural Reclassified.......................             279             623             634        1.8
        All Rural Non-Reclassified...................             504             545             551        1.1
        Other Reclassified Hospitals (Section                      46             600             589       -1.8
         1886(d)(8)(B))..............................
Type of Ownership:
    Voluntary........................................           1,934             884             904        2.3
    Proprietary......................................             879             785             803        2.3
    Government.......................................             529             917             938        2.4
Medicare Utilization as a Percent of Inpatient Days:
    0-25.............................................             533           1,046           1,074        2.7
    25-50............................................           2,134             876             896        2.3
    50-65............................................             571             717             731        1.9
    Over 65..........................................              97             523             534        2.1
----------------------------------------------------------------------------------------------------------------


[[Page 49831]]

J. Effects of Payment Rate Changes and Policy Changes Under the 
LTCH PPS

1. Introduction and General Considerations

    In section VII. of the preamble of this final rule and section 
V. of the Addendum to this final rule, we set forth the annual 
update to the payment rates for the LTCH PPS for FY 2016. In the 
preamble of this final rule, we specify the statutory authority for 
the provisions that are presented, identify those policies, and 
present rationales for our final decisions as well as alternatives 
that were considered. In this section of Appendix A to this final 
rule, we discuss the impact of the changes to the payment rate, 
factors, and other payment rate policies related to the LTCH PPS 
that are presented in the preamble of this final rule in terms of 
their estimated fiscal impact on the Medicare budget and on LTCHs.
    There are 419 LTCHs included in this impacts analysis, which 
includes data for 78 nonprofit (voluntary ownership control) LTCHs, 
326 proprietary LTCHs, and 15 LTCHs that are government-owned and 
operated. (We note that, although there are currently approximately 
430 LTCHs, for purposes of this impact analysis, we excluded the 
data of all-inclusive rate providers consistent with the development 
of the FY 2016 MS-LTC-DRG relative weights (discussed in section 
VII.C.3.c. of the preamble of this final rule)). In the impact 
analysis, we used the payment rate, factors, and policies presented 
in this final rule, including the application of the new site 
neutral payment rate required by section 1886(m)(6)(A) of the Act 
(discussed in section VII.B. of the preamble of this final rule), 
the 1.7 percent annual update to the LTCH PPS standard Federal 
payment rate in accordance with section 1886(m)(5)(C) of the Act 
(which is based on the full estimated increase of the LTCH PPS 
market basket and the reductions required by sections 1886(m)(3) and 
(m)(4) of the Act), the update to the MS-LTC-DRG classifications and 
relative weights for the LTCH PPS standard Federal payment rate 
cases, the update to the wage index values and labor-related share 
for the LTCH PPS standard Federal payment rate cases, and the best 
available claims and CCR data to estimate the change in payments for 
FY 2016.
    Under the new dual rate LTCH PPS payment structure, there will 
be two distinct payment rates for LTCH discharges beginning in FY 
2016. Under this statutory change, as discussed in section VII.B. of 
the preamble of this final rule, we provide payment for LTCH 
discharges that meet the criteria for exclusion from the site 
neutral payment rate (that is, LTCH PPS standard Federal payment 
rate cases) based on the LTCH PPS standard Federal payment rate. In 
addition, consistent with the statute, we are establishing that the 
site neutral payment rate is the lower of the IPPS comparable per 
diem amount as determined under Sec.  412.529(d)(4), including any 
applicable outlier payments as specified in Sec.  412.525(a); or 100 
percent of the estimated cost of the case as determined under 
existing Sec.  412.529(d)(2). In addition, under our finalized 
policies, there are two separate HCO targets--one for LTCH PPS 
standard Federal payment rate cases and one for site neutral payment 
rate cases. The statute also establishes a transitional payment 
method for cases that will be paid the site neutral payment rate for 
LTCH discharges occurring in cost reporting periods beginning during 
FY 2016 or FY 2017. As discussed more fully in section VII.B.4.b. of 
the preamble of this final rule, the transitional payment amount for 
site neutral payment rate cases is a blended payment rate, which 
will be calculated as 50 percent of the applicable site neutral 
payment rate amount for the discharge as determined under new Sec.  
412.522(c)(1) and 50 percent of the applicable LTCH PPS standard 
Federal payment rate for the discharge determined under Sec.  
412.523.
    Based on the best available data for the 419 LTCHs in our 
database that were considered in the analyses used for this final 
rule, we estimate that overall LTCH PPS payments in FY 2016 will 
decrease by approximately 4.6 percent (or approximately $250 
million). This projection takes into account estimated payments for 
LTCH cases that would have met the new patient-level criteria and 
been paid the LTCH PPS standard Federal payment rate if that rate 
had been in effect at the time of the discharge, and estimated 
payments for LTCH cases that would not have met those new patient-
level criteria and been paid under the site neutral payment rate if 
that rate had been in effect at the time of the discharge described 
below.
    Because the statute specifies that the site neutral payment rate 
effective date for a given LTCH is determined based on the date on 
which that LTCH's cost reporting period begins on or after October 
1, 2015, our estimate of FY 2016 LTCH PPS payments for site neutral 
payment rate cases includes an adjustment to account for this 
rolling effective date. Our approach, applied to the FY 2014 data 
that were used for the analyses in this final rule, accounts for the 
fact that LTCHs with cost reporting periods that begin after October 
1, 2015, will continue to be paid for all discharges (including 
those that do not meet the patient-level criteria for exclusion from 
the site neutral payment rate) at the LTCH PPS standard Federal 
payment rate until the start of their first cost reporting period 
beginning after October 1, 2015. Therefore, in order to estimate 
total LTCH PPS payments for site neutral payment rate cases in FY 
2016, we first identified LTCHs with cost reporting periods that 
would begin in the first quarter of FY 2016 (that is, October 
through December 2015), and modeled those LTCHs estimated FY 2016 
site neutral payment rate payments based on the transitional blended 
payment rate. We then modeled the estimated first quarter FY 2016 
payments to LTCHs with cost reporting periods that would begin after 
the first quarter of FY 2016 using the LTCH PPS standard Federal 
payment rate. We then identified the LTCHs with cost reporting 
periods that would begin in each of the remaining three quarters of 
FY 2016, and applied an analogous analysis to estimate payments in 
each respective quarter of FY 2016. (For full details on our method 
of estimating payments under our finalized policies for FY 2016, we 
refer readers to the description presented in section V.D.4. of the 
Addendum to the proposed rule.) We believe that this approach is a 
reasonable means of taking the rolling effective date into account 
when estimating FY 2016 payments. Based on the fiscal year start 
dates recorded in the March update of the Provider Specific File, of 
the 419 LTCHs in our database of LTCH claims from the March 2015 
update of the FY 2014 MedPAR files used for this final rule, the 
following percentages apply in the approach described above: 11.24 
percent of site neutral payment rate cases are from LTCHs whose cost 
reporting periods begin in the first quarter of FY 2016; 29.88 
percent of site neutral payment rate cases are from LTCHs whose cost 
reporting periods begin in the second quarter of FY 2016; 10.73 
percent of site neutral payment rate cases are from LTCHs whose cost 
reporting periods begin in the third quarter of FY 2016; and 48.15 
percent of site neutral payment rate cases are from LTCHs whose cost 
reporting periods begin in the fourth quarter of FY 2016.
    Based on the FY 2014 LTCH cases that were used for the analyses 
in this final rule, approximately 46 percent of LTCH cases would 
have been classified as site neutral payment rate cases if the site 
neutral payment rate had been in effect in FY 2014 (that is, 46 
percent of such LTCH cases would not have met the patient-level 
criteria for exclusion from the site neutral payment rate). Our 
Office of the Actuary estimates that the percent of LTCH PPS cases 
that will be paid at the site neutral payment rate in FY 2016 will 
not change significantly from the historical data. Taking into 
account the transitional blended payment rate and other policies 
applicable to the site neutral payment rate cases in FY 2016, and 
our approach to account for the rolling effective date for the new 
site neutral payment rate, we estimate that aggregate LTCH PPS 
payments for these site neutral payment rate cases will decrease by 
approximately 14.8 percent (or approximately $300 million).
    Approximately 54 percent of LTCH cases are expected to meet the 
patient-level criteria for exclusion from the site neutral payment 
rate in FY 2016, and will be paid based on the LTCH PPS standard 
Federal payment rate for the full year. We estimate that total LTCH 
PPS payments for these LTCH PPS standard Federal payment rate cases 
in FY 2016 will increase approximately 1.5 percent (or approximately 
$50 million). This estimated increase in LTCH PPS payments for LTCH 
PPS standard Federal payment rate cases in FY 2016 is primarily a 
result of the 1.7 percent annual update to the LTCH PPS standard 
Federal payment rate for FY 2016 (discussed in section V.A. of the 
Addendum to this final rule) and an estimated decrease in HCO 
payments for these cases.
    Based on the 419 LTCHs that were represented in the FY 2014 LTCH 
cases that were used for the analyses in this final rule, we 
estimate that aggregate FY 2016 LTCH PPS payments will be 
approximately $5.150 billion, as compared to estimated aggregate FY 
2015 LTCH PPS payments of approximately $5.400 billion, resulting in 
an estimated overall decrease in LTCH PPS payments of approximately 
$250 million. Because the combined distributional effects and 
estimated payment changes exceed $100

[[Page 49832]]

million, this final rule is a major economic rule. We note that this 
estimated $250 million decrease in LTCH PPS payments in FY 2016 
(which includes estimated payments for LTCH PPS standard Federal 
payment rate cases and site neutral payment rate cases) does not 
reflect changes in LTCH admissions or case-mix intensity, which will 
also affect the overall payment effects of what is in this rule.
    The LTCH PPS standard Federal payment rate for FY 2015 is 
$41,043.71. For FY 2016, we are establishing a LTCH PPS standard 
Federal payment rate of $41,762.85, which reflects the 1.7 percent 
annual update to the LTCH PPS standard Federal payment rate and the 
area wage budget neutrality factor of 1.000513 to ensure that the 
changes in the wage indexes and labor-related share do not influence 
aggregate payments. For LTCHs that fail to submit data for the LTCH 
QRP, in accordance with section 1886(m)(5)(C) of the Act, we are 
establishing an LTCH PPS standard Federal payment rate of 
$40,941.55. This reduced LTCH PPS standard Federal payment rate 
reflects the updates described above as well as the required 2.0 
percentage point reduction to the annual update for failure to 
submit data to the LTCH QRP. We note that the factors described 
above to determine the FY 2016 LTCH PPS standard Federal payment 
rate are applied to the FY 2015 LTCH PPS standard Federal rate set 
forth under Sec.  412.523(c)(3)(xi) (that is, $41,762.85).
    Table IV (column 6) shows that the estimated change attributable 
solely to the annual update to the LTCH PPS standard Federal payment 
rate is projected to result in an increase of 1.4 percent in 
payments per discharge for LTCH PPS standard Federal payment rate 
cases from FY 2015 to FY 2016, on average, for all LTCHs. In 
addition to the annual update to the LTCH PPS standard Federal 
payment rate for FY 2016, this estimated increase in aggregate LTCH 
PPS payments to LTCH PPS standard Federal payment rate cases of 1.4 
percent shown in column 6 of Table IV also includes estimated 
payments for SSO cases that will be paid using special methodologies 
that are not affected by the annual update to the LTCH PPS standard 
Federal payment rate, as well as the penalty that is applied to the 
annual update of LTCHs that do not submit the required LTCH QRP 
data. Therefore, for all hospital categories, the projected increase 
in payments based on the LTCH PPS standard Federal payment rate to 
LTCH PPS standard Federal payment rate cases is somewhat less than 
the 1.7 percent annual update for FY 2016.
    As discussed in section V.B. of the Addendum to this final rule, 
we are updating the wage index values for FY 2016 based on the most 
recent available data, and we are continuing to use labor market 
areas based on the OMB CBSA delineations. In addition, we are 
slightly lowering the labor-related share from 62.306 percent to 
62.0 percent under the LTCH PPS for FY 2016, based on the most 
recent available data on the relative importance of the labor-
related share of operating and capital costs based on the FY 2009-
based LTCH-specific market basket. We also are applying an area wage 
level budget neutrality factor of 1.000513 to ensure that the 
changes to the wage data and labor-related share do not result in a 
change in estimated aggregate LTCH PPS payments to LTCH PPS standard 
Federal payment rate cases, which increases the LTCH PPS standard 
Federal payment rate by approximately 0.095 percent.
    We currently estimate total HCO payments for LTCH PPS standard 
Federal payment rate cases are projected to decrease from FY 2015 to 
FY 2016. Using the FY 2014 LTCH cases that were used for the 
analyses in this final rule, we estimate that the FY 2015 HCO 
threshold of $14,972 (as established in the FY 2015 IPPS/LTCH PPS 
final rule) will result in estimated HCO payments for LTCH PPS 
standard Federal payment rate cases in FY 2015 that are above the 
estimated 8 percent target. Specifically, we currently estimate that 
HCO payments for LTCH PPS standard Federal payment rate cases will 
be approximately 8.1 percent of the estimated total LTCH PPS 
standard Federal payment rate payments in FY 2015. Combined with our 
estimate that FY 2016 HCO payments for LTCH PPS standard Federal 
payment rate cases would be 8.0 percent of estimated total LTCH PPS 
standard Federal payment rate payments in FY 2016, this results in 
the estimated decrease of approximately 0.1 percent between FY 2015 
and FY 2016.
    In calculating these estimated HCO payments we increased 
estimated costs by our actuaries' projected market basket percentage 
increase factor. This increase in estimated costs also results in a 
projected increase in SSO payments in FY 2016. We estimate that 
these increased SSO payments in FY 2016 will increase total payments 
for LTCH PPS standard Federal payment rate cases by 0.2 percent. 
(Payments for SSO cases represent approximately 13 percent of the 
estimated total payments for LTCH PPS standard Federal payment rate 
cases.)
    Table IV below shows the estimated impact of the payment rate 
and policy changes on LTCH PPS payments for LTCH PPS standard 
Federal payment rate cases for FY 2016 by comparing estimated FY 
2015 LTCH PPS payments to estimated FY 2016 LTCH PPS payments. (As 
noted earlier, our analysis does not reflect changes in LTCH 
admissions or case-mix intensity.) The projected increase in 
payments from FY 2015 to FY 2016 for LTCH PPS standard Federal 
payment rate cases of 1.5 percent is attributable to the impacts of 
the change to the LTCH PPS standard Federal payment rate (1.4 
percent in Column 6) and the effect of the estimated decrease in HCO 
payments for LTCH PPS standard Federal payment cases (-0.1 percent), 
and the estimated increase in payments for SSO cases (0.2 percent).
    As we discuss in detail throughout this final rule, based on the 
most recent available data, we believe that the provisions of this 
final rule relating to the LTCH PPS, which are projected to result 
in an overall decrease in estimated aggregate LTCH PPS payments, and 
the resulting LTCH PPS payment amounts will result in appropriate 
Medicare payments that are consistent with the statute.

2. Impact on Rural Hospitals

    For purposes of section 1102(b) of the Act, we define a small 
rural hospital as a hospital that is located outside of an urban 
area and has fewer than 100 beds. As shown in Table IV, we are 
projecting a 1.5 percent increase in estimated payments for LTCH PPS 
standard Federal payment rate cases. This estimated impact is based 
on the FY 2014 data for the 21 rural LTCHs (out of 419 LTCHs) that 
were used for the analyses in this final rule. We note that these 
impacts do not include LTCH PPS site neutral payment rate cases for 
the reasons discussed in section I.J.3. of this Appendix.

3. Anticipated Effects of LTCH PPS Payment Rate Changes and Policy 
Changes

a. Budgetary Impact

    Section 123(a)(1) of the BBRA requires that the PPS developed 
for LTCHs ``maintain budget neutrality.'' We believe that the 
statute's mandate for budget neutrality applies only to the first 
year of the implementation of the LTCH PPS (that is, FY 2003). 
Therefore, in calculating the FY 2003 standard Federal rate under 
Sec.  412.523(d)(2), we set total estimated payments for FY 2003 
under the LTCH PPS so that estimated aggregate payments under the 
LTCH PPS were estimated to equal the amount that would have been 
paid if the LTCH PPS had not been implemented.
    Section 1886(m)(6)(A) of the Act establishes a new dual rate 
LTCH PPS payment structure with two distinct payment rates for LTCH 
discharges beginning in FY 2016. As discussed in section VII.B. of 
the preamble of this final rule, under this statutory change, LTCH 
discharges that meet the patient-level criteria for exclusion from 
the site neutral payment rate (that is, LTCH PPS standard Federal 
payment rate cases) will be paid based on the LTCH PPS standard 
Federal payment rate. LTCH discharges that will be paid at the site 
neutral payment rate will generally be paid the lower of the IPPS 
comparable per diem amount, including any applicable HCO payments or 
100 percent of the estimated cost of the case. The statute also 
establishes a transitional payment method for cases that will be 
paid at the site neutral payment rate for LTCH discharges occurring 
in cost reporting periods beginning during FY 2016 or FY 2017, under 
which the site neutral payment rate cases will be paid a blended 
payment rate calculated as 50 percent of the applicable site neutral 
payment rate amount for the discharge and 50 percent of the 
applicable LTCH PPS standard Federal payment rate for the discharge. 
(For additional details on the application of the site neutral 
payment rate beginning in FY 2016, we refer readers to section 
VII.B. of the preamble of this final rule.)
    As discussed above in section I.J.1. of this Appendix, we 
project a decrease in aggregate LTCH PPS payments in FY 2016 of 
approximately $250 million. This estimated decrease in payments 
reflects the projected increase in payments to LTCH PPS standard 
Federal payment rate cases of approximately $50 million and the 
projected decrease in payments to site neutral payment rate cases of 
approximately $300 million under the new dual rate LTCH PPS payment 
rate structure required by the statute beginning in FY 2016.
    As discussed in section VII.B.7.b. of the preamble of this final 
rule, our actuaries

[[Page 49833]]

project cost and resource changes for site neutral payment rate 
cases due to the site neutral payment rates required under the 
statute. Specifically, our actuaries project that the costs and 
resource use for cases paid at the site neutral payment rate will 
likely be lower, on average, than the costs and resource use for 
cases paid at the LTCH PPS standard Federal payment rate, and will 
likely mirror the costs and resource use for IPPS cases assigned to 
the same MS-DRG. While we are able to incorporate this projection at 
an aggregate level into our payment modeling, because the historical 
claims data that we are using in this final rule to project 
estimated FY 2016 LTCH PPS payments (that is, FY 2014 LTCH claims 
data) do not reflect this actuarial projection, we are unable to 
model the impact of the change in LTCH PPS payments for site neutral 
payment rate cases at the same level of detail with which we are 
able to model the impacts of the changes to LTCH PPS payments for 
LTCH PPS standard Federal payment rate cases. Therefore, Table IV 
below only reflects changes in LTCH PPS payments for LTCH PPS 
standard Federal payment rate cases and, unless otherwise noted, the 
remaining discussion in section I.J.3 of this Appendix refers only 
to the impact on LTCH PPS payments for LTCH PPS standard Federal 
payment rate cases. Below we present our provider impact analysis 
for the changes that affect LTCH PPS payments for LTCH PPS standard 
Federal payment rate cases.

b. Impact on Providers

    Under the new dual rate LTCH PPS payment structure, the statute 
establishes two distinct payment rates for LTCH discharges occurring 
in cost reporting periods beginning on or after October 1, 2015. 
Under that statute, any discharges that occur on or after October 1, 
2015, but prior to the start of the LTCH's FY 2016 cost reporting 
period will be paid at the LTCH PPS standard Federal payment rate. 
On or after the start of an LTCH's FY 2016 cost reporting period, 
discharges are paid based on the nature of the case. As described 
previously, LTCH PPS standard Federal payment rate cases are defined 
as LTCH discharges that will meet the patient-level criteria to be 
excluded from the typically lower site neutral payment rate, and 
site neutral payment rate cases are defined as LTCH discharges that 
will not meet the patient-level criteria and will generally be paid 
the generally lower site neutral payment rate. For discharges 
occurring in cost reporting periods beginning in FY 2016 or 2017, 
however, the statute specifies that site neutral payment rate cases 
will be paid based on a transitional payment method that will be 
calculated as 50 percent of the applicable site neutral payment rate 
amount and 50 percent of the applicable LTCH PPS standard Federal 
payment rate.
    The basic methodology for determining a per discharge payment 
for LTCH PPS standard Federal payment rate cases is set forth under 
Sec.  412.515 through Sec.  412.536. In addition to adjusting the 
LTCH PPS standard Federal payment rate by the MS-LTC-DRG relative 
weight, we make adjustments to account for area wage levels and 
SSOs. LTCHs located in Alaska and Hawaii also have their payments 
adjusted by a COLA. As explained previously, under our application 
of the new dual rate LTCH PPS payment structure required under 
section 1886(m)(6) of the Act, the LTCH PPS standard Federal payment 
rate would generally only be used to determine payments for LTCH PPS 
standard Federal payment rate cases (that is, those LTCH PPS cases 
that meet the statutory criteria to be excluded from the site 
neutral payment rate). Under the new statutory changes to the LTCH 
PPS, LTCH discharges that will not meet the patient-level criteria 
for exclusion will be paid the site neutral payment rate, which we 
are calculating as the lower of the IPPS comparable per diem amount 
as determined under Sec.  412.529(d)(4), including any applicable 
outlier payments, or 100 percent of the estimated cost of the case 
as determined under existing Sec.  412.529(d)(2). In addition, when 
certain thresholds are met, LTCHs also will be able to receive HCO 
payments for both LTCH PPS standard Federal payment rate cases and 
site neutral payment rate cases that are paid at the IPPS comparable 
per diem amount.
    To understand the impact of the changes to the LTCH PPS payments 
for LTCH PPS standard Federal payment rate cases presented in this 
final rule on different categories of LTCHs for FY 2016, it is 
necessary to estimate payments per discharge for FY 2015 using the 
rates, factors, and the policies established in the FY 2015 IPPS/
LTCH PPS final rule and estimate payments per discharge for FY 2016 
using the rates, factors, and the policies finalized in this FY 2016 
IPPS/LTCH PPS final rule (as discussed in section VII. of the 
preamble of this final rule and section V. of the Addendum to this 
final rule). As discussed elsewhere in this rule, these estimates 
are based on the best available LTCH claims data and other factors, 
such as the application of inflation factors to estimate costs for 
SSO and HCO cases in each year. The resulting analyses can then be 
used to compare how our finalized policies applicable to LTCH PPS 
standard Federal payment rate cases affect different groups of 
LTCHs.
    For the following analysis, we group hospitals based on 
characteristics provided in the OSCAR data, FY 2012 through FY 2013 
cost report data in HCRIS, and PSF data. Hospital groups included 
the following:
     Location: Large urban/other urban/rural.
     Participation date.
     Ownership control.
     Census region.
     Bed size.

c. Calculation of LTCH PPS Payments for LTCH PPS Standard Federal 
Payment Rate Cases

    For purposes of this impact analysis, to estimate the per 
discharge payment effects of our finalized policies on payments for 
LTCH PPS standard Federal payment rate cases, we simulated FYs 2015 
and 2016 payments on a case-by-case basis using historical LTCH 
claims from the FY 2014 MedPAR files that would have met the 
criteria to be paid at the LTCH PPS standard Federal payment rate if 
the statutory patient-level criteria had been in effect at the time 
of discharge for those cases. For modeling FY 2015 LTCH PPS 
payments, we used the FY 2015 standard Federal rate of $41,043.71, 
or $40,240.51 for LTCHs that failed to submit quality data as 
required under the requirements of the LTCH QRP, which reflects the 
2.0 percentage points reduction required by section 1886(m)(5)(C) of 
the Act. Similarly, for modeling FY 2016 LTCH PPS standard Federal 
payment rate payments, we used the FY 2016 standard Federal payment 
rate of $41,762.85, or $40,941.55 for LTCHs that failed to submit 
quality data as required under the requirements of the LTCH QRP, 
again, to reflect the 2.0 percentage points reduction required by 
section 1886(m)(5)(C) of the Act. In each case, we applied the 
applicable adjustments for area wage levels and the COLA for LTCHs 
located in Alaska and Hawaii. Specifically, for modeling FY 2015 
LTCH PPS payments, we used the current FY 2015 labor-related share 
(62.306 percent); the wage index values established in the Tables 
12A through 12D listed in the Addendum to the FY 2015 IPPS/LTCH PPS 
final rule (which are available via the Internet on the CMS Web 
site), including the transitional blended wage index for the 
implementation of the CBSA delineations in FY 2015; the FY 2015 
fixed-loss amount for LTCH PPS standard Federal payment rate cases 
of $14,972 (as discussed in section V.D. of the Addendum to that 
final rule) and the FY 2015 COLA factors (shown in the table in 
section V.C. of the Addendum to that final rule) to adjust the FY 
2015 nonlabor-related share (37.694 percent) for LTCHs located in 
Alaska and Hawaii. Similarly, for modeling FY 2016 LTCH PPS 
payments, we used the FY 2016 LTCH PPS labor-related share (62.0 
percent), the FY 2016 wage index values from Tables 12A and 12B 
listed in section VI. of the Addendum to this final rule (which are 
also available via the Internet on the CMS Web site), the FY 2016 
fixed-loss amount for LTCH PPS standard Federal payment rate cases 
of $16,423 (as discussed in section V.D.3. of the Addendum to this 
final rule), and the FY 2016 COLA factors (shown in the table in 
section V.C. of the Addendum to this final rule) to adjust the FY 
2016 nonlabor-related share (38.0 percent) for LTCHs located in 
Alaska and Hawaii.
    As discussed above, our impact analysis reflects an estimated 
change in payments for SSO cases, as well as an estimated decrease 
in HCO payments for LTCH PPS standard Federal payment rate cases (as 
described previously in section I.J.1. of this Appendix). In 
modeling payments for SSO and HCO cases for LTCH PPS standard 
Federal payment rate cases, we applied an inflation factor of 4.6 
percent (determined by the Office of the Actuary) to update the 2014 
costs of each case.
    The impacts presented below reflect the estimated ``losses'' or 
``gains'' among the various classifications of LTCHs from FY 2015 to 
FY 2016 based on the payment rates and policy changes applicable to 
LTCH PPS standard Federal payment rate cases presented in this final 
rule. Table IV illustrates the estimated aggregate impact of the 
change in LTCH PPS payments for LTCH PPS standard Federal payment 
rate cases among various classifications of LTCHs. (As discussed 
previously, these impacts do not include LTCH PPS site neutral 
payment rate cases.)

[[Page 49834]]

     The first column, LTCH Classification, identifies the 
type of LTCH.
     The second column lists the number of LTCHs of each 
classification type.
     The third column identifies the number of LTCH cases 
expected to meet the LTCH PPS standard Federal payment rate 
criteria.
     The fourth column shows the estimated FY 2015 payment 
per discharge for LTCH cases expected to meet the LTCH PPS standard 
Federal payment rate criteria (as described above).
     The fifth column shows the estimated FY 2016 payment 
per discharge for LTCH cases expected to meet the LTCH PPS standard 
Federal payment rate criteria (as described above).
     The sixth column shows the percentage change in 
estimated payments per discharge for LTCH cases expected to meet the 
LTCH PPS standard Federal payment rate criteria from FY 2015 to FY 
2016 due to the annual update to the standard Federal rate (as 
discussed in section V.A.2. of the Addendum to this final rule).
     The seventh column shows the percentage change in 
estimated payments per discharge for LTCH cases expected to meet the 
LTCH PPS standard Federal payment rate criteria from FY 2015 to FY 
2016 for changes to the area wage level adjustment (that is, the 
wage indexes and the labor-related share), including the application 
of an area wage level budget neutrality factor (as discussed in 
section V.B. of the Addendum to this final rule).
     The eighth column shows the percentage change in 
estimated payments per discharge for LTCH cases expected to meet the 
LTCH PPS standard Federal payment rate criteria from FY 2015 (Column 
4) to FY 2016 (Column 5) for all changes (and includes the effect of 
estimated changes to HCO and SSO payments).

[[Page 49835]]



                                      Table IV--Impact of Payment Rate and Policy Changes to LTCH PPS Payments for Standard Payment Rate Cases for FY 2016
                                                               [Estimated FY 2015 payments compared to estimated FY 2016 payments]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                           Percent change in
                                                                                                      Average FY 2016   Percent change in  payments per case  Percent change in
                                                                 Number of LTCH    Average FY 2015   LTCH PPS standard  payments per case  due to changes to  payments per case
            LTCH Classification              Number of LTCHs      PPS standard     LTCH PPS payment   federal payment   due to the annual    the area wage     from FY 2015 to
                                                                federal payment        per case       rate payment per    update to the     level adjustment   FY 2016 for all
                                                                   rate cases                             case \1\      LTCH PPS standard     with budget        changes \4\
                                                                                                                         federal rate \2\    neutrality \3\
(1)                                                       (2)                (3)                (4)                (5)                (6)                (7)                (8)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
All Providers.............................                419             73,745            $45,764            $46,448                1.4                0.0                1.5
By Location:
  Rural...................................                 21              2,167             38,203             38,565                1.3               -0.8                0.9
  Urban...................................                398             71,578             45,993             46,687                1.4                0.0                1.5
    Large.................................                200             42,605             48,296             48,995                1.4                0.0                1.4
    Other.................................                198             28,973             42,606             43,293                1.5                0.0                1.6
By Participation Date:
  Before Oct. 1983........................                 14              2,077             42,350             43,513                1.5                0.5                2.7
  Oct. 1983-Sept. 1993....................                 43              9,068             51,140             51,812                1.4                0.0                1.3
  Oct. 1993-Sept. 2002....................                180             32,620             44,461             45,190                1.5               -0.1                1.6
  October 2002 and After..................                182             29,980             45,793             46,398                1.4                0.1                1.3
By Ownership Type:
  Voluntary...............................                 78              9,900             46,891             47,628                1.4                0.0                1.6
  Proprietary.............................                326             62,265             45,412             46,081                1.4                0.0                1.5
Government................................                 15              1,580             52,605             53,544                1.4                0.1                1.8
By Region:
  New England.............................                 13              2,924             41,298             42,367                1.4                0.4                2.6
  Middle Atlantic.........................                 29              5,315             51,549             51,942                1.5               -0.2                0.8
  South Atlantic..........................                 61             12,139             45,783             46,357                1.4                0.0                1.3
  East North Central......................                 69             12,214             46,310             46,961                1.5               -0.1                1.4
  East South Central......................                 34              5,181             44,398             44,929                1.5                0.0                1.2
  West North Central......................                 25              3,759             45,421             46,069                1.4               -0.4                1.4
  West South Central......................                130             19,551             40,235             40,932                1.4               -0.2                1.7
  Mountain................................                 33              4,281             47,101             47,782                1.4               -0.1                1.4
  Pacific.................................                 25              8,381             56,045             57,071                1.4                0.5                1.8
By Bed Size:
  Beds: 0-24..............................                 26              1,286             41,622             42,489                1.4                0.4                2.1
  Beds: 25-49.............................                195             25,087             43,495             44,099                1.4               -0.1                1.4
  Beds: 50-74.............................                118             20,400             46,794             47,390                1.4               -0.1                1.3
  Beds: 75-124............................                 47             13,003             49,000             49,719                1.5                0.1                1.5
  Beds: 125-199...........................                 21              7,734             45,647             46,458                1.5                0.1                1.8
  Beds: 200 +.............................                 12              6,235             45,778             46,805                1.5                0.3                2.2
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Estimated FY 2016 LTCH PPS payments to LTCH cases that are expected to meet the LTCH PPS standard Federal payment rate criteria based on the payment rate and factor changes applicable to
  LTCH PPS standard Federal payment rate cases presented in the preamble of and the Addendum to this final rule.
\2\ Percent change in estimated payments per discharge for LTCH cases that are expected to meet the LTCH PPS standard Federal payment rate criteria from FY 2015 to FY 2016 for the annual
  update to the LTCH PPS standard Federal payment rate.
\3\ Percent change in estimated payments per discharge for LTCH cases that are expected to meet the LTCH PPS standard Federal payment rate criteria from FY 2015 to FY 2016 for changes to the
  area wage level adjustment under Sec.   412.525(c) (as discussed in section V.B. of the Addendum to this final rule).
\4\ Percent change in estimated payments per discharge for LTCH cases that are expected to meet the LTCH PPS standard Federal payment rate criteria from FY 2015 (shown in Column 4) to FY 2016
  (shown in Column 5), including all of the changes to the rates and factors applicable to LTCH PPS standard Federal payment rate cases presented in the preamble and the Addendum to this final
  rule. Note, this column, which shows the percent change in estimated payments per discharge for all changes, does not equal the sum of the percent changes in estimated payments per discharge
  for the annual update to the LTCH PPS standard Federal payment rate (column 6) and the changes to the area wage level adjustment with budget neutrality (Column 7) due to the effect of
  estimated changes in both estimated payments to SSO cases that are paid based on estimated costs and aggregate HCO payments for LTCH cases that are expected to meet the LTCH PPS standard
  Federal payment rate criteria (as discussed in this impact analysis), as well as other interactive effects that cannot be isolated.


[[Page 49836]]

d. Results

    Based on the FY 2014 LTCH cases (from 419 LTCHs) that were used 
for the analyses in this final rule, we have prepared the following 
summary of the impact (as shown above in Table IV) of the LTCH PPS 
payment rate and finalized policy changes for LTCH PPS standard 
Federal payment rate cases presented in this final rule. The impact 
analysis in Table IV shows that estimated payments per discharge for 
LTCH PPS standard Federal payment rate cases are expected to 
increase 1.5 percent, on average, for all LTCHs from FY 2015 to FY 
2016 as a result of the payment rate and policy changes applicable 
to LTCH PPS standard Federal payment rate cases presented in this 
final rule. This estimated 1.5 percent increase in LTCH PPS payments 
per discharge to LTCH PPS standard Federal payment rate cases from 
FY 2015 to FY 2016 for all LTCHs (as shown in Table IV) was 
determined by comparing estimated FY 2016 LTCH PPS payments (using 
the payment rates and factors discussed in this final rule) to 
estimated FY 2015 LTCH PPS payments for LTCH discharges which would 
be LTCH PPS standard Federal payment rate cases if the new dual rate 
LTCH PPS payment structure had been in effect at the time of the 
discharge (as described in section I.J.3. of this Appendix).
    As stated previously, we are updating the LTCH PPS standard 
Federal payment rate for FY 2016 by 1.7 percent based on the latest 
estimate of the LTCH PPS market basket increase (2.4 percent), the 
reduction of 0.5 percentage point for the MFP adjustment, and the 
0.2 percentage point reduction consistent with sections 1886(m)(3) 
and (m)(4) of the Act. For LTCHs that fail to submit quality data 
under the requirements of the LTCH QRP, as required by section 
1886(m)(5)(C) of the Act, a 2.0 percentage point reduction would be 
applied to the annual update to the LTCH PPS standard Federal rate. 
As explained earlier in this section, for most categories of LTCHs 
(as shown in Table IV, Column 6), the payment increase due to the 
1.7 percent annual update to the LTCH PPS standard Federal payment 
rate is projected to result in approximately a 1.4 percent increase 
in estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases for all LTCHs from FY 2015 to FY 2016. This is 
because our estimate of the changes in payments due to the update to 
the LTCH PPS standard Federal payment rate also reflects estimated 
payments for SSO cases that will be paid using special methodologies 
that are not affected by the update to the LTCH PPS standard Federal 
payment rate. Consequently, we estimate that payments to LTCH PPS 
standard Federal payment rate cases may increase by less than 1.7 
percent for certain hospital categories due to the annual update to 
the LTCH PPS standard Federal payment rate for FY 2016.

(1) Location

    Based on the most recent available data, the vast majority of 
LTCHs are located in urban areas. Only approximately 5 percent of 
the LTCHs are identified as being located in a rural area, and 
approximately 3 percent of all LTCH PPS standard Federal payment 
rate cases are expected to be treated in these rural hospitals. The 
impact analysis presented in Table IV shows that the overall average 
percent increase in estimated payments per discharge for LTCH PPS 
standard Federal payment rate cases from FY 2015 to FY 2016 for all 
hospitals is 1.5 percent. For rural LTCHs, the overall percent 
change for LTCH PPS standard Federal payment rate cases is estimated 
to be a 0.9 percent increase, while for urban LTCHs, we estimate the 
increase will be 1.5 percent. Large urban LTCHs are projected to 
experience an increase of 1.4 percent in estimated payments per 
discharge for LTCH PPS standard Federal payment rate cases from FY 
2015 to FY 2016, and other urban LTCHs are projected to experience 
an increase of 1.6 percent in estimated payments per discharge for 
LTCH PPS standard Federal payment rate cases from FY 2015 to FY 
2016, as shown in Table IV.

(2) Participation Date

    LTCHs are grouped by participation date into four categories: 
(1) Before October 1983; (2) between October 1983 and September 
1993; (3) between October 1993 and September 2002; and (4) October 
2002 and after. Based on the most recent available data, the 
categories of LTCHs with the largest expected percentage of LTCH PPS 
standard Federal payment rate cases (approximately 44 percent) are 
in LTCHs that began participating in the Medicare program between 
October 1993 and September 2002, and they are projected to 
experience a 1.6 percent increase in estimated payments per 
discharge for LTCH PPS standard Federal payment rate cases from FY 
2015 to FY 2016, as shown in Table IV.
    Approximately 3 percent of LTCHs began participating in the 
Medicare program before October 1983, and these LTCHs are projected 
to experience a higher than average percent increase (2.6 percent) 
in estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2015 to FY 2016, as shown in Table IV, 
which is primarily due to a projected larger than average increase 
in payments due to the changes to the area wage adjustment. 
Approximately 10 percent of LTCHs began participating in the 
Medicare program between October 1983 and September 1993. These 
LTCHs are projected to experience a 1.3 percent increase in 
estimated payments for LTCH PPS standard Federal payment rate cases 
from FY 2015 to FY 2016. LTCHs that began participating in the 
Medicare program after October 1, 2002, which treat approximately 40 
percent of all LTCH PPS standard Federal payment rate cases, are 
projected to experience a 1.3 percent increase in estimated payments 
from FY 2015 to FY 2016.

(3) Ownership Control

    LTCHs are grouped into three categories based on ownership 
control type: Voluntary, proprietary, and government. Based on the 
most recent available data, approximately 18 percent of LTCHs are 
identified as voluntary (Table IV). The majority (nearly 78 percent) 
of LTCHs are identified as proprietary while government-owned and 
operated LTCHs represent approximately 4 percent of LTCHs. Based on 
ownership type, voluntary LTCHs are expected to experience an 
average increase in payments to LTCH PPS standard Federal payment 
rate cases of 1.6 percent; proprietary LTCHs are expected to 
experience an increase of 1.5 percent in payments to LTCH PPS 
standard Federal payment rate cases, while government-owned and 
operating LTCHs are expected to experience an increase in payments 
to LTCH PPS standard Federal payment rate cases of 1.8 percent from 
FY 2015 to FY 2016.

(4) Census Region

    Estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases for FY 2016 are projected to increase for LTCHs 
located in all regions in comparison to FY 2015. Of the 9 census 
regions, we project that the increase in estimated payments per 
discharge to LTCH PPS standard Federal payment rate cases would have 
the largest positive impact on LTCHs in the New England region (2.6 
percent as shown in Table IV), which is largely attributable to the 
changes in the area wage level adjustment.
    In contrast, LTCHs located in the Middle Atlantic region are 
projected to experience the smallest increase in estimated payments 
per discharge for LTCH PPS standard Federal payment rate cases from 
FY 2015 to FY 2016. The lower than national average estimated 
increase in payments of 0.8 percent is primarily due to estimated 
decreases in payments associated with the changes to the area wage 
level adjustment.

(5) Bed Size

    LTCHs are grouped into six categories based on bed size: 0-24 
beds; 25-49 beds; 50-74 beds; 75-124 beds; 125-199 beds; and greater 
than 200 beds. All bed size categories are projected to receive an 
increase in estimated payments per discharge for LTCH PPS standard 
Federal payment rate cases from FY 2015 to FY 2016. We project that 
large LTCHs (200+ beds) will experience a 2.2 percent increase in 
payments for LTCH PPS standard Federal payment rate cases, which is 
higher than the national average mostly due to a larger than average 
increase from the area wage level adjustment. Similarly, we project 
that both small LTCHs (0-24 beds) and relatively large LTCHs (125-
199 beds) will experience a 2.1 percent increase and 1.8 percent 
increase, respectively, in payments for LTCH PPS standard Federal 
payment rate cases, which is also higher than the national average 
mostly due to increases in the area wage level adjustment. LTCHs 
with 25 to 49 beds and 75 to 124 beds are expected to experience a 
nearly average increase in payments per discharge for LTCH PPS 
standard Federal payment rate cases from FY 2015 to FY 2016 (1.4 
percent and 1.5 percent, respectively), while LTCHs with between 50 
and 74 beds are expected to experience a smaller than average 
increase in payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2015 to FY 2016 (1.3 percent).

4. Effect on the Medicare Program

    As stated previously, we project that the provisions of this 
final rule will result in an increase in estimated aggregate LTCH 
PPS payments to LTCH PPS standard Federal payment rate cases in FY 
2016 relative to FY

[[Page 49837]]

2015 of approximately $50 million (or approximately 1.5 percent) for 
the 419 LTCHs in our database. Although, as stated previously, the 
hospital-level impacts do not include LTCH PPS site neutral payment 
rate cases, we estimate that the provisions of this final rule will 
result in a decrease in estimated aggregate LTCH PPS payments to 
site neutral payment rate cases in FY 2016 relative to FY 2015 of 
approximately $300 million (or approximately 14.8 percent) for the 
419 LTCHs in our database. Therefore, we project that the provisions 
of this final rule will result in a decrease in estimated aggregate 
LTCH PPS payments to all cases in FY 2016 relative to FY 2015 of 
approximately $250 million (or approximately 4.6 percent) for the 
419 LTCHs in our database.

5. Effect on Medicare Beneficiaries

    Under the LTCH PPS, hospitals receive payment based on the 
average resources consumed by patients for each diagnosis. We do not 
expect any changes in the quality of care or access to services for 
Medicare beneficiaries as a result of this final rule, but we 
continue to expect that paying prospectively for LTCH services will 
enhance the efficiency of the Medicare program.

K. Effects of Requirements for the Hospital Inpatient Quality 
Reporting (IQR) Program

    In section VIII.A. of the preamble of this final rule, we 
discuss our requirements for hospitals to report quality data under 
the Hospital IQR Program in order to receive the full annual 
percentage increase for the FY 2018 payment determination.
    In this final rule, we are finalizing our proposals to remove 
nine measures from the Hospital IQR Program for the FY 2018 payment 
determination and subsequent years:
     STK-01 Venous Thromboembolism (VTE) Prophylaxis (NQF 
#0434);
     STK-06: Discharged on Statin Medication* (NQF #0439);
     STK-08: Stroke Education* (NQF endorsement removed);
     VTE-1: Venous Thromboembolism Prophylaxis* (NQF #0371);
     VTE-2: Intensive Care Unit Venous Thromboembolism 
Prophylaxis* (NQF #0372);
     VTE-3: Venous Thromboembolism Patients with 
Anticoagulation Overlap Therapy* (NQF #0373);
     AMI-7a Fibrinolytic Therapy Received Within 30 Minutes 
of Hospital Arrival* (NQF #0164);
     IMM-1 Pneumococcal Immunization (NQF #1653); and
     SCIP-Inf-4 Cardiac Surgery Patients with Controlled 
Postoperative Blood Glucose (NQF #0300).
    (An asterisk (*) indicates that the measure is finalized for 
retention as an electronic clinical quality measure for the FY 2018 
payment determination and subsequent years in section VIII.A.8. of 
the preamble of this final rule.)
    The anticipated effect of removing these measures will be a 
reduction in the burden associated with the collection of chart-
abstracted data. Due to the burden associated with the collection of 
chart-abstracted data, we estimate that the removal of AMI-7a will 
result in a burden reduction of approximately 219,000 hours across 
all hospitals. We estimate that the removal of the 6 VTE and STK 
chart-abstracted measures will result in a burden reduction of 
approximately 522,000 hours across all hospitals. The remaining two 
measures we are finalizing for removal have been previously 
suspended from the Hospital IQR Program. Therefore, their removal 
will not affect burden to hospitals. In total, we estimate that the 
removal of 9 measures will result in a total burden reduction of 
approximately 741,000 hours for the FY 2018 payment determination 
across all hospitals.
    We are retaining six of the chart-abstracted measures finalized 
for removal as electronic clinical quality measures. We believe 
retaining some measures as electronic clinical quality measures will 
not affect the overall burden, as these measures were available for 
electronic reporting under previous requirements.
    In this final rule, we are finalizing refinements, modified from 
what was proposed, to expand the measure cohorts for: (1) The 
Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) 
Following Pneumonia Hospitalization measure (NQF #0468); and (2) the 
Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate 
(RSRR) Following Pneumonia Hospitalization measure (NQF #0506). 
Expanding the measure cohorts to include a broader population of 
patients adds a large number of patients, as well as additional 
hospitals, to these measures. However, this expansion will not 
affect the burden on hospitals or hospital performance on the 
Hospital IQR Program because these measures are claims-based and, 
therefore, require no additional effort on hospitals' part to submit 
the required data.
    We also are finalizing our proposal to add seven of the eight 
measures we proposed to the Hospital IQR Program measure set. Four 
of these seven measures are added beginning with the FY 2018 payment 
determination and for subsequent years; three of these measures, 
addressing clinical episode-based payments, are added beginning with 
the FY 2019 payment determination and for subsequent years. Six of 
these measures are claims-based, and one measure is structural. The 
seven new measures are:
     Hospital Survey on Patient Safety Culture (structural);
     Kidney/UTI Clinical Episode-Based Payment (claims-
based);
     Cellulitis Clinical Episode-Based Payment (claims-
based);
     Gastrointestinal Hemorrhage Clinical Episode-Based 
Payment (claims-based);
     Hospital-Level, Risk-Standardized Payment Associated 
with an Episode-of-Care for Primary Elective THA/TKA (claims-based);
     Excess Days in Acute Care after Hospitalization for 
Acute Myocardial Infarction (claims-based); and
     Excess Days in Acute Care after Hospitalization for 
Heart Failure (claims-based).
    We are not finalizing our proposal to add the Lumbar Spine 
Fusion/Refusion Clinical Episode-Based Payment measure (claims-
based).
    We believe adopting the six claims-based measures above will 
have no effect on hospital burden because they do not require 
additional effort on the part of hospitals. We further believe 
adopting the Hospital Survey on Patient Safety Culture measure will 
have a minimal effect on hospital burden, as it involves filling out 
a one-time form to report on this measure for a given performance 
period. In total we estimate a burden of 15 minutes per hospital to 
complete other forms such as the ECE and Measure Exception form, and 
to report structural measures. The estimate of 15 minutes includes 
all previously finalized and newly required structural measures.
    For the FY 2018 payment determination and subsequent years, we 
also are finalizing a modification of our proposal to require 
hospitals to report 16 electronic clinical quality measures to 
instead require hospitals to report a minimum of 4 electronic 
clinical quality measures. Under this modified policy, no NQS domain 
distribution will be required. We also are requiring that hospitals 
submit one quarter of data (either Q3 or Q4) for CY 2016/FY 2018 
payment determination and subsequent years by February 28, 2017. We 
believe the finalized requirement will increase the burden 
associated with electronic clinical quality measure reporting 
because electronic reporting was previously voluntary. The total 
burden increase is estimated to be approximately 40 minutes per 
hospital to report 4 electronic clinical quality measures for one 
quarter. For hospitals choosing to submit more electronic clinical 
quality measures, the total burden increase for hospitals to report 
16 electronic clinical quality measures would be approximately 2 
hours and 40 minutes per hospital for one quarter.
    We are finalizing our proposal to change the requirements for 
population and sampling such that hospitals will be required to 
submit population and sample size data only for those measures that 
a hospital submits as chart-abstracted measures under the Hospital 
IQR Program. We believe this finalized proposal will result in a 
minimal decrease in burden as hospitals will not have to report 
population and sample size if they electronically report any of the 
measures that can be reported either as an electronic clinical 
quality measure or via chart-abstraction.
    We also are finalizing our proposal to modify the existing 
processes for validation of chart-abstracted Hospital IQR Program 
data to remove one stratum. This modification will not affect 
hospital burden. For validation of chart-abstracted data for the FY 
2018 payment determination and subsequent years, we require 
hospitals to provide 72 charts per hospital per year (with an 
average page length of 1,500), including 40 charts for HAI 
validation and 32 charts for clinical process of care validation, 
for a total of 108,000 pages per hospital per year. We reimburse 
hospitals at 12 cents per photocopied page (79 FR 50346) for a total 
per hospital cost of $12,960. For hospitals providing charts 
digitally via a re-writable disc, such as encrypted CD-ROMs, DVDs, 
or flash drives, we will reimburse hospitals at a rate of 40 cents 
per disc. We do not believe

[[Page 49838]]

any additional burden is associated with data submitting this 
information via Web portal or PDF.
    In addition to the activities described above, participation in 
the Hospital IQR Program requires hospitals to participate in a 
number of other activities, including: (1) Reviewing reports for 
claims-based measure sets; (2) completing HAI validation templates 
for CLABSI and CAUTI; (3) completing HAI validation templates for 
MRSA bacteremia and CDI; and (4) completing other forms and 
structural measures. The cumulative effects of these activities on 
facility burden are expected to be substantially similar to that 
stated for FY 2017. Considering the proposals finalized in this 
final rule, as well as our updated estimates for the number of 
records reported and the time associated with data reporting 
activities, we estimate a total burden of 2,289 hours per hospital 
and 7.6 million hours across approximately 3,300 hospitals 
participating in the Hospital IQR Program for the FY 2018 payment 
determination.
    In general, however, we anticipate that, because of the new 
requirements we are finalizing for reporting for the FY 2018 payment 
determination, the number of hospitals not receiving the full annual 
percentage increase may be higher than average. Information is not 
available to determine the precise number of hospitals that will not 
meet the requirements to receive the full annual percentage increase 
for the FY 2018 payment determination. Historically, 100 hospitals, 
on average, of those participating in the Hospital IQR Program do 
not receive the full annual percentage increase in any fiscal year. 
The highest number of hospitals failing to meet program requirements 
was approximately 200 after the introduction of new NHSN reporting 
requirements. If the number of hospitals failing does increase 
because of the new requirements, we anticipate that, over the long 
run, this number will decline as hospitals gain more experience with 
these requirements.
    Finally, under OMB Control Number 0938-1022, we estimated that 
the total burden for the FY 2017 payment determinations was 1,781 
hours per hospital and 5.9 million hours across approximately 3,300 
hospitals participating in the Hospital IQR Program. We estimate 
here that the total burden for the FY 2018 payment determination 
will increase to 2,289 hours per hospital and 7.6 million hours 
across approximately 3,300 hospitals due to the proposals discussed 
above and updates to the historical data used to determine the 
number of cases reported and time for reporting per measure set. The 
table below describes the hospital burden associated with the 
Hospital IQR Program requirements.

              Burden Impact of Hospital IQR Program Requirements for FY 2018 Payment Determination
----------------------------------------------------------------------------------------------------------------
                                                                              Burden per
                                                          Burden per       hospital for all
                                       Number of         hospital for       requirements as      Net change in
Hospital IQR Program requirement       hospitals          previously            adopted           burden per
                                       impacted            finalized         (continuing,          hospital
                                                                            removed, added)
----------------------------------------------------------------------------------------------------------------
Chart[dash]abstracted and         3,300.............  1,131 hours.......  906 hours.........  -225 hours.
 structural measures, forms.
Review reports for claims-based   3,300.............  4 hours...........  4 hours...........  0.
 measures.
Electronic Clinical Quality       3,300.............  0 hours             40 minutes........  +40 minutes.
 Measure Reporting.                                    (electronic
                                                       clinical quality
                                                       measure reporting
                                                       voluntary for FY
                                                       2017).
Validation templates............  Up to 600.........  72 hours..........  72 hours..........  0.
Electronic Clinical Quality       Up to 100.........  16 hours..........  0 hours (no test    -16 hours.
 Measure validation test.                                                  this year).
Validation charts photocopying..  Up to 600.........  $8,496............  $12,960...........  +$4,464.
----------------------------------------------------------------------------------------------------------------

    In implementing the Hospital IQR Program and other quality 
reporting programs, we have focused on measures that have high 
impact and support CMS and HHS priorities for improved quality and 
efficiency of care for Medicare beneficiaries.

L. Effects of Requirements for the PPS-Exempt Cancer Hospital 
Quality Reporting (PCHQR) Program for FY 2018

    In section VIII.B. of the preamble of this final rule, we 
discuss our policies for the quality data reporting program for PPS-
exempt cancer hospitals (PCHs), which we refer to as the PPS-Exempt 
Cancer Hospital Quality Reporting (PCHQR) Program. The PCHQR Program 
is authorized under section 1866(k) of the Act, which was added by 
section 3005 of the Affordable Care Act.
    In section VIII.B.3. of the preamble of this final rule, we are 
finalizing our proposal that PCHs must submit data on three 
additional measures beginning with the FY 2018 program: (1) The CDC 
NHSN Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant 
Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF #1716); 
(2) the CDC NHSN Facility-Wide Inpatient Hospital-Onset Clostridium 
difficile Infection (CDI) Outcome Measure (NQF #1717); and, (3) the 
CDC NHSN Influenza Vaccination Coverage Among Healthcare Personnel 
Measure (NQF #0431). In conjunction with our finalized proposal in 
section VIII.B.2. of the preamble of this final rule to remove the 
six SCIP measures from the PCHQR Program beginning with fourth 
quarter (Q4) 2015 discharges and for subsequent years, the PCHQR 
measure set will consist of 16 measures for the FY 2018 program.
    The impact of the new requirements for the PCHQR Program is 
expected to be minimal overall because all 11 PCHs are already 
submitting quality measure data to the CDC NHSN and are familiar 
with this reporting process. Beginning with Q1 2013 events, PCHs 
have been submitting Central Line-associated Bloodstream Infection 
(CLABSI) and Catheter-Associated Urinary Tract Infection (CAUTI) 
data to the CDC NHSN (77 FR 53566). Similarly, beginning with Q1 
2014 events, PCHs have been submitting Surgical Site Infections 
(SSI) data to the CDC NHSN (78 FR 50849). As a result, PCHs are 
familiar with the CDC NHSN IT infrastructure and programmatic 
operations. In addition to fostering transparency and facilitating 
public reporting, we believe our requirements uphold our goals in 
improving quality of care and achieving better health outcomes, 
which outweigh burden.
    One expected effect of the PCHQR Program is to keep the public 
informed of the quality of care provided by PCHs. We will publicly 
display quality measure data collected under the PCHQR Program as 
required under the Act. These data will be displayed on the Hospital 
Compare Web site. The goals of making these data available to the 
public in a user-friendly and relevant format include, but are not 
limited to: (1) Allowing the public to compare PCHs in order to make 
informed health care decisions regarding care setting; and (2) 
providing information about current trends in health care. 
Furthermore, PCHs can use their own health care quality data for 
many purposes such as in risk management programs, healthcare 
associated infection prevention programs, and research and 
development activities, among others.

M. Effects of Requirements for the Long-Term Care Hospital Quality 
Reporting Program (LTCH QRP) for FY 2018

    In section VIII.C.1. of the preamble of this final rule, we 
discuss the implementation of section 1886(m)(5) of the Act, which 
was added by section 3004(a) of the Affordable Care Act. Section 
1886(m)(5) of the Act provides that, for rate year 2014 and each 
subsequent year, any LTCH that does not submit data to the Secretary 
in accordance with section 1886(m)(5)(C) and (F) of the Act shall 
receive a two (2) percentage point reduction to the annual update to 
the standard Federal rate for discharges for the hospital during the 
applicable fiscal year.
    In the FY 2015 IPPS/LTCH PPS final rule (76 FR 50443 through 
50445), we estimated

[[Page 49839]]

that only a few LTCHs will not receive the full annual percentage 
increase in any fiscal year as a result of failure to submit data 
under the LTCH QRP. There are approximately 442 LTCHs currently 
reporting quality data to CMS. At the time that this analysis was 
prepared, 47, or approximately 10 percent, of these LTCHs did not 
receive the full annual percentage increase for the FY 2015 annual 
payment update determination. Information is not available to 
determine the precise number of LTCHs that will not meet the 
requirements to receive the full annual percentage increase for the 
FY 2016 payment determination.
    We believe that a majority of LTCHs will continue to collect and 
submit data for the FY 2017 payment determination and subsequent 
years because they will continue to view the LTCH QRP as an 
important step in improving the quality of care patients receive in 
the LTCHs. We believe that the burden associated with the LTCH QRP 
is the time and effort associated with data collection.
    In this FY 2016 IPPS/LTCH PPS final rule, we are retaining 12 
previously finalized measures, 2 of which we are adopting in order 
to establish their use as cross-setting measures that satisfy the 
required addition of quality measures under the domains of skin 
integrity and incidence of major falls, as mandated by the section 
1899B of the Act: Percent of Residents or Patients with Pressure 
Ulcers That Are New or Worsened (Short Stay) (NQF #0678), and an 
Application of Percent of Residents Experiencing One or More Falls 
with Major Injury (Long Stay) (NQF #0674). We are adopting a third 
previously finalized measure, All-Cause Unplanned Readmission 
Measure for 30 Days Post-Discharge from LTCHs (NQF #2512), in order 
to establish the newly NQF-endorsed status of this measure. Finally, 
we are finalizing an Application of Percent of LTCH Patients With an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function (NQF #2631; endorsed on 07/23/2015), which 
satisfies the addition of a quality measure under the third 
initially required domain of functional status, cognitive function, 
and changes in function and cognitive function, as mandated by 
section 1899B of the Act.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50443 through 
50445) we discussed burden estimates that were inclusive of the 12 
previously finalized measures we are retaining in this final rule. 
We previously estimated the total cost for all 12 quality measures 
to be $17,410 per LTCH annually, or $7,695,423 for all LTCHs 
annually (79 FR 50443 through 50445); or $2,992,384 for all quality 
measures reported via the CDC's NHSN; and $4,703,039 for all quality 
measures reported to CMS using the LTCH CARE Data Set version 2.01. 
For a list of the 12 previously finalized measures included in the 
above burden estimate, we refer readers to the FY 2015 IPPS/LTCH PPS 
final rule.
    The burden calculation discussed in the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 50443 through 50445) accounts for any burden 
associated with newly finalized measures in this FY 2016 IPPS/LTCH 
PPS final rule. The measure, the Percent of Residents or Patients 
with Pressure Ulcers That Are New or Worsened (Short Stay) (NQF 
#0678), is currently being reported by LTCHs using version 2.01 of 
the LTCH CARE Data Set, which has burden approval under OMB control 
number 0938-1163. The burden associated with the application of the 
measure, the Percent of Residents Experiencing One or More Falls 
with Major Injury (Long Stay) (NQF #0674), is discussed at length in 
the FY 2015 IPPS/LTCH PPS final rule, and is included in the above 
total annual burden figures in that rule, as well as listed above.
    The measure, All-Cause Unplanned Readmission Measure for 30 Days 
Post-Discharge from LTCHs (NQF #2512), is calculated based on CMS 
FFS claims data, and therefore does not have any associated data 
reporting burden for LTCH providers.
    The new quality measure we are finalizing for inclusion in the 
LTCH QRP, the cross-setting functional status process measure: an 
Application of the Percent of LTCH Patients with an Admission and 
Discharge Functional Assessment and a Care Plan That Addresses 
Function, is not specifically discussed in the FY 2015 IPPS/LTCH PPS 
final rule. However, the data elements used to report this quality 
measure to CMS are included in that discussion and burden estimate 
in that final rule, because we are finalizing our proposal to use a 
subset of the same data elements that are used to report the 
previously finalized measure, the Percent of LTCH Patients with an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function, which is included in that burden estimate. 
Therefore, the addition of this quality measure to the LTCH QRP does 
not increase burden on LTCHs.
    Currently, LTCHs use two separate data collection mechanisms to 
report quality data to CMS: The CDC's NHSN, which is used to report 
all Healthcare Associated Infection (HAI) and vaccination data (used 
to calculate CAUTI, CLABSI, MRSA, CDI, VAE, and Healthcare Personnel 
Influenza vaccination measures); and the Quality Improvement and 
Evaluation System Assessment Submission and Processing (QIES ASAP) 
system, which is used by LTCHs to report quality data via the LTCH 
CARE Data Set.
    The data collection burden associated with the reporting of the 
quality measures (HAI and vaccination) reported via the CDC's NHSN 
is discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50443 
through 50445). However, we note that these measures are stewarded 
by the CDC, and the reporting burden is approved under OMB control 
number 0920-0666.
    The remaining quality measures are reported to CMS by LTCHs 
using the LTCH CARE Data Set. Currently, LTCHs are using version 
2.01 of the LTCH CARE Data Set (approved under OMB control number 
0938-1163) which includes data elements related to two quality 
measures: Percent of Residents or Patients with Pressure Ulcers That 
Are New or Worsened (NQF #0678) and Percent of Residents or Patients 
Who Were Assessed and Appropriately Given the Seasonal Influenza 
Vaccine (NQF #0680).
    We have developed a subsequent iteration of the LTCH CARE Data 
Set (version 3.00), which will also include data elements for the 
three quality measures we previously finalized in the FY 2015 IPPS/
LTCH PPS final rule: Application of Percent of Residents 
Experiencing One or More Falls with Major Injury (Long Stay) (NQF 
#0674); Percent of LTCH Patients with an Admission and Discharge 
Functional Assessment and a Care Plan That Addresses Function (NQF 
#2631; endorsed on 07/23/2015); and Functional Status Outcome 
Measure: Change in Mobility Among LTCH Patients Requiring Ventilator 
Support (NQF #2632; endorsed on 07/23/2015). We refer readers to 
section X.B.9. of the preamble of this final rule for a discussion 
of the additional data elements in version 3.00 of the LTCH CARE 
Data Set.
    Version 3.00 of the LTCH CARE Data Set will also be used to 
report the newly finalized cross-setting functional status process 
measure, an Application of the Percent of LTCH Patients with an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function (NQF #2631; endorsed on 07/23/2015). However, the 
data items that will inform this measure are a subset of the data 
elements currently used to report the LTCH-specific measure, Percent 
of LTCH Patients with an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function (NQF #2631; 
endorsed on 07/23/2015). Therefore, this measure will not add any 
data collection burden beyond that discussed in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50443 through 50445), in which NQF #2631 
was finalized.
    We discussed the LTCH burden related to the submission using the 
LTCH CARE Data Set version 3.00 in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50443 through 50445), and this burden is included in the 
total annual burden noted in that final rule, which is $17,410 per 
LTCH annually, or $7,695,423 for all LTCHs annually. We believe that 
this estimate remains unchanged as a result of the LTCH QRP 
proposals we are finalizing in this final rule. We received several 
comments on these proposals, which we summarize and respond to 
below.
    Comment: One commenter recommended that CMS modify the LTCH CARE 
Data Set to ensure consistent and necessary data will appropriately 
and accurately populate the required quality measures for the 
implementation of the IMPACT Act of 2014 as well as ongoing 
implementation of the LTCH QRP.
    Response: We appreciate and agree with the commenter's 
recommendations. As evidenced from our efforts to develop and 
successfully implement the LTCH CARE Data Set version 1.01 to 
support the implementation of the Percent of Residents or Patients 
with Pressure Ulcers That Are New or Worsened (Short Stay) (NQF 
#0678) measure starting on October 1, 2012, and our subsequent 
revisions and implementation of LTCH CARE Data Set version 2.01 
starting on July 1, 2014 to support the implementation of an 
additional quality measure the Percent of Residents or Patients Who 
Were Assessed and Appropriately Given the Seasonal Influenza Vaccine 
(Short Stay) (NQF #0680), we have developed the LTCH CARE Data Set 
version 3.00 to support the implementation

[[Page 49840]]

of additional quality measures as part of the LTCH QRP starting on 
April 1, 2016. We intend to continue to further revise and develop 
the LTCH CARE Data Set in order to support CMS efforts to 
successfully implement quality measures we adopt for the LTCH QRP 
through future rulemaking. At this time, we believe the LTCH CARE 
Data Set version 3.00 includes the necessary items required to 
support data collection to appropriately and accurately capture 
patient-level data for each of the quality measures adopted for 
April 1, 2016 implementation, for the LTCH QRP.
    Comment: One commenter suggested combining several items in 
Section GG of the LTCH CARE Data Set version 3.00. Specifically, the 
commenter suggested combining the three walking items and the two 
wheelchair items.
    Response: We appreciate the commenter's review of the LTCH CARE 
Data Set. Based on our analyses of the PAC PRD data and our feedback 
from the PAC PRD participants, we believe it is important to 
document the walking and wheeling distances as well as assistance 
needed for the activities of walking and wheelchair mobility. 
Therefore, we will not make changes to the LTCH CARE Data Set 
version 3.00 in response to this suggestion.
    Comment: Several commenters were concerned that, in the process 
of trying to limit some of the data fields that made up the LTCH 
CARE Data Set, CMS has inappropriately collapsed response 
categories, such as in the section focused on Active Diagnoses, 
Comorbidities and Co-Existing Conditions. For example, the 
commenters asked for clarification of Severe Cancers and 
Opportunistic Infections as they considered the term to be 
subjective and could lead to inconsistent reporting across 
facilities.
    Response: We appreciate the commenters' review of the LTCH CARE 
Data Set. We will provide detailed instructions in the LTCH QRP 
Manual version 3.0, including providing examples of severe cancers 
and opportunistic infections. The diagnosis groupings that we 
include on the LTCH CARE Data Set version 3.00 are the labels and 
definitions from the Hierarchical Condition Categories (HCCs), and 
some HCCs were further merged based on sample size requirements and 
the regression analysis results. Severe cancers can include, but are 
not limited to, cancer of stomach; cancer of liver; cancer of 
pancreas; cancer of trachea, bronchus, lung, and pleura; and 
multiple myeloma. Opportunistic infections include, but are not 
limited to, cytomegaloviral disease, including pneumonia; 
candidiasis of lung, esophagus, or disseminated; opportunistic 
mycoses (aspergillosis, cryptococcosis, zygomycosis, etc.); and 
pneumocystis pneumonia. We understand the importance of education 
and have worked in the past with public outreach, including training 
sessions, training manuals, Webinars, open door forums, help desk 
support and a Web site that hosts training information (http://www.youtube.com/user/CMSHHSgov). We plan to conduct such activities 
for the new items.
    Comment: A few commenters suggested that, for patients who are 
in a coma/persistent vegetative state, the LTCH CARE Data Set 
include a skip pattern that allows the clinician to skip the 
Confusion Assessment Method (CAM(copyright)) items.
    Response: We appreciate the commenters' suggestion to add a skip 
pattern that would reduce burden. We have taken this suggestion into 
consideration and determined that skipping the 
CAM(copyright) for patients in a coma is appropriate and 
therefore, we will implement this skip pattern.
    Comment: One commenter noted that many of the data elements in 
the LTCH CARE Data Set will engender codes indicating ``Not 
applicable'' and ``Activity did not occur due to medical condition 
or safety concerns.''
    Response: We agree with the commenter and are aware that for 
several of the data elements in the LTCH CARE Data Set, codes ``Not 
applicable'' and ``Activity did not occur due to medical condition 
or safety concerns'' may be appropriate. We anticipate that in the 
instances when a patient is unable to respond and family members are 
not able to provide the information, these codes would be 
appropriate. We invite readers to review the data submission 
specifications for information on specific codes (including ``Not 
applicable'' and ``Activity did not occur due to medical condition 
or safety concerns'') allowed for each data element of the LTCH CARE 
Data Set version 3.00, available for download on the CMS Web site 
at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Technical-Information.html.
    Comment: One commenter noted that the CARE Item Set would take 
60 minutes to complete in the LTCH setting although Pilot 2 of the 
PAC PRD (available at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Reports/Research-Reports-Items/PAC_Payment_Reform_Demo_Final.html) stated that, despite the 
request for time estimates at the end of each CARE tool domain, 
``The amount of time taken to fill out the form was completed for up 
to half the records for some sections, and not at all for others.''
    Response: We thank the commenter for reviewing and drawing upon 
the PAC PRD reports to inform their concern and feedback on burden 
estimates. We would like to clarify that the burden associated with 
the CARE Tool (which was used in PAC PRD) is not directly applicable 
to the LTCH CARE Data Set (which has been in use as part of LTCH QRP 
since October 1, 2012). Specifically, we are clarifying that we pay 
careful attention to and make every attempt to reduce LTCH burden 
for compliance with the LTCH QRP (including completion of LTCH CARE 
Data Set to submit data on quality measures adopted for the LTCH 
QRP). This is among several reasons why we have taken an incremental 
approach to develop and implement the LTCH CARE Data Set to include 
only those items that support data collection for quality measures 
adopted for the LTCH QRP and why we have not implemented the CARE 
Tool in its entirety.
    Further, we are clarifying that there is no new burden 
associated with the additions to Section GG of the LTCH CARE Data 
Set, since the measures adopted through this final rule will utilize 
data elements that are collected under the LTCH CARE Data Set 
version 3.00. These data elements were previously finalized through 
rulemaking in order to inform quality measures that were previously 
finalized, and for which data collection will begin on April 1, 
2016.
    After consideration of the public comments we received, we are 
finalizing our estimates of the burden associated with the use of 
LTCH CARE Data Set version 3.00 for implementation starting April 1, 
2016. Further, we are finalizing our use of CDC's burden estimates 
for using NHSN for data collection and submission of NHSN-based 
quality measures.

II. Alternatives Considered

    This final rule contains a range of policies. It also provides 
descriptions of the statutory provisions that are addressed, 
identifies the finalized policies, and presents rationales for our 
decisions and, where relevant, alternatives that were considered.

III. Overall Conclusion

1. Acute Care Hospitals

    Table I of section I.G. of this Appendix demonstrates the 
estimated distributional impact of the IPPS budget neutrality 
requirements for the MS-DRG and wage index changes, and for the wage 
index reclassifications under the MGCRB. Table I also shows an 
overall increase of 0.4 percent in operating payments. As discussed 
in section I.G. of this Appendix, we estimate that operating 
payments will increase by approximately $378 million in FY 2016 
relative to FY 2015. However, when we account for the impact of the 
changes in Medicare DSH payments and the impact of the new 
additional payments based on uncompensated care in accordance with 
section 3133 of the Affordable Care Act, based on estimates provided 
by the CMS Office of the Actuary, consistent with our policy 
discussed in section IV.D. of the preamble of this final rule, we 
estimate that operating payments will increase by approximately $75 
million relative to FY 2015. We currently estimate that the changes 
in new technology add-on payments for FY 2016 will increase spending 
by approximately $9.5 million due to the expiration of three new 
technology add-on payments and the additional approval of two new 
technology add-on payments. This estimate, combined with our 
estimated increase in FY 2016 operating payment of $75 million, 
results in an estimated increase of approximately $85 million for FY 
2016. We estimate that hospitals will experience a 2.3 percent 
increase in capital payments per case, as shown in Table III of 
section I.I. of this Appendix. We project that there will be a $187 
million increase in capital payments in FY 2016 compared to FY 2015. 
The cumulative operating and capital payments will result in a net 
increase of approximately $272 million to IPPS providers. The 
discussions presented in the previous pages, in combination with the 
rest of this final rule, constitute a regulatory impact analysis.

[[Page 49841]]

2. LTCHs

    Overall, LTCHs are projected to experience a decrease in 
estimated payments per discharge in FY 2016. In the impact analysis, 
we are using the rates, factors, and policies presented in this 
final rule, including updated wage index values and relative 
weights, and the best available claims and CCR data to estimate the 
change in payments under the LTCH PPS for FY 2016. Accordingly, 
based on the best available data for the 419 LTCHs in our database, 
we estimate that FY 2016 LTCH PPS payments will decrease 
approximately $250 million relative to FY 2015 as a result of the 
payment rates and factors presented in this final rule.

IV. Accounting Statements and Tables

A. Acute Care Hospitals

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table V below, we 
have prepared an accounting statement showing the classification of 
the expenditures associated with the provisions of this final rule 
as they relate to acute care hospitals. This table provides our best 
estimate of the change in Medicare payments to providers as a result 
of the changes to the IPPS presented in this final rule. All 
expenditures are classified as transfers to Medicare providers.
    The cost to the Federal Government associated with the policies 
in this final rule are estimated at $272 million.


Table V--Accounting Statement: Classification of Estimiated Expenditures
                 Under the IPPS From FY 2015 to FY 2016
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  -$272 million.
From Whom to Whom.........................  Federal Government to IPPS
                                             Medicare Providers.
------------------------------------------------------------------------

B. LTCHs

    As discussed in section I.J. of this Appendix, the impact 
analysis of the payment rates and factors presented in this final 
rule under the LTCH PPS, is projected to result in a decrease in 
estimated aggregate LTCH PPS payments in FY 2016 relative to FY 2015 
of approximately $250 million based on the data for 419 LTCHs in our 
database that are subject to payment under the LTCH PPS. Therefore, 
as required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table VI below, 
we have prepared an accounting statement showing the classification 
of the expenditures associated with the provisions of this final 
rule as they relate to the changes to the LTCH PPS. Table VI 
provides our best estimate of the estimated change in Medicare 
payments under the LTCH PPS as a result of the payment rates and 
factors and other provisions presented in this final rule based on 
the data for the 419 LTCHs in our database. All expenditures are 
classified as transfers to Medicare providers (that is, LTCHs).
    The savings to the Federal Government associated with the 
policies for LTCHs in this final rule are estimated at $250 million.


Table VI--Accounting Statement: Classification of Estimated Expenditures
            From the FY 2015 LTCH PPS to the FY 2016 LTCH PPS
------------------------------------------------------------------------
                 Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers............  -$250 million.
From Whom to Whom.........................  Federal Government to LTCH
                                             Medicare Providers.
------------------------------------------------------------------------

V. Regulatory Flexibility Act (RFA) Analysis

    The RFA requires agencies to analyze options for regulatory 
relief of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
government jurisdictions. We estimate that most hospitals and most 
other providers and suppliers are small entities as that term is 
used in the RFA. The great majority of hospitals and most other 
health care providers and suppliers are small entities, either by 
being nonprofit organizations or by meeting the SBA definition of a 
small business (having revenues of less than $7.5 million to $38.5 
million in any 1 year). (For details on the latest standards for 
health care providers, we refer readers to page 36 of the Table of 
Small Business Size Standards for NAIC 622 found on the SBA Web site 
at: http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.)
    For purposes of the RFA, all hospitals and other providers and 
suppliers are considered to be small entities. Individuals and 
States are not included in the definition of a small entity. We 
believe that the provisions of this final rule relating to acute 
care hospitals would have a significant impact on small entities as 
explained in this Appendix. Because we lack data on individual 
hospital receipts, we cannot determine the number of small 
proprietary LTCHs. Therefore, we are assuming that all LTCHs are 
considered small entities for the purpose of the analysis in section 
I.J. of this Appendix. MACs are not considered to be small entities. 
Because we acknowledge that many of the affected entities are small 
entities, the analysis discussed throughout the preamble of this 
final rule constitutes our regulatory flexibility analysis. In FY 
2016 IPPS/LTCH PPS proposed rule, we solicited public comments on 
our estimates and analysis of the impact of our proposals on those 
small entities. Any public comments that we received and our 
responses are presented throughout this final rule.

VI. Impact on Small Rural Hospitals

    Section 1102(b) of the Social Security Act requires us to 
prepare a regulatory impact analysis for any proposed or final rule 
that may have a significant impact on the operations of a 
substantial number of small rural hospitals. This analysis must 
conform to the provisions of section 603 of the RFA. With the 
exception of hospitals located in certain New England counties, for 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of an urban area and 
has fewer than 100 beds. Section 601(g) of the Social Security 
Amendments of 1983 (Pub. L. 98-21) designated hospitals in certain 
New England counties as belonging to the adjacent urban area. Thus, 
for purposes of the IPPS and the LTCH PPS, we continue to classify 
these hospitals as urban hospitals. (We refer readers to Table I in 
section I.G. of this Appendix for the quantitative effects of the 
policy changes under the IPPS for operating costs.)

VII. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4) also requires that agencies assess anticipated costs and 
benefits before issuing any rule whose mandates require spending in 
any 1 year of $100 million in 1995 dollars, updated annually for 
inflation. In 2015, that threshold level is approximately $144 
million. This final rule will not mandate any requirements for 
State, local, or tribal governments, nor will it affect private 
sector costs.

VIII. Executive Order 12866

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

Appendix B: Recommendation of Update Factors for Operating Cost Rates 
of Payment for Inpatient Hospital Services

I. Background

    Section 1886(e)(4)(A) of the Act requires that the Secretary, 
taking into consideration the recommendations of MedPAC, recommend 
update factors for inpatient hospital services for each fiscal year 
that take into account the amounts necessary for the efficient and 
effective delivery of medically appropriate and necessary care of 
high quality. Under section 1886(e)(5) of the Act, we are required 
to publish update factors recommended by the Secretary in the 
proposed and final IPPS rules, respectively. Accordingly, this 
Appendix provides the recommendations for the update factors for the 
IPPS national standardized amount, the Puerto Rico-specific 
standardized amount, the hospital-specific rate for SCHs and MDHs, 
and the rate-of-increase limits for certain hospitals excluded from 
the IPPS, as well as LTCHs. In prior years, we have made a 
recommendation in the IPPS proposed rule and final rule for the 
update factors for the payment rates for IRFs and IPFs. However, for 
FY 2016, we plan to include the Secretary's recommendation for the 
update factors for IRFs and IPFs in separate Federal Register 
documents at the time that we announce the annual updates for IRFs 
and IPFs. We also discuss our response to

[[Page 49842]]

MedPAC's recommended update factors for inpatient hospital services.

II. Inpatient Hospital Update for FY 2016

A. FY 2016 Inpatient Hospital Update

    As discussed in section IV.A. of the preamble to this final 
rule, for FY 2016, consistent with section 1886(b)(3)(B) of the Act, 
as amended by sections 3401(a) and 10319(a) of the Affordable Care 
Act, we are setting the applicable percentage increase by applying 
the following adjustments in the following sequence. Specifically, 
the applicable percentage increase under the IPPS is equal to the 
rate-of-increase in the hospital market basket for IPPS hospitals in 
all areas, subject to a reduction of one-quarter of the applicable 
percentage increase (prior to the application of other statutory 
adjustments; also referred to as the market basket update or rate-
of-increase (with no adjustments)) for hospitals that fail to submit 
quality information under rules established by the Secretary in 
accordance with section 1886(b)(3)(B)(viii) of the Act and a 66 2/3 
percent reduction to three-fourths of the applicable percentage 
increase (prior to the application of other statutory adjustments; 
also referred to as the market basket update or rate-of-increase 
(with no adjustments)) for hospitals not considered to be meaningful 
electronic health record (EHR) users in accordance with section 
1886(b)(3)(B)(ix) of the Act, and then subject to an adjustment 
based on changes in economy-wide productivity (the multifactor 
productivity (MFP) adjustment), and an additional reduction of 0.2 
percentage point as required by section 1886(b)(3)(B)(xii) of the 
Act. Sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as 
added by section 3401(a) of the Affordable Care Act, state that 
application of the MFP adjustment and the additional FY 2016 
adjustment of 0.2 percentage point may result in the applicable 
percentage increase being less than zero.
    In the FY 2016 IPPS/LTCH PPS proposed rule, based on the most 
recent data available at that time, in accordance with section 
1886(b)(3)(B) of the Act, we proposed to establish the FY 2016 
market basket update used to determine the applicable percentage 
increase for the IPPS based on IHS Global Insight, Inc.'s (IGI's) 
first quarter 2015 forecast of the FY 2010-based IPPS market basket 
rate-of-increase with historical data through fourth quarter 2014, 
which was estimated to be 2.7 percent. Based on the most recent data 
available for this FY 2016 final rule, in accordance with section 
1886(b)(3)(B) of the Act, we are establishing the FY 2016 market 
basket update used to determine the applicable percentage increase 
for the IPPS based on IHS Global Insight, Inc.'s (IGI's) second 
quarter 2015 forecast of the FY 2010-based IPPS market basket rate-
of-increase, which is estimated to be 2.4 percent.
    In accordance with section 1886(b)(3)(B) of the Act, as amended 
by section 3401(a) of the Affordable Care Act, in section IV.A. of 
the preamble of the FY 2016 IPPS/LTCH PPS proposed rule, we proposed 
a multifactor productivity (MFP) adjustment (the 10-year moving 
average of MFP for the period ending FY 2016) of 0.6 percent. 
Therefore, based on IGI's first quarter 2015 forecast of the FY 
2010-based IPPS market basket, depending on whether a hospital 
submits quality data under the rules established in accordance with 
section 1886(b)(3)(B)(viii) of the Act (hereafter referred to as a 
hospital that submits quality data) and is a meaningful EHR user 
under section 1886(b)(3)(B)(ix) of the Act (hereafter referred to as 
a hospital that is a meaningful EHR user), we presented in the 
proposed rule four possible applicable percentage increases that 
could be applied to the standardized amount. Based on the most 
recent data available for this FY 2016 IPPS/LTCH PPS final rule, in 
accordance with section 1886(b)(3)(B) of the Act, as amended by 
section 3401(a) of the Affordable Care Act, in section IV.A. of the 
preamble of this final rule, we are establishing a MFP adjustment 
(the 10-year moving average of MFP for the period ending FY 2016) of 
0.5 percentage point.
    In accordance with section 1886(b)(3)(B) of the Act, as amended 
by section 3401(a) of the Affordable Care Act, as discussed in 
section IV.A. of the preamble of this final rule, we are 
establishing the applicable percentages increases for the FY 2016 
updates based on IGI's second quarter 2015 forecast of the FY 2010-
based IPPS market basket, depending on whether a hospital submits 
quality data under the rules established in accordance with section 
1886(b)(3)(B)(viii) of the Act and is a meaningful EHR user under 
section 1886(b)(3)(B)(ix) of the Act, as outlined in the table 
below.

----------------------------------------------------------------------------------------------------------------
                                                                                          Hospital     Hospital
                                                                Hospital     Hospital     did NOT      did NOT
                                                               submitted    submitted      submit       submit
                                                                quality      quality      quality      quality
                           FY 2016                            data and is  data and is  data and is  data and is
                                                                   a          NOT a          a          NOT a
                                                               meaningful   meaningful   meaningful   meaningful
                                                                EHR user     EHR user     EHR user     EHR user
----------------------------------------------------------------------------------------------------------------
Market Basket Rate[dash]of[dash]Increase....................          2.4          2.4          2.4          2.4
Adjustment for Failure to Submit Quality Data under Section           0.0          0.0         -0.6         -0.6
 1886(b)(3)(B)(viii) of the Act.............................
Adjustment for Failure to be a Meaningful EHR User under              0.0         -1.2          0.0         -1.2
 Section 1886(b)(3)(B)(ix) of the Act.......................
MFP Adjustment under Section 1886(b)(3)(B)(xi) of the Act...         -0.5         -0.5         -0.5         -0.5
Statutory Adjustment under Section 1886(b)(3)(B)(xii) of the         -0.2         -0.2         -0.2         -0.2
 Act........................................................
Applicable Percentage Increase Applied to Standardized                1.7          0.5          1.1         -0.1
 Amount.....................................................
----------------------------------------------------------------------------------------------------------------

B. Update for SCHs and MDHs for FY 2016

    Section 1886(b)(3)(B)(iv) of the Act provides that the FY 2016 
applicable percentage increase in the hospital-specific rate for 
SCHs and MDHs equals the applicable percentage increase set forth in 
section 1886(b)(3)(B)(i) of the Act (that is, the same update factor 
as for all other hospitals subject to the IPPS).
    As discussed in section IV.L. of the preamble of this final 
rule, section 205 of the Medicare Access and CHIP Reauthorization 
Act of 2015 (MACRA) (Pub. L. 114-10, enacted on April 16, 2015) 
extended the MDH program (which, under previous law, was to be in 
effect for discharges on or before March 31, 2015 only) for 
discharges occurring on or after April 1, 2015, through FY 2017 
(that is, for discharges occurring on or before September 30, 2017).
    As mentioned above, the update to the hospital specific rate for 
SCHs and MDHs is subject to section 1886(b)(3)(B)(i) of the Act, as 
amended by sections 3401(a) and 10319(a) of the Affordable Care Act. 
Accordingly, depending on whether a hospital submits quality data 
and is a meaningful EHR user, we are establishing the same four 
applicable percentage increases in the table above for the hospital-
specific rate applicable to SCHs and MDHs.

C. FY 2016 Puerto Rico Hospital Update

    Section 401(c) of Public Law 108-173 amended section 
1886(d)(9)(C)(i) of the Act and states that, for discharges 
occurring in a fiscal year (beginning with FY 2004), the Secretary 
shall compute an average standardized amount for hospitals located 
in any area of Puerto Rico that is equal to the average standardized 
amount computed under subclause (I) for FY 2003 for hospitals in a 
large urban area (or, beginning with FY 2005, for all hospitals in 
the previous fiscal year) increased by the applicable percentage 
increase under subsection (b)(3)(B) for the fiscal year involved. 
Therefore, the update to the Puerto Rico-specific operating 
standardized amount is subject to the applicable percentage increase 
set forth in section 1886(b)(3)(B)(i) of the Act as amended by 
sections 3401(a) and 10319(a) of the Affordable Care Act (that is, 
the same update factor as for all other hospitals subject to the 
IPPS). Accordingly, we are making an applicable percentage increase 
to the Puerto

[[Page 49843]]

Rico-specific standardized amount of 1.7 percent.

D. Update for Hospitals Excluded From the IPPS for FY 2016

    Section 1886(b)(3)(B)(ii) of the Act is used for purposes of 
determining the percentage increase in the rate-of-increase limits 
for children's hospitals, cancer hospitals, and hospitals located 
outside the 50 States, the District of Columbia, and Puerto Rico 
(that is, short-term acute care hospitals located in the U.S. Virgin 
Islands, Guam, the Northern Mariana Islands, and America Samoa). 
Section 1886(b)(3)(B)(ii) of the Act sets the percentage increase in 
the rate-of-increase limits equal to the market basket percentage 
increase. In accordance with Sec.  403.752(a) of the regulations, 
RNHCIs are paid under the provisions of Sec.  413.40, which also use 
section 1886(b)(3)(B)(ii) of the Act to update the percentage 
increase in the rate-of-increase limits.
    Currently, children's hospitals, PPS-excluded cancer hospitals, 
RNHCIs, and short-term acute care hospitals located in the U.S. 
Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa are among the remaining types of hospitals still paid under 
the reasonable cost methodology, subject to the rate-of-increase 
limits. We are applying the FY 2016 percentage increase in the IPPS 
operating market basket to the target amount for children's 
hospitals, PPS-excluded cancer hospitals, RNHCIs, and short-term 
acute care hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa. For this final rule, 
the current estimate of the FY 2016 IPPS operating market basket 
percentage increase is 2.4 percent.

E. Update for LTCHs for FY 2016

    As discussed in section V.A. of the Addendum to this final rule, 
we are establishing an update to the LTCH PPS standard Federal rate 
for FY 2016 based on the full LTCH PPS market basket increase 
estimate (for the proposed rule, we estimated this to be 2.7 
percent; for this final rule, we estimate this to be 2.4 percent), 
subject to an adjustment based on changes in economy-wide 
productivity and an additional reduction required by sections 
1886(m)(3)(A)(ii) and (m)(4)(E) of the Act. In accordance with the 
LTCH QRP under section 1886(m)(5) of the Act, we are reducing the 
annual update to the LTCH PPS standard Federal rate by 2.0 
percentage points for failure of a LTCH to submit the required 
quality data. The MFP adjustment described under section 
1886(b)(3)(B)(xi)(ii) of the Act is currently estimated to be 0.5 
percent for FY 2016. In addition, section 1886(m)(3)(A)(ii) of the 
Act requires that any annual update for FY 2016 be reduced by the 
``other adjustment'' at section 1886(m)(4)(E) of the Act, which is 
0.2 percentage point. Therefore, based on more recent data from the 
proposed rule, that is, the IGI's second quarter 2015 forecast of 
the FY 2016 LTCH PPS market basket increase, we are establishing an 
annual update to the LTCH PPS standard Federal rate of 1.7 percent 
(that is, the current FY 2016 estimate of the market basket rate-of-
increase of 2.4 percent less an adjustment of 0.5 percentage point 
for MFP and less 0.2 percentage point). Accordingly, we are applying 
an update factor of 1.7 percent in determining the LTCH PPS standard 
Federal rate for FY 2016. For LTCHs that fail to submit quality data 
for FY 2016, we are applying an annual update to the LTCH PPS 
standard Federal rate of -0.3 percent (that is, the annual update 
for FY 2016 of 1.7 percent less 2.0 percentage points for failure to 
submit the required quality data in accordance with section 
1886(m)(5)(C) of the Act and our rules) by applying an update factor 
of -0.3 percent in determining the LTCH PPS standard Federal rate 
for FY 2016.

III. Secretary's Recommendations

    MedPAC is recommending an inpatient hospital update equal to 
3.25 percent for FY 2016. MedPAC's rationale for this update 
recommendation is described in more detail below. As mentioned 
above, section 1886(e)(4)(A) of the Act requires that the Secretary, 
taking into consideration the recommendations of MedPAC, recommend 
update factors for inpatient hospital services for each fiscal year 
that take into account the amounts necessary for the efficient and 
effective delivery of medically appropriate and necessary care of 
high quality. Consistent with current law, depending on whether a 
hospital submits quality data and is a meaningful EHR user, we are 
recommending the four applicable percentage increases to the 
standardized amount listed in the table under section II. of this 
Appendix B. We are recommending that the same applicable percentage 
increases apply to SCHs and MDHs. For the Puerto Rico-specific 
standardized amount, we are recommending an update of 1.7 percent.
    In addition to making a recommendation for IPPS hospitals, in 
accordance with section 1886(e)(4)(A) of the Act, we are 
recommending update factors for certain other types of hospitals 
excluded from the IPPS. Consistent with our policies for these 
facilities, we are recommending an update to the target amounts for 
children's hospitals, cancer hospitals, RNHCIs, and short-term acute 
care hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa of 2.4 percent.
    For FY 2016, consistent with policy set forth in section VII. of 
the preamble of this final rule, for LTCHs that submit quality data, 
we are recommending an update of 1.7 percent to the LTCH PPS 
standard Federal rate. For LTCHs that fail to submit quality data 
for FY 2016, we are applying an annual update to the LTCH PPS 
standard Federal rate of -0.3 percent.

IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating 
Payments in Traditional Medicare

    In its March 2015 Report to Congress, MedPAC assessed the 
adequacy of current payments and costs and the relationship between 
payments and an appropriate cost base. MedPAC recommended an update 
to the hospital inpatient rates equal to 3.25 percent concurrent 
with changes to the outpatient prospective payment system and with 
initiating change to the LTCH PPS. We refer the reader to the March 
2015 MedPAC report, which is available on the Web site at http://www.medpac.gov for a complete discussion on this recommendation. 
MedPAC expects Medicare margins to remain low in 2015. At the same 
time, MedPAC's analysis finds that efficient hospitals have been 
able to maintain positive Medicare margins while maintaining a 
relatively high quality of care. However, under current law, payment 
margins are projected to decline which could result in negative 
Medicare margins industry wide. Specifically, MedPAC noted several 
current law policy changes are scheduled to reduce payments in FY 
2015 and FY 2016. Because of these changes and reduced payments, 
MedPAC asserted that an update of 3.25 percent in the base payment 
is warranted. MedPAC maintains that Medicare payment rates should be 
determined by analysis of payment adequacy rather than an across-
the-board sequester reduction. Therefore, MedPAC recommended that 
hospitals receive base payment rates that are 3.25 percent higher 
than the FY 2015 base payment rates, and there should be no 
sequester adjustment. However, MedPAC concluded that if the Congress 
increases hospital payments by reinstating expiring special 
payments, the full 3.25 percent update would not be warranted.
    Response: With regard to MedPAC's recommendation of an update to 
the hospital inpatient rates equal to 3.25 percent, for FY 2016, as 
discussed above, section 1886(b)(3)(B) of the Act, as amended by 
sections 3401(a) and 10319(a) of the Affordable Care Act, sets the 
requirements for the FY 2016 applicable percentage increase. 
Therefore, we are applying an applicable percentage increase for FY 
2016 of 1.7 percent, provided the hospital submits quality data and 
is a meaningful EHR user, consistent with these statutory 
requirements.
    We note that, because the operating and capital prospective 
payment systems remain separate, we are continuing to use separate 
updates for operating and capital payments. The update to the 
capital rate is discussed in section III. of the Addendum to this 
final rule.

[FR Doc. 2015-19049 Filed 7-31-15; 04:15 pm]
BILLING CODE 4120-01-P